Altus Group Compares Commercial Real Property Tax Rates Across 10 Major U.S. Cities in Inaugural Report
NEW YORK, June 20, 2024 (GLOBE NEWSWIRE) -- 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 Lambe
Director, Global Communications, Altus Group
(416) 641-9787
elizabeth.lambe@altusgroup.com
