Authors: Nick Bignotti, Ted Dabrowski
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When we recently warned about the danger of a “doom loop” for Chicago and other cities as office space vacancies swell, we cited a study from the Lincoln Institute of Land Policy that found Chicago’s commercial property taxes are among the highest in the country. These taxes are one of several pressure points that threaten to worsen Chicago’s situation, along with soaring crime, a declining public transportation system, a declining school district, and the continuing effects of working from home.
Another tax study by Altus Group, a provider of commercial real estate asset and fund information, found the same result: Chicago has the highest effective tax rate on commercial real estate among large U.S. cities.
Chicago's effective commercial property tax rate of 5.37% is by far the highest. New York City is second worst at 4.79%. The other eight major cities listed in the study have significantly lower commercial property tax rates than Chicago. In fact, Chicago's rate is more than four times higher than San Francisco, Los Angeles, and Nashville.
Based on the data in this report, Altus believes that Chicago's office buildings are relatively overvalued and should see their assessed values decrease in the city's next reassessment. Unfortunately, such a reassessment of commercial real estate would shift the tax burden onto homeowners, who already pay some of the highest effective property tax rates in the country.
And that only leads to a potential loop of doom for downtown.
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