The U.S. can count on a recession by 2019 or 2020, but to Spencer Levy, that’s a good thing.

Speaking to the 21st annual real estate conference sponsored by the University of San Diego’s Burnham-Moores Real Center for Real Estate, Levy asked the audience when the current economic cycle would end and a recession would commence.

“The wrong answer is we have no recession,” said Levy, national research director for the CBRE brokerage.


He said the economy is stuck in a period of “cyclical stagnation” with the gross national product growing by an anemic 1.6 percent last year. But a recession would be a “good thing,” he said.

“I’m OK with peaks and valleys,” he said. “If we have a recession in two or three years, it can serve as a ‘clearing’ event.”

The best thing that can take place now, Levy said, is for employers to create thousands of new jobs and bring people back into the workforce. But he said President Donald Trump’s commitment to increasing manufacturing and infrastructure spending will not do the trick.

New manufacturing will entail wide use of robots in factories, not traditional blue-collar jobs, because relatively high U.S. wages can never compete with lower-cost production in other countries, he said.


The better strategy is to increase service jobs, led by health and education. Levy cited Rolls Royce’s business model of giving jet engines to customers but signing them to long-term contracts.

“It’s the perfect example, even in the most complex goods in the world,” he said. “They’re devaluing products in exchange for services.”

Infrastructure spending is also suspect, because it will likely be spread among many big and small markets and not in urban centers where it can do the most good.

“I don’t think we should hang our hat on infrastructure because it is so hard to do efficiently,” he said.


On other trends, Levy said industrial space is the hottest commercial real estate type because of warehousing and e-commerce needs.

But brick-and-mortar retail actually has a positive future for two reasons: Shoppers want “experience” shopping surrounded by colors and brights lights — he flashed a photo of Istanbul’s bustling bazaar. Community and neighborhood centers are strong because few have been built in recent years.

“We’re late in the cycle, no matter how optimistic you are,” he said. “I see toppiness in (central business district) office and multifamily (housing).”

Economist Arthur Laffer also weighed in on the economic outlook, saying lower taxes and other changes proposed by Trump are likely to be enacted because of strong support in Congress, the states and the judiciary.


But he expressed concern about protectionist talk, such as imposing a border tax, and cutting welfare benefits before reforms take hold. He predicted large deficits and big increases in the national debt, although a stimulated economy will produce long-term economic benefits.

“Once the machine starts rolling, you’ll have everyone jumping on board to join the supply-side revolution,” Laffer said, just as Democrats as well as Republicans did in the 1980s when he was advising President Ronald Reagan and voting for Bill Clinton in the 1990s, because both favored lower taxes.

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roger.showley@sduniontribune.com; (619) 293-1286; Twitter: @rogershowley