Follow the money

Blackstone celebrated 25 years of its London office last week. In that time it has done as much as anyone to redraw the domestic investment – and real estate – landscape. The anniversary lays down a useful marker, and it begs a question: if the world’s largest alternative asset manager has called many of the shots over the past 25 years, what’s its view of the next 25?

There are clues in its history: with $1.2 trillion of assets under management, globally it oversees 250 portfolio companies, 12,600 real estate assets and more than 4,750 credit issuers. Yet sectorally, it has done anything but stand still. The business has all but retreated from US offices over the past 15 years; a sector that once accounted for 60% of its real estate equity portfolio now makes up just 2%. Today, some 75% now consists of what it describes as its “highest conviction sectors: logistics, data centres and rental housing”.

In the UK over the last quarter-century, Blackstone has gone from little more than zero to $100bn AUM, with those businesses employing 50,000 people.

The most successful investors succeed through change. And Blackstone is ready to do so again. Over the next 10 years it will invest as much as $500bn in Europe, more than doubling the $350bn portfolio it has built up over the last 25. To do so it will grow its loan book and target large infrastructure and private equity takeovers.

Infrastructure – that word again. Definitions these days are pretty loose, and Blackstone is eying what it sees as the infrastructure of the future, specifically that which fuels four megatrends: AI, power, life sciences and the digital economy.

And where does London and the UK figure in this ambition?

Well, cross Berkeley Square in Mayfair and you’ll see its 226,000 sq ft, European HQ coming out of the ground.

Developed by Core, the 10-floor building is nearly two-thirds larger than Blackstone’s existing office on the square and it will be home to more than 650 people working across private equity, real estate and private credit. The firm has doubled its headcount in London over the past three years and, with Britain Blackstone’s second biggest investment market globally, we can be confident that its exposure to the UK will rise too.

But this isn’t to labour a point about a Blackstone; it’s to better understand investor thinking – something that will be critical to the entire built world as priorities and opportunities shift.

So consider again Blackstone’s priority sectors: logistics, data centres and rental housing; AI, power, life sciences and the digital economy. Those are on many investor wish lists right now. More interestingly, they are right up there on the government’s too. Each secured an explicit or implicit mention in the chancellor’s spending review.

Looking at some of the mooted infrastructure improvements planned for (or at least hoped for) over the next 25 years and it’s inconceivable that Blackstone and its peers will not play a central part.

From HS2(.0), and whatever that might look like, to a new Liverpool-Manchester railway; critical new energy and water infrastructure; an extension to the Bakerloo tube line; 1.5 million homes started “by” 2029; the net zero transition by 2050; events-driven regeneration with, perhaps, another London Olympics in 2036 and, maybe, a FIFA men’s World Cup in 2038.

These will be opportunities that government, largely, enables, investors lead and the whole of the built world delivers.

It’s a little crude: but we should all follow the money.