Winter is coming to the economy — or at least a substantial snowstorm — that will impact real estate in a few years, said Kenneth Rosen, chairman, Fisher Center for Real Estate and Urban Economics at UC Berkeley to an audience at the Pension Real Estate Association's Spring Conference in Beverly Hills, Calif.
"We have a sea change going on," Mr. Rosen said. There's "an inflexion point" that could lead to a downturn in the next few years, he added.
For example, defense and non-defense spending could "explode the budget deficit," Mr. Rosen said. Another risk to the economy is that interests rates have been kept too low for too long, and the easy money can cause asset bubbles.
What's more, there is a labor shortage in the U.S. caused by opioid addiction and "an education mismatch" in which colleges and universities are failing to train people for the available jobs, he said.
"Job growth is key for real estate growth," Mr. Rosen said. "It fills buildings."
He recommended that real estate managers hedge against the coming headwinds.
"There will be a sugar high in the next couple of years" of economic growth," Mr. Rosen said. "We have had two years of extra innings (in the real estate industry), but we will see rising interest rates and capitalization rates are moving up."
Returns for core real estate could stay in the low double digits or it could turn negative, he said.
"Don't think the last five years will repeat. Stress (test) your portfolios," Mr. Rosen said.
In a separate panel discussion on cryptocurrency and blockchain, Mark Suster, a managing partner of venture capital firm Upfront Ventures, told the group not to expect blockchain to have an impact on the real estate industry for at least another three years. There are issues that need to be addressed, Mr. Suster said.
For example, he said in the blockchain world, records that are stored cannot be changed. So there is no mediator. As opposed to the non-blockchain world, where if $1 million disappears from a bank account, the owner of the account can get reimbursed by the bank.
"In a blockchain world, how do I get my $1 million back?" Mr. Suster asked. "These are issues that need to be solved."