The national office sector is projected to experience a slowed growth in 2012 due to a damper on demand for new space. However, according to the National Real Estate Investor, select office markets that are home to technology firms and energy companies will continue with steady growth in the foreseeable future. The average office vacancy at the end of 2011 will stand at 16.8%, and is only expected to decrease down to 15.7% over the course of 2012. In addition, average rents of all classes of office properties will continue to stagnate.
A group of at least 20 Peoria, Illinois commercial property owners are seeking $100,000 or more reduction in assessed values. According to pjstar.com, some of the requests are larger than Board of Review assessing officials have seen before, with certain businesses seeking anywhere from $1.5-2 million worth of reductions on certain properties. These larger requests have prompted some government bodies to intervene out of concern that their already cash-strapped operations could lose valuable resources.
Interest rates on commercial properties have experienced their lowest levels in decades, but those with intentions to refinance shouldn't expect the trend to continue. According to The Wall Street Journal, at the height of the boom years, many owners of office buildings, hotels, shopping malls, and other commercial real estate financed their properties using five-year mortgages, most of which are set to mature next year. Now lenders are warning that refinancing won't be automatic and low mortgage rates likely won't apply anymore.
The JBG Cos. has filed six petitions against the District of Columbia seeking millions of dollars in assessment reductions. According to the Washington Post, taxation of commercial properties has grown more contentious in the economic downturn, with private property owners arguing that the value of their properties has dropped more quickly, and more dramatically, than tax assessors recognized.
Though the amount of delinquencies on commercial real estate loans overall improved in 2011, they are likely to continue to face tough times due to loan write-offs and a contraction in liquidity. According to HousingWire, the multi-family mortgage segment is performing the best with the sector's delinquency rate falling to 3.6%, as the sector continues to benefit from favorable rent and occupancy rates as well as strong investor demand.
Declined rental income from warehouses has led to a 22-year high in delinquencies on industrial property loans that were packaged into commercial mortgage-backed securities. According to Standard and Poor's, the delinquency rate for U.S. industrial CMBS as of the end of the third quarter was 12.05%. In addition, net operating income has fallen at 47% of the properties used as collateral for industrial CMBS since the securities were issued.
The Michigan Business Tax has been repealed effective January 1, 2012. With that repeal, the 35% refundable industrial personal property tax credit has also been repealed. Since the credit is based on industrial personal property taxes paid during the tax year, the credit will only apply to taxes paid on or before December 31, 2011.
Despite inconclusive evidence of improving commercial real estate fundamentals, investors are continuing to look for buying opportunities in the office sector as 2011 comes to a close. According to PR Newswire, a fourth quarter PwC Real Estate Investor Survey shows that investors are bullish in the office sector regarding their prospects for tenant retention and expect office rent growth in many markets in the coming year.
Hotel revenue per available room is expected to increase 6.1% in 2012 with rising room rates for high-end hotels leading the way. In a report issued by PKF Hospitality Research, it states that the rise in high-end hotels will more than offset the effect of stagnant occupancy at midscale and economy properties. Overall, room rates will rise 4.7% in 2012 due to increases in business travel and the lack of new hotel supply in most markets.
The maximum penalty for failure to report to the Assessor a change in ownership of a commercial property in the state of California has been increased for 2012. Existing law requires that a Change in Ownership Statement must be filed at the time of recording or within 45 days of the date of the change. Failure to file a statement within that timeframe results in a penalty of $100 or 10% of the taxes applicable to the new base year value, but not to exceed $2,500.
A recent growing demand has risen for early environmental assessments on certain commercial real estate properties across the nation. According to the Houston Business Journal, during the third quarter of 2011, the total volume of Phase I environmental assessments on real estate projects involving 10 or more properties in the five highest-volume states grew 13% above the third quarter of 2010. California led the way with an 18% increase, followed by New York, Texas, Georgia and Florida.
The city of Philadelphia, PA is getting another chance to submit data on 2010 property sales to avoid the potential loss of millions of dollars in property tax revenue. According to Philly.com, for decades the city had turned in data that masked inequitable and inaccurate assessments. In 2010 however, the new Office of Property Assessment had submitted very good data for 2010 sales that in turn resulted in a shift that could cause thousands of appeals by property owners amounting to millions in reduced property taxes.
With the aid of Black Friday Weekend, the 2011 holiday shopping season got off to an impressive start with sales up 4.5% over last year. According to the Boston Business Journal, though consumers remain concerned about the economy, they are demonstrating an increased willingness to spend this holiday season, not only on gifts but also on small luxuries for themselves. The data was compiled by the National Retail Foundation who continues to forecast holiday sales growth of 2.8%.
As the hotel industry continues on the path of steady recovery, there has been a recent increase in renovation projects that is predicted to continue on into 2012. According to The Washington Post, hotel owners had placed planned upgrades on the backburner as bookings and room revenue took a hit three years ago at the beginning of the recession, but now that travelers are back in the market with several options to choose from, hoteliers are renovating their properties to remain competitive.
A challenge on the state margin tax in Texas, a primary source of business tax revenue, has been struck down by the Texas Supreme Court who has validated its constitutionality in the face of claims that it acts as a personal income tax when applied to limited partnerships. The margins tax, approved in 2006, is being viewed as effectively a statewide property tax to fund public schools, a definite constitutional no-no. To provide a fix to the constitutional questions raised from the margin tax, a broad-based business tax was developed to replace a one-third reduction in property taxes.
New York City unsurprisingly emerged as the nation's most expensive commercial real estate market, according to the 2011 Experience Exchange report issued by BOMA International. Based on total rental income from office, retail and other space, New York City led the way at $48.27 per square foot. The rest of the top 10 were as follows:
New property values for Allegheny County will be mailed out December 19th, a five day delay from the December 14th deadline for releasing the numbers set by the Common Pleas Judge. According to the Pittsburgh Post-Gazette, the delay for mailing the new assessments will still allow the city and school board to set new millage rates by the end of the year and mail out 2012 tax bills on time. Previous concerns were that the school boards would face up to $2 million in additional short-term borrowing costs if tax bills were delayed.
Investor confidence in commercial real estate has remained relatively strong despite the economic and political turmoil that has dominated the news the past couple months. According to the latest National Real Estate Investor and Marcus & Millichap Investor Sentiment Survey, results show that there is a large amount of resilience and no sense of panic towards the state of the commercial real estate industry. Support of this confidence comes from the fact that, although at a slow pace, activity in the broader economy is moving forward.
Massachusetts Real Estate Assessments for the Fiscal Year 2012 will be issued by December 31, 2011 on the third quarter tax bill. Fiscal Year 2012 assessed values are 100% of Fair Market Value as of January 1, 2011. The predominant deadline to file your appeal is February 1, 2012.
The new retail hubs planned for the area surrounding the World Trade Center have the potential to be among the highest producing retail venues in the United States. According to Retail Traffic, the potential sales volume for the site is backed by the fact that in the past decade, downtown's residential base has grown more than 50% to 50,000 people and is expected to reach 60,000 by 2013. When pairing that with the Lower Manhattan Business District experiencing a steady inflow of new businesses, the area is in for a very bright future.
Property tax reform for commercial and industrial land owners in the state of Iowa is the top legislative priority for the state's largest chambers of commerce. In the 2011 meetings both the House and Senate put out property tax relief proposals that ultimately were not agreed upon by the time the session closed. Now, many in the state feel that in order to compete with other states, regions and countries, Iowa must improve its business tax climate.