Blackstone co-head tells Retirement System Investment Commission scale, logistics and data centers underlie recovery case for real estate

Kathleen McCarthy, co-head of real estate at Blackstone, told the Retirement System Investment Commission on Feb. 27 that Blackstone’s scale and data advantages make it well positioned to deploy capital in a volatile market environment.

McCarthy said the firm’s global platform and ‘‘information advantage’’ — including portfolio companies and centralized investment committees — allow it to source large, complicated transactions and capture value as markets normalize. ‘‘We have 62 portfolio companies…12,000 assets that these companies operate,’’ she said, outlining why scale matters for sourcing and execution.

Why it matters: Commissioners are investors in Blackstone vehicles and the comments framed Blackstone’s view of where return opportunities may appear in the near term. McCarthy emphasized three structural drivers that support real estate: lower cost of capital, reduced new construction, and resilient cash flow in key sectors.

In sector detail, McCarthy said roughly 75% of Blackstone’s real estate exposure sits in logistics, residential assets and data centers. She described logistics as a long-term winner from e-commerce growth and onshoring, saying e-commerce’s share of retail sales has roughly tripled since 2019. On multifamily, she said deliveries had been high recently but demand and rent resilience remain, especially in supply-constrained Sun Belt and coastal markets. ‘‘Apartment demand and rent growth has been quite resilient,’’ she said.

On data centers, McCarthy called the theme ‘‘new’’ and propelled by digitization and artificial intelligence demand. She cited take-private deals — including QTS and a recent Asia purchase — and stressed that data centers face natural supply constraints such as power availability and complex build requirements. ‘‘The tenant for those projects is typically investment-grade technology firms on long leases,’’ she said.

McCarthy also addressed office and retail. She called office the most challenged niche, describing many assets as functionally obsolescent while noting selective, high-quality opportunities in markets such as Midtown Manhattan. For retail, she said grocery-anchored community shopping centers have been resilient and highlighted a recent large grocery-anchored acquisition as an example of scale-based access.

During a question-and-answer period, commissioners asked about policy risks, tariffs and local impacts. Asked whether new policy-driven costs could affect construction, McCarthy said higher construction costs would likely reduce new supply and could be ‘‘a silver lining’’ for existing asset cash flows. On tariffs and industrial markets she said port markets are most vulnerable, though she expects onshoring to be gradual. Asked whether immigration enforcement has affected residential demand, McCarthy said Blackstone has not observed material portfolio effects but acknowledged developers have reported construction-site disruptions in some cases. On whether data centers foster local ecosystems she cited construction and engineering jobs and the potential to anchor new power projects.

The presentation concluded after roughly an hour and commissioners thanked McCarthy for the briefing. The commission’s investment staff planned a deeper, staff-led dive into specific real estate holdings later in the meeting.