The current U.S. economic expansion is already one of the longest since World War II, but because most investors have been relatively conservative in their investment choices, few reasons exist for concern about a sharp downturn in the near term, panelists said at the 2017 ULI Spring Meeting, discussing the latest ULI Real Estate Consensus Forecast. They also agreed that certain policy changes like corporate repatriation of profits or tax cuts would increase the possibility of further growth.

Matt Anderson, a managing director with Trepp, said he has become more bearish about the economy in recent weeks because of the failure of policy initiatives like health care reform to move forward, which has called into question his confidence regarding higher economic output.

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Avalon Bay’s forecast is mostly bullish, said Craig Thomas, a vice president for market research at the firm, but he expressed concern about the ability to find workers. “If we were going to reaccelerate job growth, where would the people come from?” he asked. “The job market has never been this tight. Job openings are at record highs.” Thomas noted that the labor participation numbers have improved lately, but that the U.S. economy is close to full employment.

Though unemployment is broadly low, it is even lower for college-educated employees in the good job markets, said Josh Scoville, a senior managing director with Hines. The high cost of living in places like San Francisco is beginning to drive migration to other markets, he noted. “Lower-cost places like Austin, or even Seattle or Portland, are winning at the expense of those high-cost places.”

Scoville said he believes bipartisan support exists for some corporate repatriation and that whenever tax cuts or repatriation of profits are approved, the result will be improved growth.

Because the current expansionary cycle has been more of a slow burn than a boom, Thomas said, the economy has not experienced the kind of inflationary risk, speculation, or imbalances in inventory and debt that typify a cycle that is nearing its end. “Everything is sort of conservative right now, and to some degree the policy uncertainty keeps people from taking aggressive risks that eventually lead to overinvestment and then disinvestment,“ he said.

Panelists agreed that transaction levels have been low so far this year. Buyers and sellers are in a standoff, Scoville said. “Ultimately I think buyers will wind up winning that. There’s a lot of fund lives coming to a close,” he said. “There’s a lot of debt that has to be rolled over, particularly the CMBS [commercial mortgage–backed securities] market, and it’s 2006–2007 debt. That’s going to shake the tree on deal volume as well.”

Thomas said that though some markets may be overbuilt in multifamily housing, other sectors need new supply. “There’s no overabundance of well-planned, mixed-use, walkable, and transit-oriented communities that we all work on,” he said. “There is a plethora of disorganized, poorly planned communities that don’t allow people to thrive and don’t allow folks to reach their potential.”

Companies like Blackstone Group have billions of dollars to invest, Scoville said, and the amount of “dry powder” is at an all-time high, but it was also high in 2009 when prices were much lower.

A gap exists between high-productivity and low-productivity firms, said moderator Melissa Reagan, head of real estate and agriculture research with Metlife, and it is possible some of the low-productivity firms will cease to exist. This could unlock some gains for the higher producers, she said.

In response to a question from the audience, Reagan said she thinks the Phoenix market is interesting. “Particularly downtown, I think there’s interesting new development happening there, where no one cared about Phoenix five years ago, and ten years ago it was in the middle of a housing boom and then bust.” Places like Pittsburgh or Salt Lake City are also interesting, she said, because they have the potential to become more affordable U.S. technology hubs.