Dubai could change the face of real estate
Anyone following the world market knows that Dubai is in the middle of a meltdown and for those not following, you may not yet know that it could be detrimental to the United States. The commercial real estate sector in America is already struggling and not expected to see recovery start until 2011 and Dubai’s trouble could extend that forecast out even longer.
Dubai World is a massive conglomerate that has $59 billion in liabilities and recently said it will restructure its debt, setting off a global stock market selloff and on Friday, the DJUSRE (Dow Jones US Real Estate Index) fell 2.9%, almost double the decline of any other sector at close last week as Dubai World may unload prestigious properties across the globe (including the U.S.) at less than prestigious prices, driving down the price of commercial real estate. This means the already struggling MGM Mirage could be one of the properties to be dumped, along with W hotels in New York or Fontainebleu Miami Beach resort.
The “potential for contagion” is the critical threat to the US commercial real estate sector, said Sam Chandan, chief economist at Real Estate Econometrics LLC in New York. “It has the potential to spill over into the broader perception of real estate development and real estate as being a very risky area for exposure.”
This morning, the United Arab Emirates noted it could step in and become part of the restructuring process, but nothing is finalized as of yet. It’s a small world and we’re all connected, especially in real estate.