As real estate investors grapple with market volatility following Trump’s Liberation Day speech and continuing global geopolitical turbulence, Blackstone’s global co-head of real estate, Kathleen McCarthy, told delegates at the annual INREV conference in Berlin that “we are in a moment of extraordinary uncertainty”.
In an onstage interview with Sabina Reeves, chief economist and head of insights and intelligence at CBRE Investment Management, McCarthy said: “[Uncertainty] is very tough on investment committees. I think the faster some of this uncertainty can be resolved, the better, for many reasons.
“But it’s quite natural that I think everyone in this room and investors around the world are saying, okay, I need to make sure I continue to feel good about my assumptions about the world, about my real estate investments, about the underwritings I’m assuming. But we haven’t yet seen that really translate to any kind of material change in investment strategy.”
McCarthy told the annual gathering of institutional real estate investors and fund managers that the first quarter of the year had been good for Blackstone’s real estate business. “We were very proud to have announced two successful fundraising conclusions in the first quarter and we are not seeing any sudden movements or sharp changes in investor approach,” she said.
McCarthy said Europe had turned out to be the “highest activity market for us for about three years running”, echoing sentiments expressed by Principal’s Seema Shah in her keynote address at the event.
“In terms of consistency of pipeline and things that we’ve been executing on, Europe has already been quite attractive. And, similarly, in Asia, I think this global dislocation has created great opportunities for us to continue with things we had already been pursuing in Japan and India, in particular.”
McCarthy outlined other reasons why European real estate should generate opportunities for investors. “Sectors like logistics have not seen the supply increases that we saw in markets like the US or Canada, where rents ran really sharply and that spurred new development – that’s positive,” she said.
“And a lot of the news here in Germany, in terms of renewed investment, particularly behind manufacturing and defence… that’s extremely positive.”
Asked about the uncertainty around valuations and the economic impacts of tariffs on the real estate recovery, McCarthy said: “I would say we continue to feel confident that real estate has turned the corner [and that] we’re in the midst of a recovery that’s really cash-flow driven”.
She added: “The cost of capital shock that we have had over the past few years we do think is behind us now. Cost of capital is down thanks to a combination of short-term rates and spreads, and it is coming down further. It feels a little more uncertain today, but I do think we can feel good about in terms of driving value back upwards.
“And so I think we, as investors, as a collective, have an opportunity to buy into high-quality assets and sectors where you believe you’re benefiting from long-term tailwinds at really attractive set-up valuations compared to replacement costs and historical values. I think you can feel good about that and feel optimistic that you’re going to have the ability to ride through some uncertainty in the short term.”
Mood in the room among delegates
Many of the conversations among delegates outside of the auditorium were less sanguine. One senior real estate industry veteran, who did not want to be named, said: “The performance of real estate as an asset class has not met expectations, so [defined benefit pension fund] investors, and to some extent, other investors are looking to exit.
“Real estate needs to gain the confidence of those long-term pension schemes and investors for whom real estate is aligned with their vision. [To do this] it has to be more transparent. It has to be more liquid in addressing redemptions. But I’m positive that the nimble, the more efficient managers will find a solution.”
Another delegate, Peter Hobbs, managing director of private markets at Bfinance, agreed with McCarthy that “now is a great time to invest”, adding that more generally across the real estate market that “the capital is still on the sidelines because performance isn’t there just yet, and there’s all this uncertainty”.
He felt the mood of the conference was more downbeat than the picture many of the speakers were painting – apart from “a very depressing” address by Anders Fogh Rasmussen, former secretary general of NATO and former prime minister of Denmark, who talked about the gloom around macro and geopolitical uncertainties in no uncertain terms.
Hobbs added: “This shock two weeks ago has paused things again. Kathleen McCarthy said it was killing any new supply, and you’re not getting any new development. So all the while you’ve got this, pent-up demand is building, and there’s a shortage of supply, particularly for those new products, in all these new sectors that are growing.
“So that sets us up for a better rental growth when the recovery does come. Lots of people were thinking 2025 was a year of recovery, but it more pushes it back more to 2026 just because people are being much more cautious.”
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