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The European real estate market is ‘certainly not as compelling as it was a few years ago’, but it is still a decent period to invest, according to Jon Gray, Blackstone’s global head of real estate.

Speaking at the annual INREV conference in Barcelona last week, Gray said Europe was headed for a period of modest growth rather than a downturn.

‘There’s no question that we’re past the distress phase. Things are not nearly as cheap as they were three years ago and what we did in the last three years may be hard to replicate. But if you look at the price per m2, assets are still trading below replacement costs. That discount gives me some comfort. Yields may not fall as much as they have, but it doesn’t feel like there’s a crazy bubble.’

There’s not a lot of new building, he added. ‘We bought $30 bn (€28 bn) worth of property in Europe in the past three years, but I think it’s still a pretty good time. When you see the cranes come out in a big way, that’s when you need to become cautious.’

Blackstone has built up a $1 bn portfolio of assets in the southern European markets of Spain, Italy and Portugal, Gray said. ‘There has been a lot of dislocation and legacy distress in southern Europe, which is why we like these markets. But it is changing and financing is coming back. Supply is low and the economies will come back, although not in a robust way.’

One of the advantages Blackstone has over its competitors is that it has access to a lot of capital, Gray said. ‘We invest in a lot of geographies and buckets and can move easily between asset classes.’

Commenting on new technology, Gray said it was impacting on real estate ‘in a big way’. ‘It is affecting certain asset classes more than others. Retail will be affected more as shopping moves online. It will also affect emerging markets more as they don’t have a physical land base. We’ll see more of an impact in China than in Europe and the US. Logistics is also a big beneficiary.’

Online shopping is not a real alternative, however, for food or discount apparel, he added. ‘It’s hard to do food or discount apparel over the internet. There are also a lot of costs involved in packaging and in the last mile delivery.’

As technology becomes more democratised, urbanisation will spread to emerging countries, he predicted. ‘London and New York and major cities will continue to benefit. Technology really facilitates that.’