Commercial real estate executives are predicting a strong finish to 2018, according to the Q4 2018 Economic Sentiment Index released by the Real Estate Roundtable yesterday.

The report measures the views of “CEOs, presidents, and other top commercial real estate” executives, regarding market conditions and future outlook across three topics: Overall real estate conditions, access to capital markets, and real estate asset pricing.

The Q4 index was rated at 50 out of 100—according to a press release put out by the Real Estate Roundtable, any number over 50 is viewed as “positive.” While the outlook remains strong, the latest index is a two-point drop from Q3.

The Future Conditions index was measured at 47, below the Roundtable’s threshold of a positive outlook. 45% of respondents expect their real estate asset values to be somewhat lower one year from now.

Chart courtesy of the Real Estate Roundtable

Survey participants also cited increased cost of construction as a concerning factor in the industry. “Construction rates seem to be five to ten percent higher this year in major markets,” said one anonymous respondent. “More than the tariff decisions coming into the system we feel this is pressure for a lack of labor.”

The cautious optimism, based on subjective quotes solicited in the survey, seems to be based primarily on the unusual over-performance of the industry across the last decade, rather than quantifiable signals of an upcoming downturn. “We are comfortable but cautious when looking at the market. People aren’t behaving absurdly, but it’s smart to be cautious this late in the cycle. We just don’t see a clear thesis on what could potentially happen to derail the market.”

Said another respondent, “Everyone is doing well, but also everyone is asking, how much longer do we have?”

Participants in the Q4 2018 Economic Sentiment Index included representatives from CBRE, Cushman & Wakefield, Silverstein Properties, Wells Fargo, TD Bank, Citigroup, and more.