Commercial real estate is flashing signs that the worst of the distress is over, Blackstone president says

The commercial real estate sector is already showing signs of distress as a wave of $1 trillion debt is poised to mature this year.

The worst of the commercial real estate turmoil looks to be over, Blackstone president Jon Gray says.

The private equity exec gave a cautiously optimistic outlook on the commercial property market at a recent event hosted by Goldman Sachs.

He says the tide may be turning, evident in a handful of signs flashing in the market similar to those that signaled a bottom in 2009, when the commercial real estate sector was beginning to rebound after the Great Financial Crisis.

“We said in January, publicly on earnings, that we thought commercial real estate was bottoming. And we’ve continued to believe that,” Gray said. “We began to get those signals at the end of last year saying, look, the markets are recognizing inflation coming down. The Fed’s starting to tilt toward a different area. As the cost of capital comes down in these sectors, we should go out there and get it.”

The state of the market mirrors 2009, when activity in the sector was just starting to pick up after the Great Financial Crisis, Gray said.

“And the problem for investors is they’re often looking in the rearview mirror. So they’re saying to themselves, ‘Real estate, oh, I got all this troubled real estate. And I don’t want to go back into that,'” he said. “But if you went back to 2009, the best investments in the cycle were then. You didn’t get the all clear sign from everybody else till 2012.”

Blackstone has been busy “deploying capital” this year, he said, noting that the firm has been scooping up logistics assets in Europe like buildings involved in storing and transporting goods, as well as real estate in Asia.

“If you were an investor in real estate after the financial crisis, you would have made a lot of money. And my guess is, if you’re an investor today, the same thing will happen,” he added.