NEW YORK CITY- Blackstone isall-in on industrial, viewing the favored asset class that has seenvacancies at record-lows thanks to e-commerce as poised for evengreater growth as more and more investors seek to gobble upwarehouses closer to dense city centers. 

And aside from betting on thetried and true industrial asset class, the alternative assetmanager is tooting its horn about venturing off the beaten path asit continues to tap into the retail market more broadly through itsnon-traded REIT the Blackstone Real Estate Income Trust, accordingto Stephen Schwarzman, chairman, CEO and co-founder of Blackstoneat Goodwin's Real EstateCapital Markets Conference 2020. 

Blackstone started buyingwarehouse logistics in 2010, betting it was a good investment ase-commerce behemoth Amazon began to increase its market share,predicting that other retailers would follow suit, thus leadingBlackstone to sell-off its shopping malls and acquire an estimatedone billion square feet of warehouses across the world todate. "Once you understoodwhat was happening with online shopping and that every retailer inscale would need to do something similar [to Amazon],  thewhole game was gonna change," Schwarzman said. 

The firm remains with 800 million square feet of its warehouseportfolio after selling 200 million square feet. Despite risingprices in the sector, the firm has no intention of slowing down asinvestors compete for warehouses closer and closer to city centerslike bumper carts, mainly because tenants are willing to pay doublethe rent to offer one-day delivery to customers. The fundamentalsare promising given that rental costs are a very small part oftotal distribution costs in the supply chain for an onlineretailer.

The closer an investor buys an existing warehouse to a city, themore rising costs are justified because there is less competition,according to Schwarzman, who says the firm is aiming to penetratedenser markets globally for warehouse acquisitions. "Prices havegotten higher and the only way to offset that is to buy closer andcloser into cities," he said. "It's been great, and better thanmalls by the way."

Another focus for Blackstone is tapping the retail market morebroadly through its non-traded REIT BREIT, seeing a need in theretail market to bring its institutional quality product to abroader range of accredited investors. And with the retail market valued at anestimated $50 trillion, the demand for its product has been a happymarriage, according toSchwarzman.

"We said 'jeez wouldn't retail people like to have the same kindof institutional quality product that we do' where we've raisedthese enormous sums of money," Schwarzman said. "We went to theretail market and said 'we're not gonna price this the way otherpeople have where they take a huge amount of profit away from youand move it to us. We'll charge in line what we charge institutionsand give you the benefit of getting a high level of current incomeand appreciation that'll hopefully take you into doubledigits.'"

The retail market was largely receptive, he said. "We found outthere's a huge demand for this, but in particular with our name andcredibility, so we handle this like we do our other stuff."