The firm that helped build the modern private real estate market is now facing a slowdown in its property business, even as the rest of the firm continues to thrive.
Across credit, private equity, and infrastructure, Blackstone keeps breaking records. But its real estate division, once the engine of its growth, is shedding assets and executives.
Blackstone’s assets under management (AUM) reached nearly $1.4 trillion in the third quarter of 2026, a record driven by growth across credit, private equity, and infrastructure. Fee revenues also climbed 17% in the first nine months of the year compared with 2025, according to the firm’s third-quarter earnings release.
Yet that growth masks a widening divide within the business. While its major divisions continue to expand, Blackstone’s property arm is losing assets, absorbing write-downs and undergoing a leadership shake-up that has thinned its senior ranks over the past year.
Blackstone is the world’s largest commercial property owner, so what happens in its shrinking portfolio has implications for the broader private property market and its path to recovery.
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Higher borrowing costs weigh on Blackstone’s real estate fees and returns
Distributable earnings from the property segment fell 10% year over year through the first nine months of 2026, according to Blackstone’s third-quarter earnings release.
Management and advisory fees for the division dropped 9% to $628.8 million in the third quarter, and fee-related earnings slid 9% to $499.2 million.
Property AUM shrank to $309 billion from $320.5 billion a year earlier, making it the only one of Blackstone’s four segments to lose assets over the past twelve months. That figure is roughly $28 billion below the division’s peak of about $336.9 billion at the end of 2023, according to Blackstone’s Q4 2023 earnings release.
The performance gap between the division’s strategies also widened, with opportunistic funds losing 3.2% in the quarter while core-plus funds gained 1.6%, Blackstone’s Q3 earnings confirmed.
Jon Gray, President & Chief Operating Officer at Blackstone, acknowledged on the firm’s earnings call that cap rates widened across the portfolio as bond yields surged.
Gray maintained, however, that underlying property operations were improving despite valuation pressure from higher interest rates.
<strong>…Importantly, while higher rates are a headwind to the sector’s recovery, strengthening fundamentals are a tailwind…,</strong>
Write-downs on European properties and U.S. apartments drove the opportunistic decline, while data center and logistics holdings supported the core-plus gain, the Institute for Real Estate Operating Companies showed.
Not all of the division’s strategies have struggled. Blackstone’s latest global opportunistic fund appreciated 17% over the twelve months.
Executive departures and troubled loans add to Blackstone’s real estate challenges
The financial pressure has coincided with a reshuffling of the division’s most senior leaders. Nadeem Meghji, Blackstone’s Global Head of Real Estate, announced his departure in September 2026 after nearly two decades at the firm, The Wall Street Journal reported.
His exit followed the November 2025 departure of co-head Kathleen McCarthy.
About a dozen senior managing directors have left the property group over the past three years. David Levine and Giovanni Cutaia, both longtime Blackstone veterans, were elevated to co-lead the division, providing new leadership as the firm navigates the transition.
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The turnover has also extended to Blackstone Real Estate Income Trust (BREIT), the firm’s flagship non-traded fund, which has cycled through three chief executives in less than 12 months, AltsWire reported.
A $1.3 billion commercial mortgage-backed securities (CMBS) loan tied to a Blackstone apartment portfolio also entered special servicing in October 2026, after missing its maturity date, Commercial Observer reported. The loan, originated in 2021, still had a $517.7 million balance when it transferred to the servicer.
Falling construction supports Blackstone’s hopes for a property recovery
Despite those challenges, Blackstone’s executives have anchored their recovery thesis to one structural factor: the sharp decline in new construction across the sectors where the firm has concentrated its investments.
New supply across major U.S. asset classes has dropped by roughly 60% from peak levels, a January 2026 Blackstone outlook noted.
Stephen Schwarzman, Chairman, CEO, and Co-Founder of Blackstone, described the supply environment on the earnings call as among the most constrained of his career, calling it a rare advantage for existing property owners.
Michael Chae, Blackstone’s Chief Financial Officer, added that widening cap rates were partially offset by strong leasing momentum in data centers.
The firm has concentrated about 54% of its global property holdings in data centers and logistics, the Q3 earnings release confirmed.
BREIT held 30% of its portfolio in data centers and 20% in industrial assets as of September 30, 2026, the fund’s quarterly SEC filing showed, and posted 21 consecutive months of positive returns with approximately 11% net over the past year for its largest share class.
Blackstone expects property fees to stabilize as recovery efforts continue
Gray and Schwarzman have argued that shrinking construction pipelines should eventually lift property values, but the division’s distributable earnings have continued to contract even as those indicators improve.
Chae acknowledged that multifamily housing was among the hardest-hit areas, while data center leasing provided a partial offset.
He also indicated that Blackstone expects property fee revenues to stabilize heading into 2027 as BREIT’s growth offsets the drag from older investment vehicles.
Blackstone’s leadership is betting that constrained construction, stronger leasing demand, and its growing exposure to data centers and logistics will help restore momentum to the property business. But declining AUM, lower fees, and continued leadership turnover suggest that the recovery remains a work in progress.
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