Altus Group Compares Commercial Real Property Tax Rates Across 10 Major U.S. Cities in Inaugural Report
20 Junho 2024 - 10:00AM
Altus Group Limited (“Altus Group” or “the Company”) (TSX: AIF), a
leading provider of asset and fund intelligence for commercial real
estate (“CRE”), today released its inaugural US Real Property Tax
Benchmark Report comprising a comparative analysis of real property
tax rates for commercial real estate across 10 major cities in the
United States.
Real property tax represents one of the largest
operating expenses for most commercial real estate owners and
operators. In the United States, there are over 17,000 property tax
districts, each with its own assessment authority, legislation, and
tax policy, which together determine annual property tax
liabilities. Understanding how the tax amount is calculated, when
changes may occur, and how to compare costs for properties in
multi-jurisdictional portfolios can be challenging. This report
simplifies these complexities by providing a comparison of property
taxes paid in the 2023 calendar year for office, multi-family,
industrial, and retail properties in ten major U.S. cities,
supported by Altus Group’s data, analytics, and expertise.
“This report not only identifies cities with
property tax assessments that do not align with local sales data,
but also highlights where commercial property owners might consider
filing appeals to secure property tax reductions and where they
should prepare for higher taxes in the future,” said Sandi
Prendergast, Director of Tax Research, Altus Group. “Proactively
managing property taxes offers significant opportunities to reduce
an asset's operating expenses and ultimately enhance its
value.”
Effective Property Tax Rates
Since the methodology for calculating property
taxes differs by city, the report standardizes the comparison using
an effective property tax rate as a common denominator to compare
the cities. The effective property tax rate is calculated by
dividing the total tax bill (the tax amount per $1,000 of property
by the city, school district, and other taxing entities) by the
assessor’s determination of value (the “assessed fair market
value”).
The standardized 2023 effective property tax
rates by city for commercial assets were:
Chicago |
5.37% |
New York City |
4.79% |
Dallas |
2.29% |
Houston |
2.15% |
Miami |
2.06% |
Washington DC |
1.65 – 1.89% |
Atlanta |
1.63% |
Nashville |
1.30% |
Los Angeles |
1.20% |
San Francisco |
1.18% |
AVERAGE |
2.36 – 2.39% |
Property Taxes and Sale Prices
The report also compares property tax rates and
sale prices leveraging Altus Group’s Reonomy data to illustrate
where property tax assessments are out of sync with market values.
The tax/sale ratio (property tax paid as a percentage of sale
price) helps evaluate property tax equity and future tax
changes.
If a sales ratio is higher than the effective
tax rate, it might indicate that values in that sector are not
keeping pace with the overall market, implying there may be more
opportunities to challenge assessments in that sector. Conversely,
if the sales ratio is lower than the effective tax rate, it might
suggest that the market segment may be underassessed, and signal
that property taxes for that sector could increase with the next
revaluation.
Altus Group’s analysis in the report shows that
the actual level of taxation, based on current selling prices, is
in many cases quite different than the expected level of taxation
based on the effective tax rate. The office sector is paying the
highest taxes in proportion to current values, while the industrial
and multi-family sectors are paying the lowest. Despite value
declines in 2023, assessments in these sectors are likely to
increase (as has already happened in Dallas in 2024).
Given the limited transactions available for
analysis in 2023, Altus Group also examines how market value
changes in 2023 may impact property tax rates in 2024. The analysis
indicates a disconnect between assessments for property tax and
market trends could be grounds for challenging assessments through
the appeal process.
“In most regions, we find that assessors are
about 18 months behind on market trends, whereas our clients are 18
months ahead,” added Prendergast. “We work closely with our clients
to bridge that gap and look at the reality as of the date of
valuation to make sure that our clients’ properties are fairly
assessed.”
For a full analysis of regional trends and to
download a copy of the report, please visit:
https://www.altusgroup.com/featured-insights/united-states-property-tax-benchmark-report/
About Altus Group
Altus Group is a leading provider of asset and
fund intelligence for commercial real estate. We deliver
intelligence as a service to our global client base through a
connected platform of industry-leading technology, advanced
analytics, and advisory services. Trusted by the largest CRE
leaders, our capabilities help commercial real estate investors,
developers, proprietors, lenders, and advisors manage risks and
improve performance returns throughout the asset and fund
lifecycle. Altus Group is a global company headquartered in Toronto
with approximately 3,000 employees across North America, EMEA and
Asia Pacific. For more information about Altus Group (TSX: AIF)
please visit altusgroup.com.
FOR FURTHER INFORMATION PLEASE
CONTACT:
Elizabeth LambeDirector, Global Communications,
Altus Group(416) 641-9787elizabeth.lambe@altusgroup.com
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