Arsene Wenger's side submitted a 42 million pound bid for the Uruguay forward on Monday as the striker prepares to hand in a formal transfer request.
Despite a lack of Champions League football at Anfield, Owen insists that Liverpool's stature is on a par with Arsenal and argues that the 26-year-old would be better suited to Spain's top two clubs.
"Arsenal are a fabulous club and have got a great heritage but Liverpool are as big - if not bigger," Owen told BBC's Sportsweek. "I'd be very surprised if he were to move to Arsenal. Madrid or Barcelona would make more sense."
Owen feels that Suarez should not opt to join another Premier League club and feels that Arsenal would not be a force in Europe next season unless the squad is strengthened this summer.
"I'm struggling to understand why he would leave and stay in England with Liverpool being the stature they are," the recently retired forward continued. "From Suarez's point of view, you can understand him if he wants to reach the absolute pinnacle of the game - that's playing in the Champions League. Liverpool obviously are not in that at the moment.
"Truthfully, can you really see Arsenal winning the Champions League next season or going into the later stages? Unless they buy a good few players then I can't."