Past performance can be a powerful tool in business, and the world of commercial property ownership is no exception. When you enter into a new tax year armed with information such as the latest commercial property tax trends and forecasts regarding what’s to come, you can move business ahead in a smarter, more strategic way. You’re also less likely to suffer sticker shock when the next commercial property tax notice arrives in the mail.
At Lane Property Tax Advocates, we’re dedicated to helping you unburden your business and remain better informed. Read on for an overview of commercial property tax trends that have taken hold in recent years and factors that could impact your bottom line in future seasons.
To better gauge what a commercial property owner might be up against in future tax seasons, it helps to understand the goings-on of the past. Here are some trends to keep an eye on.
Commercial Property Taxes Are Rising: This upward track is likely no surprise to any commercial property owner, as it’s evident in the notices and bills that grace mailboxes each year. Understanding contributing factors behind such increases, however, can soften the blow.
The amount you pay in commercial property taxes is directly linked to the property’s value. And in most areas, property values rise year over year. In Texas, although recent legislation was implemented to curb what property owners pay, investment activity and growing populations have increased demand for commercial property — further driving the rise. The Lone Star State’s lack of a state income tax also means it relies on property taxes to fund public schools, road projects, fire departments and the like. While it is true that taxes continue to increase, some of that perceived growth may come from the fact that the state already generates some of the nation’s highest property tax bills.
Property Owners Have Become More Comfortable Opting to Protest: Since our company’s start, Lane has adamantly gotten word out that the commercial property tax protest is one of the best ways to bring overinflated assessed values in check and lower one’s bill. We recommend protesting one’s commercial property taxes annually, and it seems others have also begun to see the value those efforts offer.
Numbers released by the Texas Comptroller’s office indicate that property tax protests are becoming increasingly popular. The office’s 2023 Appraisal Review Board Survey notes that 38% of respondents reported protesting their property taxes annually, up from 2022’s 37.6%. The number of people protesting for the first time increased to 37.5%, vs. the previous year’s 33.5%, too. Of those who did protest, 75.2% saw success, with their appraisal review board (ARB) lowering their appraised value.
Your Options for Commercial Property Tax Firms Are Becoming Limited: Independently owned firms like Lane’s are becoming increasingly rare as large corporate firms seek to grow their market share through acquisitions. As Vice President Hunter Lane noted in REDNews, this trend took hold in the late 2000s and gained momentum when pandemic-related economic hardships began impacting smaller firms.These mergers can prove troublesome on a number of levels, from a loss of local expertise to fee changes that deal a hefty blow to bottom lines and diminished protest outcomes, too. Now, more than ever, it’s important for commercial property owners to look out for their best interests. Hunter offers helpful advice in the aforementioned piece.
Commercial Property Valuations Are Wrong More Often than Not: We talk frequently about the fact that the county appraisal districts (CADs) use mass appraisal systems to assess large numbers of properties in one fell swoop. Although this approach does result in substantial time savings on their end, its failure to take into account issues such as a property’s condition, amenities and extras means it fails to present a clear picture. This issue is unlikely to change anytime soon, underlining the importance of pursuing annual commercial property tax protests.
Understanding what’s happened in the past is just half the battle. It’s also important to know what to expect moving forward.
As we come off an election year and a new administration settles in, there is some uncertainty as to the impacts the commercial real estate (CRE) world might see. As Reuters reports, President-Elect Donald Trump has spoken out in support of permanent tax cuts and incentives for property owners. At a time when the CRE world is grappling with issues such as vacant office space and high financing costs, however, it’s difficult to predict how proposed tax changes might shift the balance.
Ongoing inflation concerns paired with substantial increases in insurance premiums have had commercial property owners paying careful attention to spending in recent months. Experts anticipate both issues will continue into 2025. Of course, the same commercial property tax trends we’ve spotted in the past — particularly rising property values as startups and tech companies make their way to Texas — will likely continue to make themselves known in the form of rising assessed values and higher tax bills. As such, it’s crucial for property owners to advocate for their best interests and seek ways to protect their bottom line. Continuing to protest overinflated commercial property values on an annual basis will be key.
Unfair valuations and unknowns related to what you pay can be frustrating, but the world of commercial property taxes is simpler with the right team by your side. At Lane, our property tax pros are dedicated to keeping an eye out for emerging trends and changes that could impact your tax bills, communicating any information you should know — and providing the support you need through the protest process and beyond.
If you have questions about any of the above, or if you’re interested in talking with Lane about your commercial properties, feel free to reach out. We’re here, and we’re glad to help.
