|

Blackstone is Betting on a Real Estate Comeback

The alternative investment giant may be on the verge of its first New York office building transaction in nearly three years.

Photo of a Blackstone office sign
Photo via Roman Tiraspolsky

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

The commercial property market has resembled a subplot in a Michael Bay disaster movie, but has the next act begun? 

Blackstone sure seems to think so. “Office [real estate] has bottomed, particularly in stronger markets and better-quality buildings,” Blackstone President Jon Gray said in an interview with Bloomberg on Thursday, ahead of both the company’s earnings call as well as a possible major real estate deal.

Skyscraping By

As it turns out, rock bottom may actually be behind us. According to a report published by broker Colliers International Group earlier this month, the office space vacancy rate in New York City at the end of 2024 was around 16.5%. That’s about double from pre-pandemic norms but marks the lowest point from September 2022’s peak. 

Valuations, meanwhile, are down as much as 70% from their pre-covid peak — which is why Gray said he expects a rebound, and likely why Blackstone is seizing the opportunity to get back into the market:

  • The firm is nearing a deal to acquire 1345 Avenue of the Americas in Midtown, sources told Bloomberg. The building is 50 stories tall, spanning 1.9 million square feet.
  • While details of the building’s price are not clear, S&P Global in November appraised the value of the loans secured against the building at $896 million. That’s down from $1.2 billion when the loans were first issued, though rent per square foot for top NYC buildings is now above pre-pandemic levels, according to real estate services firm Savills.

Sign of the Times: If completed, the deal would mark Blackstone’s first New York office building transaction in nearly three years. The office sector was once core to its real estate business — accounting for over 50% of its property holdings way back before the 2008 financial crisis. These days, office space accounts for roughly 2% of its portfolio, with warehouses, apartments, and data centers making up the bulk of its holdings.