With increasing tax assessments for commercial real estate properties, an independent third-party appraisal may lessen the property-tax burden for CRE owners.

BBG, the nation’s largest independent commercial real estate services firm, can provide the support that attorneys and tax consultants need in seeking property-tax relief for their CRE clients, many of whom are facing steep increases in assessments for properties that may have declined appreciably in value.  

COVID-19 impact, higher interest rates weigh on CRE valuations 

From coast-to-coast, a double-whammy of the pandemic’s impact and rising interest rates has created a softer CRE market this past year, with office and multifamily among the hardest-hit property types.

During the height of the COVID-19 outbreak, commercial property owners were mostly spared from the sting of sharply higher property taxes, thanks to local and state governments receiving COVID-related federal aid to fund public services.

But with federal funding drying up, taxing authorities have or plan to substantially boost assessments in many areas across the country to avoid budget shortfalls. However, this situation presents a rare opportunity for CRE owners to reduce assessments because assessors are aware of how the pandemic impacted many commercial properties.

For example, many office buildings, especially older ones, lost substantial value due to increased vacancies caused by COVID-19’s impact. Valuations for many office buildings have declined by half or more nationwide. Additionally, insurance costs have been skyrocketing nationwide, especially in coastal states.

To make matters worse for CRE property owners, they also have to contend with successive rounds of interest-rate hikes. This has pushed borrowing costs higher for owners already saddled with reduced valuations for their properties.  

Urban areas are especially vulnerable to hefty property-tax bills. For example, New York City is bracing for a coming wave of commercial property-tax appeals as CRE owners retaliate against higher assessed valuations.

The city’s higher CRE assessments are being driven by projected revenue losses for the city caused by a shrinking office market, fewer sales transactions, and high net-worth individuals relocating to lower property-tax havens. BBG’s New York office is currently working on appraisals for several tax appeals and expects significantly more because of reduced valuations of the city’s office market, especially older buildings in the downtown and midtown areas.

BBG’s New Jersey office, which conducts appraisals for tax appeals on diversified property types all along the East Coast, expects a substantial increase in CRE tax protests as owners of offices, hotels, retail stores and other commercial properties seek relief from high property taxes.

While a deluge of tax appeals is expected this year, BBG appraisers said some attorneys and tax consultants will typically bundle multiple years of assessment appeals for their clients rather than taking one year at a time.

Unitary valuations of pipelines and powerlines also are done for properties assessed by a state rather than a county. These properties are owned by oil and gas companies, mining companies, telecoms, and power companies that have operations in many states. These companies typically file tax appeals because their properties are vulnerable to the current interest-rate environment, state and federal regulations and other economic forces.      

BBG Offers Proven Track Record in Property-Tax Appeal Support

BBG has been busy working with attorneys specializing in ad valorem tax appeals and tax consultants to help their clients successfully get relief from inflated assessments. They understand that getting an independent third-party appraisal from a firm like BBG can potentially increase the odds of a property owner successfully appealing inflated real estate tax assessments. Recently, BBG was hired to appraise a portfolio of several hundred commercial properties in a Western state for property-tax purposes.

BBG has a proven track record of providing exceptional property-tax appeal support. The firm offers conflict-free and data-driven appraisals designed to help property owners significantly reduce over-assessments. BBG’s team of professionals also has decades of experience in litigation support, including dispositions and expert testimony, which is critical if a property tax appeal case goes to court. For more information on BBG’s property-tax appeal support services, go to www.bbgres.com or contact taxappealsupport@bbgres.com.