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Chicago's commercial real estate market has yet to recover from the pandemic, even as many cities, such as New York, have recovered. From the Chicago Tribune:
“Demand for Chicago office space continues to fall into 2023, signaling that a true recovery for Downtown could take years. While demand has nearly returned to 2019 levels in some fast-growing cities like New York City, West Coast tech markets remain sluggish, far behind Chicago, according to a new survey from New York-based software company VTS, which tracks the number of companies considering potential new office space.”
That's not surprising. Chicago's economy was one of the last of the nation's major cities to recover jobs lost during the pandemic. One factor is the city's commercial property taxes, the second highest in the country. The study found that Chicago's commercial property tax rate of 3.78% is more than double the U.S. average for large cities in every state.
Only Detroit has a higher commercial property tax rate, at 4.21%, according to a study by the Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence. Why? Chicago is passing the buck on businesses, big and small. The study found that Detroit has a higher effective commercial property tax rate on commercial properties over $1 million. This is due to low property values in the distressed city, which filed for bankruptcy in 2013. The study concluded that Chicago's higher tax rate is due to higher local government spending and a tax system that passes on a higher burden to businesses. What the experts say: “Chicago Mayor Brandon Johnson is trying to get more tax revenue from businesses, despite the second-highest commercial property tax burden in the country. His latest proposal, a $100 million “mansion tax,” would raise real estate transfer taxes on properties selling for more than $1 million, including commercial and industrial properties.”With downtown Chicago's office vacancy rate already at an all-time high and commercial real estate values plummeting, raising taxes on downtown businesses is the opposite of what the city needs and will only exacerbate the woes of Chicago's businesses,” said Bryce Hill, director of fiscal and economic research at the Illinois Policy Institute.
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