Business & Tech

At real estate conference, there’s talk of a coming slowdown

New office construction is booming in Cambridge (above) and Boston.
Katherine Taylor for The Boston Globe
New office construction is booming in Cambridge (above) and Boston.

Economists attending a major real estate conference this week in Boston generally agree on two things: The boom times for building in the United States are due for a slowdown, but it probably won’t be a crash.

That’s the forecast from the Urban Land Institute, a real estate trade group that surveyed dozens of its members — developers and investors who drive the US real estate economy — and found predictions that economic growth, job growth, and real estate price increases would slow over the next few years.

“It feels like a plateau,” said Andrew Warren, director of real estate at consulting firm PwC, at ULI’s Fall meeting at the Boston Convention & Exhibition Center on Wednesday. “I don’t really see a sharp downturn.”

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And the experts expect Boston will remain among the strongest markets in the country, with a survey of ULI members ranking it seventh among 80 large US markets in overall real estate prospects, and number one in demand from investors.

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That means the spigot of cash into the region’s real estate market will likely keep flowing, fueling new projects and flipping office and apartment buildings into the hands of global investors seeking long-term stability. Despite its costs and complexity, Boston has one essential ingredient investors are looking for, said Tom Toomey, CEO of apartment developer UDR: Brainpower.

“You’ve got a highly educated workforce, and that draws capital,” said Toomey, whose firm recently opened a nearly-600-unit apartment building on Harrison Avenue in the South End. “That capital builds a lot of buildings.”

But there also are hurdles.

Costs for labor and construction materials are climbing nationwide. So are interest rates. That’s squeezing profit margins for developers and could put some projects on hold if rent increases don’t keep pace. Population growth could slow, too, especially in parts of the country that rely on immigration to add new people, said Arthur Margon, a partner at Rosen Consulting Group.

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Those issues, plus already-high costs of living and doing business, could be a concern for older markets in the Northeast. While Boston and Brooklyn fared well in the rankings, Hartford, Providence and Portland, Maine, all placed in the bottom five of ULI’s 80-city rankings.

Seven of the top 10 real estate markets were in the South, where large employers are migrating to tap growing populations, at lower costs. That gives people more opportunities to work in those cities, said Mary Ludgin, managing director at real estate investment firm Heitman.

“You have jobs following people,” she said. “Look at places like Raleigh, N.C. People are graduating from college now and staying there, instead of leaving.”

But that’s what’s happening in Boston, too. Businesses are expanding here, especially in the core of the region in Boston and Cambridge, scooping up blocks of office space and driving demand for new housing, which is fueling investment. When that might end, said ULI chief executive Ed Walter, is anybody’s guess.

“This recovery has already lasted a lot longer than many of us thought,” he said.

Tim Logan can be reached at tim.logan@globe.com. Follow him on Twitter at @bytimlogan.