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Commercial Properties See Major Tax Hikes

June 29, 2018

Commercial and multifamily properties across the country are seeing, in some cases, very steep rises in property taxes as assessors reset values at higher levels, the National Real Estate Investor reports. Rising property taxes are proving to be a big concern for landlords and tenants alike.

Property tax appraisals can take time to catch up to the current market conditions. Some areas assess commercial property values every year while others do it every two to three years, or even every seven years in some locales.

“There have been major re-evaluations in commercial properties in all of metro Atlanta for the past two years and especially this year,” John Hunsucker, owner of Property Tax Consulting LLC in Atlanta, told the National Real Estate Investor. He says some of the reassessed values on higher-end properties saw “tremendous increases.”

Some states and jurisdictions cap how much taxes can be raised annually, such as at 2 percent or 3 percent. However, Georgia does not have a cap, and some tax assessments have surged by more than 300 percent, Hunsucker notes. For example, in Fulton County, 2018 assessed values on higher-end apartments are more than what the properties would go for in the current market, Hunsucker says.

Not all of these tax increases can be passed through to the tenants either. Some commercial tenants have tax stops in leases that place a cap on how much a landlord can raise taxes annually. In cases like those, owners will have to absorb the higher rates. But in general, higher taxes will likely lead to higher rents for apartments, the National Real Estate Investor notes.

Some owners are pursuing property tax appeals to push back against recent increases.

The five cities with the highest effective tax rates for 2017 on commercial property worth $1 million were Detroit; New York; Bridgeport, Conn.; Chicago; and Providence, R.I., according to the 2018 50-State Tax Comparison Study. On the other hand, the five cities with the lowest commercial property tax rates are: Fargo, N.D.; Virginia Beach, Va.; Honolulu; Seattle; and Cheyenne, Wyo.

Property Taxes Surge on Higher Values,” National Real Estate Investor (June 27, 2018)