About this Video

• Video Title: Blackstone's Gray on AI, Real Estate, Office Rents
• Channel: Bloomberg Television
• Speakers: John Gray (presumably), Ally (presumably)
• Duration: 00:14:07

Introduction

This Bloomberg Television interview features John Gray, likely from Blackstone, discussing the company's strong performance, driven by increased investment in alternatives and private assets. The conversation also covers the impact of AI on data centers, the outlook for the office real estate sector, and predictions for future dealmaking and investment strategies.

Key Takeaways

• Strong Q1 Performance: Blackstone reported one of its best quarters, with distributable earnings up 56%, driven by fundraising, investing, and realizations.
• Shift Towards Alternatives: A "sea change" in investor openness towards private assets is fueling growth, particularly in private wealth and private credit.
• Data Center Outlook: While acknowledging concerns about AI efficiency impacting data center demand, Gray emphasizes the continued need for physical infrastructure, predicting ongoing demand for compute power, despite potential shifts in usage. Blackstone's long-term leases and prudent building approach mitigate immediate risk.
• Office Sector Recovery: Gray believes the office sector has bottomed out, citing decreased vacancy rates in prime locations and anticipates rent increases. Blackstone intends selective investment in high-quality buildings and markets.
• Dealmaking Outlook: Favorable economic conditions, a healthy equity market, and a growing IPO pipeline suggest a positive outlook for M&A activity in 2025.
• Investment Focus: Blackstone plans to focus investment in digital infrastructure, power, life sciences (particularly companies running Phase 3 drug trials and their real estate needs), India, and Japan.

The transcript indicates Blackstone is seeing significant inflows in private wealth (an 80% increase last year, with January 2024 being the best month since May 2022). It also highlights the success of private credit, leveraging relationships with insurance companies, pension funds, and individual investors to capture additional yield. However, the transcript does not detail the specific strategies employed beyond these observations of successful outcomes. Therefore, a precise answer to your question is unavailable within the transcript.

According to Gray, the "ingredients" for a rebound in the M&A market include:

1. A strong U.S. economy.
2. A healthy equity market (the S&P being up 60% in the last two years is cited as positive).
3. A good IPO market (with the pipeline of IPOs being double that of last year).
4. Strong debt capital markets (investment-grade and high-yield spreads at historically low levels, although rates are acknowledged as somewhat high).
5. A regulatory environment supportive of M&A activity.
6. Pent-up demand for M&A due to previous market dislocations preventing sales.

He states that all these factors are currently present, leading him to believe in a better year for M&A in 2025.