Why does commercial real estate keep attracting investors when so much of it is empty? There are two key reasons: First, the buildings eventually will be leased, or, at least, they always have been, and, second, almost everything about a real estate investment gets some sort of tax preference.

The eventual lease-up is what makes it all work. Absent that, the project will fail.

But the real money in many buildings comes from the tax write-offs.

The most important of these preferences is depreciation. For tax purposes, owners are allowed to state that their building is getting less valuable as time passes, even though in reality it usually is getting more valuable, and to deduct from their taxes the amount of the decline each year.

Until 1981, depreciation was tied to the "useful life" of the structure, often 30 or 40 years, which meant that investors could write off only one-thirtieth or one-fortieth of their building's cost each year. But in 1981, Congress lowered the period to 15 years.

Last summer, Congress moved the depreciation period up to 18 years, but that has not been a big enough change to discourage many.

In addition, costs are also deductible -- interest, repairs, insurance, utilities and the like.

Finally, when the property is sold, the proceeds are accorded capital-gain treatment, meaning that 60 percent of the gain is excluded from federal taxation.

Taken together, these are so valuable that enterprising real estate entrepreneurs are able to package them and sell them to high-bracket taxpayers. These syndications work this way: A group of investors puts up cash to buy an interest in a building, usually in the form of a limited partnership. The money they put up goes for such things as the down-payment on the building and to create a reserve to cover operating losses.

They are able to write off their share of the depreciation and any costs, creating losses larger than the sum they have invested. Ratios of between 2 to 1 and 2.5 to 1 are common. At 2 to 1, a 50 percent taxpayer breaks even; at anything larger, he is ahead.

And even if he only breaks even, he gets to keep a lot more of this year's income -- a benefit, since money today is always more valuable than money tomorrow because of inflation -- and when he does finally pay taxes on it -- when the building is sold in, say, 1999 -- he gets capital-gain treatment.