Commercial property fears create opportunities, Blackstone real estate co-head says

Fears over turbulence in commercial real estate is creating opportunities for well-capitalized investors, according to Blackstone Inc. co-head of global real estate Kathleen McCarthy. 

"When sentiment gets really negative, prices decouple from fundamental value," she said in a Bloomberg Television interview with Francine Lacqua. "We have a practice of trying to quiet that noise and look at the information in front of us."

High vacancy rates in U.S. office markets and the impact of rising interest rates on property values in Europe have prompted a brutal selloff in publicly traded real estate stocks and bonds. The depth of the downturn implies investors are expecting prices to collapse, though a standoff between buyers and sellers means the pain has yet to fully filter through to asset values. 

Blackstone has deployed about €3.5 billion ($3.8 billion) in Europe so far this year, sticking mostly to properties where it sees the best potential for rents to rise and offset higher borrowing costs, like warehouses, student housing and lab space, McCarthy said. 

"We have more data than any other investor on the planet," she said. "That informs where we transact." Blackstone is being very selective but is still prepared to "lean in to where we see strength in the short term and over the long term," she added.

The volume of German commercial real estate deals in the first half of the year was about two-thirds below the long-term average. But pressure is building on landlords that need to sell assets in order to reduce their relative indebtedness, which is rising as asset values fall. 

"It takes a period of time for sellers to recognize that it is maybe time to move on or settle in to new pricing," McCarthy said.