Sky-high valuations have been added to the list of challenges facing Dallas-area commercial property owners.
Citing the Dallas Central Appraisal District, Bisnow reported that commercial property assessments in Dallas County are up 21 percent from last year, despite signs of a slowing market.
Ryan Chismark, Partner, Meritax Advisors (LinkedIn)
While the commercial sector saw double-digit increases across the board, some asset classes were hit harder than others. The sharp rise in valuations revealed in preliminary assessments contrasts sharply with the actual market conditions as perceived by property owners.
“We're not surprised that the notice price was high, as appraisal districts tend to be aggressive,” Ryan Chismark, a partner at Meritax Advisors, told the outlet, “but it's unfortunate that the notice price was high, given where we actually are in the market.”
Commercial property sales plummeted 58% last year due to rising interest rates, stricter lending standards and a widening gap between buyers and sellers. A lack of recent comparable transactions has forced appraisers to rely on outdated cap rates, drawing criticism from property owners and consultants.
Industrial properties saw the largest increases over the past year, estimated at more than 50 percent on average, with some lower-tier properties doubling in value from a year ago. Chismark suggested the surge in industrial property values could be due to them being historically undervalued, which prompted the District to recalibrate its assessments.
Multifamily and retail properties also saw gains of 20% and 10%, respectively. Even in the office sector, which is still struggling with soaring vacancy rates in the remote-work era, valuations are 5% to 10% higher than a year ago.
John Redmond, U.S. property tax manager at Altus Group, was surprised that retail price increases were relatively modest, given the industry's steady recovery from the pandemic.
“We will always protest, even in a bad market,” he said. “But [retail owners] They will be amazed at the price, just like our office and industrial clients.”
The protest and litigation process routinely leads to lower assessments — more than $9 billion in preliminary valuations were slashed last year alone — and Chismark is optimistic that most owners will ultimately find a satisfactory solution with the Central Appraisal District, despite the expected battles.
—Quinn Donahue
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