Blackstone, the world's largest owner of commercial real estate, said it expects opportunities to emerge for acquisitions and other investments as the United States' imposition of tariffs around the globe has led to economic uncertainty.
While questions prompted by the Trump administration's fast-shifting trade policy toward China, Canada and other countries could “create a little speed bump” and affect investor sentiment in a recovering commercial real estate market, Blackstone said it's time to “lean in” to seize potential buying and investment opportunities.
“The complexity of the situation means patience and the staying power is key," Blackstone CEO Stephen Schwarzman said on a call Thursday with Wall Street analysts. "The economy entering this period is fundamentally strong. A fast resolution is critical to keep the economy on the growth path."
Schwarzman made his comments after Blackstone reported positive first-quarter returns across its investment platforms, including real estate. In the first quarter, Blackstone’s core-plus real estate investments — those in relatively stable, income-generating, high-quality real estate, including Blackstone Real Estate Income Trust — posted a 1.2% gain, an improvement from a 0.1% increase in the past 12 months. At the same time, its riskier opportunistic real estate investments created a return of 0.2%, reversing a 3.7% drop in the past 12 months.
Blackstone has about $177.2 billion in undrawn capital, or so-called dry powder, as the New York-based firm last quarter attracted $62 billion in investor inflows, its highest level in nearly three years. The company's total assets under management rose to a record of about $1.17 trillion in the first quarter, up 10% from a year earlier.
Prologis, a major owner of industrial property, also reported positive earnings this week. Prologis said it recorded a better-than-expected 9.5% jump in revenue, to $2.14 billion, in the first quarter from the same time a year earlier.
However, the San Francisco owner of logistics real estate tempered its outlook, saying demand has eased in recent weeks as some businesses delay commitments to taking space during this time of economic disruption surrounding the Trump administration's shifting tariff policy.
Another property owner, SL Green, Manhattan’s largest office landlord, said on Thursday it’s not yet seen any effects on its office leasing momentum. Chief Executive Marc Holliday said “in uncertain times, New York shines,” adding that “there’s still a great demand out there for the office product. ... You have tenants with a real need for space … driven by return to work."
Best time to invest
President Donald Trump announced tariffs on April 2, and that led to swings in financial markets. The administration has made several changes to the country's tariff policies and signaled its intent to negotiate with some countries.
The tariff-related uncertainty has “dramatically impacted investor sentiment,” but it’s “too early to see what the impact will be,” Schwarzman said.
Still, Schwarzman said he’s confident in Blackstone’s ability to navigate the current environment. A time when other buyers stand on the sidelines or shift toward safer investments can be positive, he said: “The best time to invest is [in a] risk-off world. We do some of our best work in times of volatility.”
Blackstone’s “direct first order of exposure” across its portfolio that’s tied to the tariffs talks is limited, Schwarzman said. Meanwhile, higher tariffs may drive up real estate construction costs that may further reduce supply in sectors such as logistics and rental housing that Blackstone has said had long-term “structural undersupply.”
That will “support real estate value” absent the scenario of the U.S. economy entering a recession, he said.
While there's uncertainty tied to tariff-induced market gyrations, stock sell-offs might also mean there’s more “receptivity” from the boards of public companies in a sale, Blackstone President and Chief Operating Officer Jon Gray said during the investors call.
“In terms of seed planting, this is certainly a better environment,” Gray said.
Monitoring for economic slowdown
It’s an opportunity to “put more capital” in areas including data centers and other digital infrastructure and “recovering commercial real estate,” he said.
To be clear, while Blackstone has little exposure to companies such as retailers and manufacturers that may be harder hit by costs in the supply chain, it’s watching whether the market uncertainty will raise the cost of capital and lead to a “real economic slowdown,” Gray said.
While Blackstone is eyeing buying opportunities, Schwarzman said the investment giant is “less likely to sell in the near term,” in a “volatile market.”
Gray said the current market backdrop isn’t anything like the Great Recession, when the ratio of investment based on borrowed money was much higher.
“The overall system is much less leveraged,” he said. “You tend to have much less systematic risk." In commercial real estate, "other than office, there’s little problem.”
In Blackstone’s portfolio, the default rate is just half a percentage point across Blackstone's non-investment-grade credit portfolio, Gray said.
All the company’s other investment platforms also posted positive performance returns in the first quarter, led by a 7.5% jump in infrastructure that includes data centers. Private credit saw a 2.7% return as Blackstone has said providing funding for areas including digital infrastructure and real estate is a growth opportunity.
Real estate “is still a sector that has underperformed,” Gray said. “This period of time may slow some of the movements toward real estate. … [But] you’ll see the capital flow back. This may create a little speed bump. The lack of new supply and the cost of capital are going to be the foundation for recovering real estate. … We are still in that early recovery phase for real estate.”
Gray said Blackstone has also not seen any effects from global investment clients cutting back on allocating capital except “just a handful of those that have issues around geopolitical environment.”
He added that “there are definitely questions from global investment clients” given the uncertainty. But “most have a lot of confidence in the United States.”