By Peter Grant and Eliot Brown

Saudi Arabia's government fund is taking a two-thirds stake in a site for a planned Manhattan skyscraper, the latest sign that foreign investors are flocking back to New York's rapidly recovering real-estate market.

The Kingdom's Public Investment Fund is teaming with Related Cos., which has said it is planning to build a 1,200-foot tower on the site. The New York developer and the Saudis own this site one block from Central Park, which was purchased last year for more than $600 million.

Related initially planned a mixed-use project there with residential, retail and a hotel. But more recently the firm said it has been considering an office building instead to take advantage of the strong demand among businesses for top-quality space in the city.

The overall cost for the site and development is expected to be more than $1 billion, according to people familiar with the matter. The Saudi fund's final contribution is still being determined, but PIF has already invested about $200 million, these people said.

Foreign investors this year have been returning to New York City's commercial-property market, which is the largest, most liquid and one of the top performers in the U.S.

U.S. property developments and investments slowed considerably early on during the pandemic. They were hit again after interest rates soared in 2022, pushing down values. Foreign investor interest evaporated.

But lately investment in New York has been recovering as more workers return to the office, providing a new lift for neighboring businesses. Manhattan's office leasing during the first half of the year surpassed the same period in some years before Covid-19's outbreak, according to data firm CoStar Group.

New York City apartment rents are at all-time highs -- boosting the mayoral candidacy of democratic socialist Zohran Mamdani, who recently won the Democratic primary while pledging a rent freeze. The city's visitor numbers are just below record highs.

Eastdil Secured has seen the increase in foreign activity first hand. The real-estate brokerage and investment bank has $12 billion worth of New York real-estate deals completed or under way in 2025, according to Chief Executive Roy March.

"Virtually every one of them has some level of foreign capital involved, " he said.

Foreign investors purchased more than $2.1 billion of Manhattan commercial property in the first quarter of 2025 and the last quarter of 2024 combined, according to data firm MSCI. That total was five times as much as the same six-month period two years earlier.

The Saudi Public Investment Fund has assets of about $1 trillion, making it one of the world's largest investors. It is one of the major overseas funds returning to New York.

The fund has a close relationship with Related, best known for its sprawling Hudson Yards development on Manhattan's west side. In 2020, the Saudi fund made a debt investment in Related that is convertible into a 15% equity stake. Since then the two have consulted closely on numerous real-estate projects, including the proposed skyscraper at 625 Madison in Manhattan.

Saudi Arabia's Public Investment Fund has historically been a relatively small player in real estate outside of the country -- instead directing its property-focused dollars toward domestic megaprojects meant to transform the nation.

But in the past few years, it has planted its flag on a number of high-profile global properties and brands. Last year it took a 40% stake in Selfridges, a high-end U.K. department-store group that boasts a grand flagship by London's Hyde Park.

In 2022, it joined with other funds to put $900 million into the ultraluxury hotelier Aman, and in 2023 bought a 49% stake in the upmarket hotel chain Rocco Forte.

Write to Peter Grant at peter.grant@wsj.com and Eliot Brown at Eliot.Brown@wsj.com

(END) Dow Jones Newswires

July 07, 2025 10:17 ET (14:17 GMT)

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