Fireside Chat, Interview
From “The Way Forward" Conference: Jon Gray, President and COO, Blackstone
- Business air travel is projected to decline significantly over the 6, 12, and 18-month period preceding perceived vaccine availability, with a long-term expectation to revert to historical growth rates of over 5% annually once demand returns.
- Urban centers like New York and London will experience near-term changes including spaced elevators, temperature checks, and reduced density, with office space requirements potentially increasing from 300 to 200 or 150 square feet per employee.
- Remote work arrangements will likely persist for specific roles and hybrid schedules, though a full return to offices is expected to maintain organizational culture and onboarding effectiveness.
- Retail sector rent collections will face material headwinds for enclosed malls, department stores, movie theaters, and apparel tenants, while convenience retail, grocery-anchored centers, and services like restaurants and nail salons are forecast to perform better.
- Hotel occupancies in the leisure and drive-to sectors are expected to recover to the 50% range, whereas large meeting hotels will maintain low occupancy levels.
- Real estate investment dynamics will shift, with office values facing short-term challenges but offering attractive entry points for recovery, while logistics property prices are anticipated to rise, potentially complicating capital deployment.
- Dynamic real estate markets are expected in logistics, life sciences, and office hubs located in the US West Coast, Cambridge, London, Amsterdam, Bangalore, and Shenzhen, driven by global online consumption demands.
- Urban migration trends toward emerging cities such as Raleigh, Durham, Nashville, Austin, and Salt Lake City will likely accelerate over the next decade due to cost and tax factors, though the next two years may present fiscal challenges and potential tax policy shifts.
- Economic recovery is modeled to show an initial near-term increase followed by a slower, uneven recovery resembling a "Nike swoosh," with unemployment projected to drop from the high teens to the high single digits.
- Global online consumption will drive sustained demand for last-mile logistics, even as e-commerce sales growth potentially reverts slightly as consumers return to physical retail, though a significant behavioral shift will remain.
- Business meetings are expected to recover through a hybrid mix of simulcast formats and in-person interactions, with long-term betting against the hotel business deemed a mistake.
- Blackstone plans to utilize over $150 billion in dry powder, reserves, and staying power to deploy capital during market uncertainty, while enhancing diversity through task forces and improving communication to navigate dislocation.
- Delivering returns for pension funds will gain heightened importance as essential service providers are recognized, balancing the need to reaffirm culture against health and safety constraints.