ALTERNATIVE asset manager Blackstone has made significant inroads into the private wealth space, particularly in its real estate investment offerings. The sector, however, grapples with challenges amid higher interest rates and shifts in demand particularly in the office sector. We ask Alan Miyasaki, Blackstone’s head of real estate acquisitions Asia, for his views on the opportunities.
US commercial real estate grapples with a challenging environment. What is your overall outlook for this particular sector and which segments offer value?
Miyasaki: Where you invest matters. Sector selection is critical. In an environment like today, it can lead to massive dispersions in performance. As high-conviction, thematic investors, we have focused on certain sectors where we see strong macro trends – such as logistics, residential, and data centres, which continue to experience strong performance. Logistics, for example, makes up 40 per cent of our real estate equity holdings globally, and is seeing record rent growth and very low vacancy.
Traditional office has been challenged, particularly in the US. The good news for us is that it makes up very little of our overall portfolio – US traditional office comprises less than 2 per cent of our global real estate equity portfolio. That number was 60 per cent in 2007. We’ve been shifting our focus towards sectors with higher growth prospects. Data centres with growth supercharged by artificial intelligence (AI) are a good example of this.
As a global investor where do you see the most attractive opportunities outside the US for real estate, and why?
We see significant opportunities in Asia-Pacific (Apac), a growth engine of our global real estate business. Favourable fundamentals such as the rapidly growing middle-class population and urbanisation continue to drive many of our thematic investments here.
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Logistics, our largest exposure globally, makes up 40 per cent of our global real estate equity portfolio and is also a key theme for us in the region. Seeing the trend develop early on in the US and Europe, we developed a conviction that it would make its way to Asia. Today, we’ve developed large-scale portfolios across markets like India, Australia, Japan, and Greater China.
We’re also huge believers in the rebound in global travel. Tourism is picking up rapidly in this part of the world, which was slower to open up post-Covid. Last year, we made our largest investment to date in Apac with Crown Resorts, three premium hospitality and entertainment resorts in Australia. In Japan, we acquired an eight-hotel portfolio during the height of the pandemic, confident in our expertise and track record of transforming these assets into leading tourism destinations.
India is a unique market where some nuances come into play. We have some of the largest portfolios across office, retail, and logistics. We’ve found success with our retail platform, the largest in the market, supported by favourable trends in India such as the rise in the middle-class population and consumption growth. We recently launched Nexus Select Trust, our retail-focused Reit – the first of its kind in the market and the third Reit we’ve helped bring to India – which has seen positive response from investors.
In addition, we’re building our data centre platform across Asia, starting in India and Japan, where we are seeing robust demand. Our global scale and expertise are a real advantage when developing this large-scale data infrastructure.
How and to what extent do you incorporate sustainable criteria in your evaluation of real estate for the portfolios? Which criteria are most important and why?
As a significant investor in the region, we’re committed to supporting sustainable operations to drive profitability and long-term value for our investments, communities, and stakeholders. Our sustainability efforts include managing energy, water consumption, and waste more efficiently. Ultimately, we believe these initiatives achieve cost savings and benefit tenants, investors, and communities.
In India where we are one of the largest global investors, two of our office portfolios – Embassy Office Parks and Nucleus Office Parks – were recognised by the US Green Building Council’s LEED (Leadership in Energy and Environmental Design) rating system as some of the largest LEED-certified buildings in the market (Platinum Operations and Maintenance).
How might AI change the way you work and how you approach and evaluate assets as investors?
We have been early adopters of AI, building a data science team and the capabilities needed to capture the AI opportunity since 2015. With a portfolio comprising 12,600 assets and 230 portfolio companies, we have the ability to gather insights and spot trends faster, giving us an advantage in making investment decisions. Today, we have a global team of 50 data scientists.
We’re also investing in data centres, seeing unprecedented demand around the world. We have the scale and expertise to build the large-scale, high-quality infrastructure required to store hardware, servers, and all the company’s data. We’re bringing our capabilities to Apac, where we’ve established a data centre platform.
Blackstone has successfully raised assets for funds recently. What does this signal in terms of investors’ risk appetite?
Blackstone’s recent US$30.4 billion close of our flagship global Real Estate fund – the largest real estate drawdown fund ever – is indicative of the trust that our investors continue to place in us. It also speaks to our ability to capitalise on opportunities in a dislocated environment like we are in today. Some of our best deals have been made during dislocated capital markets.
In addition to the US$30 billion global real estate fund, we also announced the close of our third opportunistic Asian real estate fund at US$8.2 billion, making it the largest Asian real estate fund ever.
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