Blackstone Group, the New York City-based investment management company, is widening its logistics portfolio. The firm, which invests in everything from real estate to health care to IT, on Tuesday bought up a $2.8 billion portfolio of warehouse space from Cabot Properties in two separate transactions. The portfolio consists of 124 logistics properties in the United States and Europe.
The U.S. side of the Cabot portfolio was acquired by Blackstone Real Estate Income Trust, which owns properties like the Bellagio in Las Vegas. The 102 U.S. properties make up about 15.2 million square feet of warehouse space, while the remaining 22 properties in Europe, which were purchased by Blackstone’s European Core+ business, total around 2.2 million square feet.
“The logistics sector continues to benefit from strong tailwinds driven by e-commerce,” said David Levine, senior managing director at Blackstone Real Estate, in a statement.
“These high-quality, stabilized assets are perfectly suited for our Core+ vehicles given their strong locations, stable cash flows and long-term growth potential,” he continued.
For Blackstone (NYSE: BX), this move is just the latest in a decadelong push into the logistics space. It made its first big logistics play in 2012 when it founded Logicor, a large warehousing business based in Europe with over 146.4 million square feet of warehouse space, which it sold to China Investment Corp. in 2017 for almost $14 billion.
A year later, the firm inked the largest private real estate deal in history when it acquired $18.7 billion worth of logistics assets from GLP in Singapore. At the time, Ken Caplan, co-head of Blackstone Real Estate, called logistics the company’s “highest conviction global investment.” Blackstone has also gotten into last-mile logistics, acquiring the U.S. last-mile portfolio of Colony Industrial, the industrial arm of Colony Capital.
And just in October, Blackstone entered into a joint venture partnership with Kimco Realty, through which the firm will manage a little less than half of Kimco’s Sunbelt region shopping center portfolio.
Now, with the Cabot deal completed, the company is back in on warehousing, and its timing couldn’t be better. It’s now or never when it comes to acquiring new warehouse space –– demand across the country is spiking to unprecedented levels, while supply is at a premium.
A 2021 report from commercial real estate company JLL revealed that demand for warehouse space is up 22% year-over-year, but vacancy rates are approaching all-time lows with almost 96% of existing industrial space already in use.
The trend of buying up as much warehouse space as possible has been spurred on by pandemic conditions, which have coincided with a massive shift toward e-commerce. At the same time, in-store shopping has not significantly slowed. That heightened demand among buyers has forced retailers to scramble to meet it, but the vast majority of them have had trouble doing so without additional capacity.
In fact, an estimate from JLL anticipates that the U.S. will need to come up with another 1 billion square feet of warehouse space by 2025 to meet rising demand brought about by the e-commerce boom. And according to real estate investment trust Prologis, e-commerce companies will require an estimated 1.2 million square feet of space for every $1 billion in sales.
With the demand for warehouse space reaching new heights, Blackstone’s acquisition of the Cabot portfolio helps the company cover its bases.