Funny thing this globalization: Just when you think everything is starting to settle down and maybe, just maybe, the world's economic plight is finally on the mend, along comes news from a place such as Dubai that threatens to send everything into a tailspin all over again.
Stock markets have already felt the shock waves from the news that Dubai's state-owned investment arm--Dubai World--needs to restructure its debt...a fancy way of saying, it simply can't pay its bills. Bills, by the way, that come to some $59 billion. And, there is no app to download that can easily fix that!
But, as Reuters reports, the bigger worry now is what Dubai's debt might do to the property market in the United States where commercial real estate is already on shaky ground, right alongside residential real estate, in most parts of the country.
Following news of Dubai's economic woes Friday, the Dow Jones U.S. Real Estate Index nosedived by 2.9%--or as Reuters correctly reports, "nearly twice the decline of broader U.S. market indexes."
And, it is easy to see why: Dubai World has a big stake, along with MGM Mirage, in the huge Vegas CityCenter project. An arm of Dubai World also has substantial investments in everything from the Mandarin Oriental and W hotels to the newly re-opened Fontainebleau in Miami Beach.
Says Sam Chandan, the chief economist at Real Estate Econometrics in New York, and quoted by Reuters, "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 could have the effect of driving real estate prices down more than they have been already.
Unfortunately for the fledgling, and still unproven, world economic recovery, what happens in Dubai doesn't stay in Dubai!
Charles Feldman is a journalist and media consultant and co-author of the book, "No Time To Think, The Menace of Media Speed and the 24-hour News Cycle."