In our current peak economic conditions, is there any opportunity to
get an assessment reduction?
It depends on asset type. Industry disrupters like Uber and Amazon have fundamentally changed commercial real
estate. Uber makes owners take out garage spaces and add more dwelling units; Amazon and eCommerce effectively
reduced the demand side of the equation of retail properties.
Since 2017, no less than 6,000 retail stores have closed nationwide annually. Even high-end shopping areas, like Union
Square in San Francisco, are not immune to the “Amazon Effect.” The result is a drastic decline in the number of new
leases signed, and an equally drastic increase in vacancy rates. Rental rates also declined by as much as 50% from
2014-15, the peak year for high-end retail in San Francisco. With the drop in rents and increase in vacancies, values
have decreased and opened the door to reductions in the assessed values.
Closing thoughts?
Property and transfer taxes are significant, yet manageable, expenses of real estate ownership. Any ownership change,
redemption or capital call may have property tax consequences. The best time to consult your property tax advisor is in
the planning stage of your pending business transaction. Property owners should take a proactive approach rather than
a corrective one, as the latter can be far more costly and time-consuming. n
Mark Ong is the Founder and Managing Director of Independent Tax Representatives, LLC. Contact Mark at
[email protected] or call 415-495-3333.
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