What's going on?
On Sunday, American private equity titan Blackstone announced its purchase of several US warehouses from Singaporean logistics firm GLP, paying $19 billion in the biggest private real estate deal ever (tweet this).
What does this mean?
Blackstone’s already one of the world’s largest property owners, and snapping up more warehouses will almost double its US industrial footprint. They’ll mostly be used for ecommerce logistics – like Amazon fulfillment centers: demand for such industrial warehouses is increasing thanks to ecommerce’s continual growth. Savvy investors getting in on the trend have helped the valuations of publicly listed warehouse owning firms rise 30% this year, according to The Wall Street Journal.
Why should I care?
The bigger picture: Nothing happens in a vacuum.
Ecommerce illustrates the chain of knock-on events that affects several industries beyond retail. As online retailers succeed while traditional brick and mortar retailers struggle, mall owning real estate companies may struggle too, losing income as tenants shut up shop. Real estate companies that own industrial warehouses 😉, however, may thrive as demand rises. Cheaper mall and high street rents may then attract undesirable neighbors and experiential pop-up shops – which can, in time, make neighborhoods totally unrecognizable. Investors aim to stay one step ahead of these changes in order to generate profits when other investors catch up.
For you personally: Blackstone doesn’t have to be alone.
Property investing is generally considered relatively safe compared to the stock market – and is becoming more accessible to ordinary people. And while stocks can be bought and sold with relative ease, real estate is typically a lot harder to move around, making its value less volatile. British commercial real estate (like warehouses and shops) investments delivered returns of 8% in 2018, while residential (like houses and apartments) returned around 3%. Stateside, residential property prices grew by 6% last year, while commercial property values remained stable.