Real estate industry ushers in unpredictable market.

No one would deny that the past decade, especially through the first quarter of 2000, has been a memorable and heady time. Investors from all walks of life have benefited from a booming stock market and an economy beyond their wildest dreams. Even though we all knew that some day it had to end, many people were surprised at the speed and severity of the dot-com meltdown that started in April 2000 and continues to this day.

My colleagues and I, like you, have been asking ourselves many questions throughout the past year. What impact will the continuing market downturn have on our overall business volume? On deal size and negotiations? What kind of strategies should we advise our clients to take to be fully prepared for whatever 2001 may bring?

Real estate investors are asking themselves similar questions. For them, educated decisions in their real estates investments can be the difference between their dream retirement and working to age 67.

As we usher in an uncertain year, real estate industry insiders need to keep their mind on a few key issues, namely interest rates, proposed changes in estate planning/gift taxes, and the influence of dot-com companies. They also need to start thinking about "what if" scenarios and strategies that will help them maximize their opportunities and minimize their tax/financial planning consequences. Let's take an in-depth look at these issues.

Several weeks ago, the Federal Reserve Bank kicked off the Millennium by announcing a surprise cut in interest rates by half a percentage point. (This is certainly an improvement from the early 1980s when the interest rate was 18%!)

Many people immediately assumed that Greenspan's decision was to keep that dreaded "R" word (recession) from happening. These fears are overblown. While the economy is by no means operating with the speed and power it had just one year ago, we are far from the economic tailspin that so many people are predicting.

Now that the dust has settled from the Fed's decision, this move is clearly good news for real estate in both the public and private arenas. This affects the industry more so than others, since real estate is highly interest rate-sensitive.

The recent Federal Rate Cut will help real estate in two key ways: 1) help people afford more real estate (commercial and residential) and 2) help jumpstart the economy. Here's why: real estate is one of the most capital-intensive industries where companies borrow a significant portion of the cost of a property. The lowered interest rate will make the cost of borrowing money cheaper. These rates are likely to have a ripple effect on other rates such as long-term rates -- thus encouraging deals of all sizes to actually happen.