Clifford H. Schwartz, CPA

PricewaterhouseCoopers LLP

Suzanne McElyea, CPA

PricewaterhouseCoopers LLP



Real estate encompasses a variety of interests (developers, investors, lenders, tenants, homeowners, corporations, conduits, etc.) with a divergence of objectives (tax benefits, security, long-term appreciation, etc.). The industry is also a tool of the federal government's income tax policies (evidenced by the rules on mortgage interest deductions and restrictions on "passive" investment deductions). The real estate industry consists primarily of private developers and builders.

Other important forces in the industry include pension funds and insurance companies and large corporations, whose occupancy (real estate) costs generally are the second largest costs after personnel costs.

After a decade of growth spurred by steadily falling interest rates in an expanding economy, the new millennium brought in its wake a series of traumatic events that highlighted the uncertainties inherent in the real estate industry:

  • Collapse of the dot-coms. The sudden rise and dramatic collapse of the Internet-related economy delivered the first shock to real estate markets since the banks scandals of the 1980s. A seller's market was turned on end as rapid retrenchment left behind a glut of office space.

  • The attacks on the World Trade Center and the Pentagon. The attacks dealt a hard blow to an already declining economy and real estate ...

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