The Counselors of Real Estate, a Chicago-based industry group, recently released the "Top Ten Issues Affecting Real Estate in 2013."

No. 10: Retail malaise and repositioning.The Internet has forever changed retail, meaning there's less demand for bricks and mortar stores. Now, shoppers are all about the retail "experience," which includes entertainment and restaurants that attract families after dark.

No. 9: The impact of technology on office space.Technology means we don't need to be tied to the cubicle, and younger workers are content to work anywhere using mobile phones and laptops.

No. 8: Global real estate growth and risk. U.S. investors are focusing on emerging markets such as China, Brazil and India, plus distressed properties and debt in Europe. And foreign investors are finding the U.S. an attractive target .

No. 7: Increased U.S. natural gas and mining reserves: North Dakota, are you listening? New mining technologies mean more investment options for real estate. But be aware of environmental issues associated with "fracking" and the inherent problems with boom-and-bust economies.

No. 6: Echo Boomer housing demand. The 80 million children born between 1982 and 1995 are now young adults who prefer an urban lifestyle. Watch out, suburbs.

No. 5: The effect of climate change and weather on coastal properties. Not a huge issue in Minnesota, but weather patterns are becoming less predictable, negatively impacting public infrastructure and development as a result.

No. 4: Event risks: A terror attack in Boston. Tornados in Oklahoma. Financial crises in Greece, etc. No one can predict catastrophic events, but the likelihood one will occur is all-but assured. And that's bad for the real estate biz.

No. 3: Resurgence in the capital markets: Debt markets like real estate again. New properties are attracting cash and others are being refinanced. Underwriting requirements are growing less stringent, and loan-to-values are increasing, CRE says. But this "raises the concern that the U.S. could return to a period of too-lenient underwriting and over-leveraging."

No. 2: Health care: Demand for medical services and facilities will continue as Baby Boomers age and as the Affordable Care Act takes effect. 

And the No. 1 issue affecting real estate this year? Drumroll please.

Low interest and capitalization rate risks: Interest rates are historically low, and cap rates continue to decline in most U.S. markets, "posing risk to equity values if cap rates should rise significantly," CRE says. If interest rates edge up as the economy improves, this could lead to cap-rate decompression. Proceed with caution.

Janet Moore covers commercial real estate for the Star Tribune.



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