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Three Questions for Counselors of Real Estate Advisor Stephen B. Friedman

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Last week, Chicago-based real estate professional group The Counselors of Real Estate (CRE) released their annual "Top Ten Issues Affecting Real Estate 2013." This year's list includes factors from interest rates to potential terrorist attacks and natural disasters and it scored a lot of news coverage across the country. We talked with CRE advisor Stephen B. Friedman, president of SB Friedman Development Advisors, and asked him to weigh in on the group's findings:

Curbed: In terms of overarching themes, how would you compare this year's list of issues to last year's?

The list is intended to take a broad view and highlight issues that make the headlines – issues that often seem unrelated – and ultimately have an effect on real estate. The CRE and the CRE External Affairs Committee produced the list from discussion and surveys with the invitation-only professional organization's members. This group strives to present an objective dialogue about the issues, looking at both sides of each of them – the opportunities and the risks.

2012 was the first year The Counselors produced the list. This year it has been adapted to include more emphasis on the interest rate environment, health care and disaster recovery. These are current events that are shaping our national dialogue, and clearly have effects on real property and investments in real estate. Many of last year's issues are still issues. Of those, capital markets have become more liquid, but remain focused on major markets and core property types. The others remain, but new ones have also emerged.

Curbed: What other important issues were in the running that were ultimately left off the list? Why?

There are more than ten issues that affect real estate, of course. And some issues that were included on the 2012 list but are not represented on the current list are still highly relevant, such as student loan debt burdens and the aging of America as Baby Boomers retire (or can't retire). But actually it's more of an emphasis shift, not that these issues are not represented in the 2013 list.

For example, aging Baby Boomers are in large part the drivers of renewed development of senior communities, as well as medical facilities, diagnostic labs and physical therapy centers, which are increasingly needed as America ages. If the Baby Boomers themselves are too young to need senior housing, then it's their parents who do. Baby Boomers are very likely to be caring for their aging parents now or in the future. And by the sheer number of people in the Baby Boomer demographic, health care will continue to be an expanding area of development in real estate.

The student loan debt burden is undeniable. In this year's list, it is represented as part of the issue surrounding Echo Boomer Housing Demand. The 80 million children born between 1982 and 1995 are children of the Baby Boomers, so again, the large number of these young adults might be expected to drive housing development – but many of them are saddled with student loan debt, limiting their choices. This is likely to be a factor in the trend we are seeing in young people moving into cities instead of choosing suburbia. They are willing to trade size of housing for walkability and public transit access.

Curbed: How do these issues vary place by place -- here in Chicago, for instance?

Chicago is certainly seeing the influx of younger people to urban neighborhoods. Between students, millennials (echo boomers), and boomers, downtown Chicago within two miles of City Hall is the fastest growing downtown in America. By itself it would be the second largest city in the state. It is attracting 21st century firms due to labor force and amenity. So it is benefitting from some of the positive potential in the trends. Chicago also is vulnerable to feeling the effects of Event Risks, another issue on our Top Ten list. The Boston Marathon bombing – an event risk – sends a chill down every urbanite's spine. The central neighborhoods of Chicago might not feel a direct impact from a "Super Storm" like Hurricane Sandy, which devastated parts of the East Coast, but the risk of severe weather can be anywhere, and the Chicago area has had its share of tornadoes and flooding. Those are events you need to be aware of, but due to their unpredictability, you cannot plan for them at a specific time. And the ongoing pension funding debate in Illinois – a 2012 issue – remains unresolved and is generally agreed to be chilling investment and business growth.
·The Counselors of Real Estate [official]
·SB Friedman & Company [official]