Blackstone is growing in most areas except real estate, with assets under management rising 10% to $1.4 trillion in Q3. However, its real estate sector shrank 4% to $309 billion, lagging behind credit and private equity. While opportunistic real estate funds dropped 4%, private equity funds saw a 14.7% gain. The challenge lies in borrowing costs, even as Blackstone’s non-traded REIT projects a 3% rise in same-property income through September. Nadeem Meghji, the global real estate head, is set to leave, passing challenges to David Levine and Giovanni Cutaia.

In France, street unrest has calmed, but the bond market remains volatile. President Trump commented on the situation following intense riots, noting that France’s 10-year yield reached 4.99%, with a premium over Germany at a one-year high. Prime office spaces in Paris yielded 4.15% to 4.30% this spring, but now government bonds offer better returns, making real estate less attractive.

The phrase “below replacement cost” is currently popular for commercial real estate purchases, but it carries risks. When property yields are less than borrowing costs and rents have limited growth potential, buyers are betting on future rent increases or lower interest rates, according to LA investor Moses Kagan. Apartment starts were at a 349,000 annual rate in September, far below the 503,000 permits issued. With fewer than a quarter of renters able to buy homes, renting remains a challenge, especially in rent-stabilized markets where rents can’t keep up with inflation.

Source: Bisnow.com

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