Tuesday, February 18, 2014

Go Global

My Bloomberg app on my iPhone does not update its industry articles as fast as Bloomberg's website.  I read this article on Blackstone's view on real estate opportunities on my iPhone last night.  The article originally appeared last Thursday.  Anyway, I guess I'm glad the app is slow because I missed the story when it was first published.

Blackstone is looking at the dislocation in emerging markets as an opportunity.  Of more interest to me is Blackstone's opinion on Europe:
While Europe’s economic crisis has eased, the shrinkage of loans and other assets that regulators are pressing banks to undertake will “be taking some oxygen” out of the region’s economies. Blackstone is forecasting “very slow growth,” (Jonathan) Gray said. (Mr. Gray is Blackstone's global head of real estate.)

For real estate investors, Gray expects forced sales by European banks to continue for several more years, fostering opportunity. Blackstone is seeking distressed warehouses, hotels and office buildings throughout the region, he said.

“When people are forced to sell, the pricing tends to be better,” he said. “In Europe, it’s not a growth story. It’s a distress story.”
Blackstone also sees "great strength" in the US housing market as construction still trails pre-recession levels.  Finally, Blackstone sees "good signs" in the US lodging market.  The "good signs" is somewhat substantiated by this Calculated Risk blog post that Las Vegas Convention traffic is 18% below pre-recession levels, telling me that one important demand component is still recovering.

Of course the global head of real estate, responsible for an $80 billion portfolio, is going to be optimistic, but it's still interesting to read where one of the largest real estate investors in the world sees opportunities.


Anonymous said...

You continue to point to pre-recession levels as some sort of relevant figure. How is that relevant, in terms of housing or hotels or otherwise? I'm not saying that the housing market looks bad going forward, but what makes you think we will ever reach pre-recession levels again? That was an insane time, it was unhealthy, and it is unlikely NINJA applicants will be doing 0-down speculation ever again.

Rational Realist said...

I see pre-recession numbers as a benchmark. I don't expect housing starts to exceed 2007 levels anytime soon. I see the pre-recession numbers as how much room there is for recovery. In 2013, new home sales were up 16% year-over-year and the best since 2008. But sales were still the 6th worse on record, which dates to the 1960s. Even during the recession the population continued to grow and families were formed, and these people need places to live. Having new homes sales in 2013 lower than years in the '60s, '70s and '80s tells me the housing recovery has a way to go just to get back to normal. Housing is such a large part of the economy that I find its recovery important.