Blackstone Group, billed as the world’s largest alternative asset manager and commercial property owner, posted a second-quarter loss as the values of its private equity and opportunistic real estate portfolios declined after sharp gains a year earlier.

But the New York-based firm said its performance still far outpaced the broader market, and its real estate portfolio, concentrated in residential rental and logistics properties, will be an important advantage that will help it weather high inflation and other economic concerns. Capital raising for new investments remained strong.

Total assets under management rose 38% to $940.8 billion as fundraising of $88.3 billion last quarter made the second-largest inflow Blackstone has seen “in the midst of market chaos,” Blackstone Chairman, CEO and co-founder Stephen Schwarzman said on a conference call. About $49 billion of the money it raised came from its real estate business, including $24.4 billion it raised in its 10th global opportunistic fund.

The company's position in the commercial real estate industry means its performance can be considered a market snapshot amid rising interest rates, inflation that has hit a 40-year high, and shifts in residential property demand. In a week where mortgage applications were reported to have hit a 22-year low, investors and analysts are looking for indicators of changes in consumer sentiment that can affect multifamily and other commercial real estate, as well as prospects for companies.

In one sign of the economic shift playing out in corporate America, Blackstone said its second-quarter loss of $29.4 million compared with profit of $1.31 billion a year earlier. That came as the value of its corporate private equity fund, including investments in businesses such as the Bumble dating website and Ancestry digital family history service, dropped 6.7% after a 10.1% jump a year earlier.

The value of its opportunistic real estate portfolio, which invests in “undermanaged, well-located” properties worldwide, dipped 1% after a 35% increase a year earlier. And the value of its core plus real estate investments rose 2.3% following a 25.5% jump in 2021. Those assets include logistics, residential, office, life sciences and retail properties located in global gateway cities.

While the value of its real estate portfolios declined or saw slower growth, Blackstone said its performance on various fronts still sharply outpaced that of its peers and broader real estate and other market indexes.

With the additional money, Blackstone’s total real estate assets under management increased 54% to $320 billion, outpacing its private equity, hedge fund and other businesses.

“These results are stunning versus losses most investors are experiencing,” Schwarzman said. “We had anticipated higher interests rate and more pervasive inflation for some time and positioned our portfolio to reflect that. We are seeing a clear benefit of that foresight today. Looking forward, market conditions will remain challenging.”

Jonathan Gray, Blackstone’s president and chief operating officer, said its bets on “hard assets with short-term duration with pricing power” will continue to pay off and help the firm navigate market uncertainty. Those include its residential rental real estate and logistics property investments, which make up the majority of its real estate portfolio.

He said increased online shopping is providing a boost to the logistics space, while supply chain concerns and companies moving away from “just in time” inventory management — or making goods when orders come in versus stocking them — translate to additional demand for warehouses.

For both residential and industrial property types, “the backdrop is extremely constructive” with “record low vacancies,” he said.

While Gray expects the high residential rental rate growth “at some point will come down,” he said the decline in new construction and home starts, coupled with increased mortgage rates and construction costs, bodes well for the rental market.

“People still need to live somewhere,” he said. There’s “less new supply. We have a big infrastructure shortage. That pushes people to the rental market.”

Meanwhile, while higher interest rates and borrowing costs have led to real estate investment trusts including SL Green Realty — Manhattan’s largest office landlord — and Vornado Realty Trust to shift how they plan to pay down or refinance debt, Gray said as a lender Blackstone's floating-rate debt business will benefit. The firm's fixed-income real estate debt business is heavily oriented toward floating-rate debt, according to Gray. Every time the Federal Reserve raises rates, the returns are “strong” for that business, he said.

Among some of Blackstone’s notable real estate transactions last quarter, it sold the Cosmopolitan luxury hotel and casino in Las Vegas, which it said was its real estate business’s most profitable single-asset sale. The firm also recapitalized Mileway, a pan-European last-mile logistics company, in what it described as “the largest-ever private real estate transaction globally.”

Blackstone also completed the $7.6 billion purchase of PS Business Parks, the owner of 27 million square feet of commercial properties consisting primarily of industrial space that appeals to small and midsize companies.