As the financial impacts of the COVID-19 pandemic linger and remote and hybrid work remains in place for many businesses, commercial real estate owners and investors face continued uncertainty to long-term lease obligations and creditworthiness—as well as new challenges in releasing vacated space.

Commercial real estate vacancy rates are an important value characteristic and can have a major impact on a property’s assessment.

When properties are overvalued, property owners and investors could potentially pursue tax refunds.

Check Data Behind Assessed Value

Assessors appraise various classes of taxable commercial property, generally grounded to the concept of market value and with the objective of assigning uniform, equitable values. Mass appraisal models can produce or miss an important value characteristic, such as high and chronic vacancy.

Properties that declined in value through increased vacancy, major tenants moving out, downsizing, or concessions that negatively affect property value often see assessments exceeding fair market value, making them excellent candidates for assessment appeals.

As pandemic restrictions end, many office and retail properties fit this definition, especially with the challenges they face with declining occupancies and rents.

For income-producing properties, a real estate tax professional can typically analyze the most recent year-end income statements and rent rolls to determine if the data supports the assessed values.

Detailed cost data is necessary for recently constructed or recently renovated properties. Closing statements for recently acquired assets are also needed as part of an analysis.

How the Real Property Assessment Process Works

Real property assessment procedures can be complex.

After you receive a valuation notice from an assessment authority, a tax professional can help you:

• Read and analyze data as well as information secured from the assessment jurisdiction to determine if assessed values are fair and equitable
• Identify and quantify issues causing excessive assessed values
• File assessment appeals when valuations are excessive
• Initiate informal negotiations with assessing jurisdictions
• Attend hearings, as necessary, at state and local assessment appeals boards, preparing and presenting appeal evidence

We’re Here to Help

For assistance reviewing your property assessment and to determine if you might be eligible for refunds, contact your Moss Adams professional.

You can also visit our State & Local Tax Services for additional information.