Blackstone Group (NYSE: BX) is pulling out of a deal to buy an office property in Oakland, California, for $400 million.

The firm had planned to use funds from its non-traded Real Estate Investment Trust (BREIT) to buy the Upton Station building from real estate and infrastructure invest firm CIM Group. It will will forfeit a $20 million deposit to exit the transaction.

Blackstone Group Pulls Out of Oakland Deal

Uptown Station is a 397,000-square-foot building that is occupied by the payments company Square (NYSE: SQ).

Blackstone Group wanted to buy the building due to the increasing demand for Oakland real estate. Tech companies are looking for lower coast office space in the East Bay region. However, the sudden radical changes in the economy caused the asset manager to reconsider the deal and forfeit the $20 million

This is an early indication of the impact that the coronavirus might impact commercial real estate markets.

We do not know yet how many commercial tenants skip on April rent payments, but it is a lot of them.

Several restaurant chains have made the decision to conserve cash by mot making the payments. Buyers are reconsidering how much they want to pay for building and how they want to fiancé the transaction.

As is the case for most industries right now, the current economic slowdown is bad enough, but the uncertainty of how long this lasts and what conditions look like on the other side are causing many commercial real estate buyers to reconsider their options. Blackstone Group is clearly showing this as a sign of things to come.

By: Tim Melvin

Related: Blackstone CEO Steve Schwarzman: Fewer Things to Buy Today for Private Equity