What Effects Were Accelerated For Big Box Stores, Malls And Shopping Centers During The Pandemic That Ultimately Harmed Commercial Property Values?
The primary effect of COVID on Malls and Shopping Centers has been high vacancy rates and rent pressure from tenants. Many landlords were forced to offer rent reductions, abatements, or deferments. If the sector recovers to pre-pandemic rates, it will potentially take years, if at all. Big Box stores have done very well during the pandemic, partly because they were permitted to remain open, especially in the first few months of the pandemic because they were considered essential businesses.
What Has Been The Impact Of The Pandemic On The Hospitality Industry In New Jersey, Pennsylvania, And New York Specifically Regarding Hotels And Property Values?
The impact of the pandemic on specific hospitality properties, such as hotels, has been difficult, and vacancy rates are very high. It is not uncommon to see occupancy rates in hotels during the past year well below 50%. Over time, this industry may recover as more business travelers resume regular activity, and more leisure travelers begin to vacation again, but it will take time.
What Impact Has COVID-19 Had On Office Spaces And Commercial Buildings In New Jersey, Pennsylvania, And New York?
The effect of COVID-19 is being seen in the office market as well, also with high vacancies, consolidation, and rent reductions occurring, It remains undetermined whether or not companies will require their personnel to come back to work in their physical offices full time or adopt a hybrid model making unclear what the future will be for these spaces. The greater the vacancy there is in the marketplace means that there is downward pressure on rents which depresses the value of buildings because rental income is not as high and therefore should depress tax assessment values. It is not likely that the value of office buildings will rebound quickly again, but it must be measured over time.
What Should Property Owners Be Looking For This Year To Determine Whether They Need To File A Tax Assessment Appeal?
Some property types have been doing very well during the pandemic, including, for example, Big Box stores and industrial buildings, especially distribution warehouses. Much of it depends on the property type and the property’s performance over the past year or two in terms of rent paid, rent received, or any occupancy issues. To best determine if an appeal should be filed, a property owner should have a property tax attorney review the financial information relevant to the property in question.
Could The Layout Of My Commercial Property Decrease The Value Of The Property To New COVID-19 Safety Protocols?
Yes, there could be an impact from COVID-19 Safety Protocols. For example, some hotels have cordoned off or closed their eating areas, dining areas, and conference rooms because of the need to socially distance during the pandemic. So, the lack of utilization of certain common areas impacts:
- The usability of the space.
- The marketability of that space.
- The income realized through that space and
It is yet to be determined how that affects assessment value, but if it is functionality, it can be pointed out during a tax appeal.
Will There Be Any Automatic COVID-19 Reduction Factors Applied To Tax Assessments?
I have not seen any automatic reduction trackers applied in any jurisdictions that we represent clients in yet. However, in some jurisdictions which assess annually I have seen assessors make generalized value reductions to particular property types, including hotels.
For Tax Payers Contesting Their Assessments, What Will Be The Challenges To Show COVID-19 Consequences Affected Their Property And The Extent Of The Resulting Value Losses?
The best way to demonstrate proof or evidence is by what is occurring in the market. If there is evidence that the same space was leased two years ago and is now available and leasing for rent at 25% below what it was two years ago, that’s market evidence. Likewise, if properties have been sold at amounts that are lower than they might have been pre-pandemic, then that is good evidence as well. Certainly, there is information in the market about vacancy and occupancy and declining asking rents, and that information needs to be utilized in presenting a case to the assessor.
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