Armed with oil profits, two Middle Eastern buyers recently snapped up New York’s Chrysler Building and General Motors Building for an estimated $3.7 billion. But their acquisitions of the two trophy offices belie their waning interest in U.S. commercial real estate this year as the U.S. economy stumbles and property prices dip.
Earlier this month, Abu Dhabi Investment Council, one of the world’s largest sovereign wealth funds, bought a 75 percent stake in the Chrysler Building for an estimated $900 million. In June, Dubai-based Meraas Capital LLC was part of a joint venture that bought the General Motors Building for about $2.8 billion.
But Middle East investment is expected to be flat or down this year compared with a banner year in 2007. This year’s total sales will probably fall far below last year’s $8.2 billion in deals.
Other countries have similarly pulled back their investment in U.S. real estate, and the disruption in the credit markets has halted many deals. At midyear, sales of office buildings were just a third of last year’s total through the first half. Retail property sales were down 62 percent; industrial sales, down by half; and apartment sales, down by 45 percent.
Prices, especially in suburban markets, have started to slip, making many investors jittery about getting into a sliding market.
But the current investment conditions have pluses for cash-rich Mideast investors who have been able to grab landmark buildings, which are more likely to hold their value even in a lackluster market.
