Given the liquidity issues besetting the US economy at present, Shapiro says, "we should welcome the investment of these wealth funds. They're responsible, conservative investment professionals, and the contribution they're making to our economy right now is unique. We should be less concerned about the motivation of foreign interests to invest in the US, because without them, we would be unable to sustain some very important segments of our own economy."

Foreign investment has accounted for more than 48% of YTD investor dollar volume in Manhattan commercial properties, according to Cushman & Wakefield's midyear report issued last week. Lack of supply and a weak dollar were cited as key factors in boosting foreign investor volume from the 12% to 15% levels seen in recent years.

Additionally, in the 2008 annual survey of the Association of Foreign Investors in Real Estate, the US was deemed the "most stable and secure" country for real estate investment and the country with the best opportunity for appreciation. AFIRE's survey, conducted in Q4 '07, also found that New York City had vaulted to the top of the worldwide list of cities for foreign investment, followed by Washington, DC. The two US cities elbowed last year's chart-topper, London, into third place. And despite public perception that wealth funds are tied to Middle Eastern countries such as Kuwait or Dubai, the second largest state-owned fund in the world is reportedly Norway's Government Pension Fund, similarly driven by petrodollars and valued at $400 billion.

And while the wealth funds have come into prominence over the past 12 months, Shapiro says the basic idea is nothing new. "Virtually every major real estate owner and developer has a capital partner behind them," he says. "The wealth funds have emerged in the past 12 months as a ready source of investment capital. But this is not a novel idea. There are large investment funds in the US that have been providing the capital to drive real estate for the past 100 years, if not longer."

Will foreign investors keep up the pace in Manhattan and other major real estate markets after the supply of available trophy properties runs out? Shapiro and Fasulo say yes. "The wealth funds are looking for one of two things: either iconic properties that are universally recognized or the kinds of returns we would associate with any opportunistic real estate investor," says Shapiro. "They will look beyond the iconic properties if they can partner with an operator with a superior track record and a spotless reputation. Their challenge is in performing due diligence from a distance of 6,000 miles."

Fasulo adds, "there's a perception out there that this is dumb money. That's a pretty naïve view of how sophisticated some of these wealth funds have become over the years. Many of them have operations just as sophisticated as the top institutional investors here in the US. They're going to go where the opportunities are. Unless the dynamics change significantly, I see this continuing to go forward as we've seen in the past six months."