Going through financial challenges that embrace inflation, forex points, and different headwinds, business actual property corporations ought to focus extra on money movement property as a technique to drive income development, Kathleen McCarthy, international co-head of Blackstone Actual Property, mentioned throughout a basic session on the ULI Fall Assembly in Dallas.
“A rising-cap-rate setting makes it exhausting to develop income, so traders should flip to money movement alternatives,” she mentioned. “You should discover asset lessons which have the wind at their backs, with constructive fundamentals and shorter-duration leases. Now we have been working towards having this sort of portfolio since 2015. [A few years back] we have been feeling like that is all too good to be true.”
Blackstone is the world’s largest business actual property proprietor, with $577 billion in property in additional than 37 international locations. Immediately, 80 p.c of Blackstone’s portfolio covers multifamily housing, warehouses, life science workplaces, and hospitality.
“There’s a lot noise on the market, we attempt to give attention to what we all know,” she mentioned. “Now we have a lot nice information that helps lead us to [make] higher selections on a every day or weekly foundation.”
Policymakers Ought to Focus Extra on Housing
McCarthy mentioned policymakers ought to dedicate extra consideration to housing—the dearth of provide, the dearth of affordability, and excessive demand.
“Given a lot NIMBYism in so many markets, they need to be creating extra insurance policies that reward builders that create extra transit-oriented growth and reasonably priced housing total,” she mentioned.
She inspired ULI members to converse with their governments about what they’re seeing on this area.
A Spin by Blackstone’s Major Sectors
McCarthy additionally broke down how Blackstone sees its main asset lessons and present trade traits.
Industrial. E-commerce continues to develop. Corporations are trying extra at offshoring and how one can higher deal with provide chain points, she mentioned. Retail, with its excessive inventories, has created higher demand for warehouse area.
The U.S. emptiness price for warehouses is about 2.8 p.c, McCarthy mentioned. Provided that new growth prices are so excessive—they’ve risen about 100% over the previous two years—there’s simply not a whole lot of new provide coming, she mentioned.
Hospitality. Blackstone is extra bullish on this sector than many, McCarthy admitted.
“It’s nonetheless a high-conviction phase for us,” she mentioned. “Whenever you have a look at journey, there’s a 30-year development line heading to the higher proper. We search for super-special property in super-supply-constrained markets, a lot associated to seashores and gaming.”
On the similar time, Blackstone has invested in less-expensive hospitality property comparable to Nice Wolf Lodges.
“Even throughout harder financial occasions, folks nonetheless take holidays. It’s simply that they do extra by driving to get there,” she mentioned.
Life sciences. “We wish to be the place corporations wish to be,” McCarthy mentioned. “It was that everybody’s purpose was to personal a category A shopping center. For the reason that pandemic, every thing has modified. A revolution has taken over life sciences. Now, it’s not simply all about prescription drugs, however extra about interventions in well being care companies.”
Life sciences was run out of just about “secretive” campuses, she mentioned, “however now they’re extra open supply, the place they’re making an attempt and prepared to work with different data facilities to unravel issues. Issues are simply extra open now.”
Sustainability. “Issues comparable to various vitality and ESG [environmental, social, and governance] targets are firmly within the Blackstone ecosystem,” she mentioned. “We need to cut back emissions by 15 p.c immediately with each new asset we purchase.”
Ladies in management. “Actual property corporations—and actually, all corporations—ought to be working towards having their administration extra intently resemble the world inhabitants, and that features folks of shade and about half feminine,” she mentioned.
Blackstone not too long ago has doubled the variety of managing administrators and senior managing administrators who’re ladies.
“When trying to ‘get higher,’ corporations ought to notice that ladies have a whole lot of various things occurring of their heads about how one can deal with issues than males do,” she mentioned. “Senior leaders ought to have extra direct conversations with ladies in administration about what they’re considering.
“In addition they ought to talk about the fact of struggles that ladies face within the office, comparable to work/life stability. Males, too, ought to make extra of an effort to say publicly, ‘I’m not going to make that assembly or attend that massive convention’ to give attention to their every day well-being. And that’s okay. Males coming ahead to share this actually advantages working ladies, too.”