What Inning?

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Blackstone Profits Jump As It Bets Big on Data Centers

Is Blackstone’s optimism about the commercial real estate market warranted? Their recent statement about hitting “the bottom” raises a critical question: what does “the bottom” mean in a high-interest-rate environment where intrinsic value is continuously shifting?

While property prices have dropped about 20% from their peak, this doesn’t necessarily mean they’re deeply discounted. These prices may simply be reaching what we’d call “fair value” now that financing costs are so much higher. This shift matters because intrinsic value—the real worth of an asset based on cash flow and adjusted for risk—must be recalculated when borrowing is far more expensive.

Since 2022, we’ve also seen an unusual negative spread between short-term and long-term interest rates, a strong signal of investor caution. This inversion challenges past valuation models that relied on growth and cap rate compression, forcing investors to seek higher returns to offset added risks. Combined with a wave of loan maturities, these pressures will likely make the path to stability longer than Blackstone suggests.

Adding to this uncertainty are the upcoming U.S. elections and increasing geopolitical risks, both of which impact market confidence. With these risks in play, patient investing is crucial. Private credit seems especially attractive now, offering yield opportunities that fit today’s adjusted intrinsic values. And for equity investors, 2025 may bring better deals as prices more fully align with the “higher-for-longer” environment.

What Inning in CRE? Pre-2022 game of zero interest rates is over and we are now in a NEW GAME!

Peachtree Group Peachtree Group Credit Jared Schlosser Brian Waldman Jatin Desai Brent LeBlanc Daniel Siegel Michael Harper Jordan Kellerman Brian Cho Daniel Savage