Lowering Costs and Increasing Potential through a Commercial Property Tax Appeal
As a commercial property owner, real estate taxation represents a significant and often unavoidable expense. However, with the expertise of NAI Summit’s brokers, property managers, and property accountants, navigating property tax assessments can become a strategic way to control operating costs and maximize profitability. By understanding and challenging property assessments, owners can uncover opportunities to reduce expenses and enhance their property’s financial performance.
Property tax assessments determine a property’s taxable value by multiplying the assessed value by the local tax rate. While this calculation is straightforward, the assessed value may not always reflect the true market value of the property. If a property owner believes their assessment is too high, they have the option to appeal. Successfully appealing a tax assessment can reduce operating expenses and improve profitability, and NAI Summit is here to guide you every step of the way .
When Should a Property Owner Consider a Tax Appeal?
A tax appeal may be appropriate under several circumstances.
Market Value Fluctuations
Rapid changes in the market driven by economic downturns, natural disasters, and global events can significantly impact property values. For instance, during the Covid-19 pandemic, demand for certain property types of commercial space, such as urban offices, sharply declined, while other sectors like industrial saw growth.
Property Damage
Damage caused by fire, flooding or tenant negligence can significantly alter the value of a commercial real estate property. For example, a retail building requiring major renovations after storm damage could warrant a reassessment to reflect its lower value.
Loss of Functionality
A building that no longer meets industry or regulatory standards may struggle to attract tenants. An example is an office building with out-of-date HVAC systems might not appeal to tenants in industries with stringent air quality requirements such as healthcare. This could lead to lower lease rates and reduced income.
Occupancy Changes
A significant change in a building’s occupancy or income stream can impact a property’s valuation. This could occur if an anchor tenant, such as a major grocery store or big-box retailer, vacates a significant portion of a retail shopping center, and it could also occur if a large office building in an urban area that relies on public parking no longer has parking available to the tenants.
Investment Property Sales
Reducing a property’s tax burden can make it more attractive to potential buyers by improving the overall return on investment (ROI). Lower tax also creates additional appeal for investors seeking high-performing assets.
How Brokers, Property Managers, and Property Accountants Offer Professional Support
Navigating a property tax appeal can be complex, but having the right support makes it easier. Brokers, property managers and property accountants bring valuable expertise to the table, providing insight into local market conditions, comparable lease rates, and property values.
At NAI Summit, our property managers actively monitor tax assessments across our portfolio of managed properties, working closely with our property accountants, who track financial data and our brokers, who sell and lease buildings, to identify potential tax appeal opportunities. When we identify a building paying significantly higher taxes than comparable properties, we recommend the owner consider an appeal.
Recently, we assisted the owner of a multi-tenant office building in the Lehigh Valley in pursuing a tax appeal. This older property, competing with modern facilities, successfully reduced its real estate taxes, allowing the owner to lower operating costs and offer more competitive lease rates to tenants.
Our property accountants and property managers will collect and organize the documentation needed for a successful tax appeal. Records like receipts, photos, repair quotes, and occupancy data help demonstrate the true market value of the property, and we maintain a historical record of expenses and valuations to streamline the process.
Further, our brokers bring valuable market knowledge, providing insights into comparable lease rates, sales data, and local trends. Working alongside your hired appraiser, who will assess the property’s value, and your real estate attorney, who will present the case to the tax appeal board, our team provides the expertise and supporting evidence needed to strengthen your argument and maximize the likelihood of a tax reduction.
Contact Us for Expert Guidance on the Real Estate Tax Appeal Process
At NAI Summit, we specialize in managing properties, providing accounting services, and proactively monitoring tax assessments to identify potential savings opportunities. With extensive experience guiding property owners through every stage of the tax appeal process, our team is here to help you lower costs and maximize the value of your property. Contact us today to discover how our expertise can make a difference for your property’s success.