NEW YORK CITY—Commercial real estate executives seeking reinforcement of the optimistic sentiment permeating today's market were in the wrong place Wednesday morning. Economist Dr. Sam Chandan shared words of concern and caution during a keynote speech at ABS Partners Real Estate's executive economic briefing in Midtown, as did Seth Pinsky, EVP of RXR and former president of the city's Economic Development Corp.

“Even though it may not feel like it, this month marks the five-year anniversary of the end of the recession,” noted Chandan. “On average, recoveries have lasted just under five years, so if this was an average recovery, then in July we'd be on the cusp of recession. This has been different but we need to be cautious. Unless we believe this recovery is an outlier, it's a pretty safe bet that within the next 60 months (five years), we'll find a stress on activity. If your planned exit from an asset is within five years, you're going to face some challenges.”

He also discussed some issues in the housing and labor markets that could hurt commercial property. “It's seven or eight years after our most significant housing crisis and the bias toward renting remains very strong. Housing remains weak and there's a question of whether we're building too many apartments.

“A significant drag on housing is the weakness of the labor market,” Chandan continued. “We're finally at the point where we've replaced nearly all the jobs that we lost in the downturn. But it's never taken this long to get people to work and there's too little debate on this in the public sector. We only have 58% of the population working.”

Meanwhile, Pinsky has his eyes set on City Hall and what its doing. “There's a negative symptom of the city's success: the laws of supply and demand have kicked in and affordability has declined. For us to be successful long term, we need a diverse economy—meaning jobs across the spectrum—and a diverse workforce. So far, the administration has been pretty focused on the affordability and on the supply. The details are sketchy but schematically, this is where they want to go.”

So what tactics is the Mayor likely to deploy, and what should the industry be rooting for? Advised Pinksy, “We need to remember what has worked for us to date. One of the most important measures accomplished by the Bloomberg administration was its investment in improving quality of life and in infrastructure. That allowed us to attract young residents so that when areas like the East Village became too expensive, they could look across the river to Williamsburg where now, trains that don't break down every 2,000 miles and residents are not worried about safety."

Sounding mayoral himself, Pinsky issued a word of caution about Mayor de Blasio's laser-like focus on the issue of affordable housing.

“If we want to accomplish everything that de Blasio wants to do, even just on the housing front, we have to stay prosperous; we must have the economy functioning on a high level.”

To that end, he noted, the Mayor has yet to make clear his plans. “We haven't seen a clear economic development agenda articulated from the administration That doesn't mean there won't be one but we don't know what it is yet and the administration can't solely focus on the cost of housing, it also needs to focus on economy.”

There is, however, one upcoming policy change Pinsky is fairly certain about. “I think the 80/20 program will likely change. The administration wants to squeeze more out of the development community.

“But I don't think that's a bad thing,” he asserted. “There's a lot of wealth created for the development community, and for the city government to ask for a share of that wealth to enhance the public good isn't bad.”

Still, Pinsky again advised the administration—if it's listening—to exercise caution. “The challenge is how much you squeeze, because there isn't an infinite amount of wealth and at a certain point, you can have a detrimental effect on the economy and projects won't get completed. Where the administration draws the line is a big open question.”

Also important he says, is at what point in the cycle the administration “draws the line. Sometimes programs get reformed when we're at the top of the market and then the market suddenly turns and the impact of that reform is much more negative than intended. So we need programs that work not just at the top of the market but in other points in the cycle.”