BREIT's Returns Reached Less Than 2% In 2024, Weighed By Turbulent Market

The commercial real estate market’s sluggish recovery weighed down one of Blackstone’s flagship funds for the second consecutive year. 

Blackstone Real Estate Income Trust's returns reached 1.95% in 2024. It’s the second year that Blackstone’s managers failed to reach the 5% return floor required for the firm to reap profits. 

The investment giant acknowledged headwinds in the real estate sector impacted the fund’s performance but said that a market rebound was already beginning to manifest. 

“While the sharp increase in base rates impacted fourth quarter performance, we see substantial data indicating we are in the early stages of a real estate recovery supported by healing capital markets and collapsing new construction in our key sectors,” a Blackstone spokesperson said in a statement. 

BREIT's annual return was hamstrung by a 1.1% slip in value in December primarily due to markdowns in rate-sensitive sectors like multifamily and net-lease properties, the investment giant said in a January note to investors. 

Over the course of the year, the fund was buoyed by strong data center sector performance and positive mark-to-market interest rate strategies. 

Since its inception eight years ago, the fund has delivered a 9.5% annualized net return on Class I shares driven by its concentration of investments in high-growth sectors, including data centers, warehouses and Sun Belt rental housing, the spokesperson said. 

Fund managers told investors in the January note that a real estate recovery was underway, but not V-shaped, with tailwinds from a healthy economy, a decline in new construction starts and a reduction in the all-in cost of capital. 

Rental housing accounts for 49% of BREIT's portfolio, with 25% industrial assets and 13% exposure in data centers, according to the investor note. 

The modest growth in 2024 followed a 0.5% loss in 2023. The fund faced challenges during the pandemic as investors shuffled cash out of real estate.

BREIT capped redemptions for each quarter from November 2022 and through the end of 2023 to help stem the flow of cash out of the fund.

Net redemptions at BREIT are down 97% from their January 2023 peak, according to Bloomberg.