If a proposed income and property tax reduction plan goes in to effect as planned in 2018, the state of Kansas could face a $910 million budget deficit. According to The Wichita Eagle, the tentative tax-cut agreement includes phasing out non-wage income taxes for limited liability companies, which can include small retailers and large businesses. The plan would also channel $45 million a year to local governments for property tax relief.
The state of Ohio is already attracting investments and new businesses only two years after it phased out its tax on business and commercial equipment. According to MLive, Ohio attracted the most major capital investments in the nation over 2011 with 498. Though the old tax supported local government operations to the tune of about $470 million, the Ohio Legislature replaced most of the tax with a commercial activities tax which favors manufacturers that sell their good outside of the state.
Hotels are unlike the usual institutional grade real estate investments, especially when it comes to valuing the real estate for taxation purposes. Hotels are the only class of real estate investments that are typically valued by assessors with the income of the business. No one values an office building by asking for business income of all the tenants that occupy the space. No one values a regional mall by asking for the income of all the businesses that occupy the real estate. However, hotels are valued that way.
Beginning later in 2012, improvements in employment growth should begin to have as much an impact on leasing activity for the office and industrial sectors as the lack of new supply. According to GlobeSt.com, the addition of 2.1 million private-sector jobs over the past 12 months does not represent thrilling velocity, but is nonetheless consistent and in time will begin to bear fruit. Hiring has been prevalent throughout several industries, providing encouragement that employment gains will continue amongst several uncertainties.
Michigan Senate Majority Leader, Randy Richardville, wants the Personal Property Tax reform package on the Governor's desk before summer break, and believes that the issue should be addressed completely by summer's end. According to the Michigan Chamber of Commerce, the package introduced would eliminate $470 million of the $1.2 billion total revenue per year that personal property taxes account for. This particular package wouldn't be fully implemented until 2022.
While still few in number, value-add industrial opportunities are available across the country, no matter where a particular market is in its recovery cycle. According to GlobeSt.com, the key when looking for such properties is to know where each market lands in the cycle and how that affects what type of opportunity exists. Markets such as Northern and Southern California, Central Pennsylvania, Denver, Houston, and Kansas City have all seen solid and stable opportunities for industrial investors.
Iowa Republican and Democratic legislative leaders have narrowed their differences on plans to overhaul the commercial property tax system, and plan to have approval before this year's session ends. According to Omaha.com, both sides agree that business property taxes are out of line with neighboring states, but the sides take sharply different approaches to solving the problem. A middle-ground seems to be getting closer, but details are still being negotiated.
As the multi-family industry of commercial real estate continues to outperform other sectors, developers are planning on opening hundreds of thousands of new apartment units over the next few years. According to the National Real Estate Investor, national vacancies dropped to 4.9% in the first quarter of 2012, the lowest level since late 2001. With more than 36,000 units being leased up last quarter, the allure of promising returns is leading to the upcoming growth in supply that will hopefully keep the sector's vacancy rates from rising.
Activity in the US hotel industry remained flat over the month of March after only the slightest of increases in February. According to e-forecasting.com's Hotel Industry Pulse index (HIP), which gauges monthly overall business conditions in the US hotel industry, the hotel industry remained at a 104.6 reading month-over-month. The HIP six-month growth rate increased 1.3% in March after a 1.7% increase in February compared to an average uptick of 3% over the past 30 years.
Newly released data from the first quarter of 2012 shows that Las Vegas, Nevada commercial real estate continues to be amongst the worst in the nation. According to VEGAS INC, the commercial real estate sector in Southern Nevada was hurt badly during the recession by what turned out to be overbuilding during the boom years as many businesses, instead of expanding, reduced operations and laid off staff. Recent rent and vacancy figures, and an unemployment rate still over 12%, mean that growth is still a ways away.
For the first time in half a decade, golf in the United States is growing as the economic recovery strengthens. According to the Cape Cod Times, the number of rounds played on American courses has climbed for four straight months through February, and 2012 is expected to be the strongest since the recession. The $20 billion a year green fee business is beginning to get back to its peak and consumer confidence in general is growing.
The national foreclosure rate decreased 2% from the fourth quarter of 2011 to the first quarter of 2012, but a spike in short sales over the last couple of months could lead to a surge in foreclosure activity later this year. Still, according to GlobeSt.com, the low numbers, especially the 16% decrease from the first quarter of 2007, indicate that the nation is starting to see the light at the end of the tunnel of the foreclosure crisis, particularly in some of the hardest-hit states driving national trends.
Commercial real estate assessment values across the state of Minnesota have significantly increased, leading to tax bills rising by over 6% on average. While the nation's commercial real estate outlook is improving from quarter to quarter, Minnesota is seeing a decreased demand for commercial space, causing rents to decrease, but building owners property taxes to increase as much as 50% over what they were only five to eight years ago. One cause of the drastic tax increases is the Minnesota Homestead Market Value Exclusion that has shifted more tax burden onto non-homestead properties.
Commercial Real Estate across the nation is continuing on the path of recovery, led by the office, industrial, and retail sectors. According to a research report from CoStar Group, while not out of the woods yet, data compiled for the first quarter of 2012 demonstrates an ongoing recovery and points towards future growth. In addition, interest rates on commercial mortgage lending still remains low, another positive sign for continued growth for the remainder of the year.
Landlords of commercial properties in Washington D.C. are increasingly offering free rent and tenant improvements in order to keep rental rates artificially high and preserve property values. According to the Studley annual Effective Rent Index, concessions in the D.C. area spiked by about 11.5% in the past year and now hover at about $111.50 per foot, up from $60 per foot back in 2007. The vacancy rate in the area, although at 11%, stands to be impacted by new construction, and is what is leading to all of the generosity amongst landlords.
Montgomery County, Maryland is seeing its property values drop over $10 billion since fiscal year 2011. According to The Washington Examiner, taxable property values are projected to fall to $157.1 billion in fiscal 2013 from $167.8 billion in fiscal 2011. This decrease will greatly affect several of the county's services as property taxes make up about 30% of the county's revenue. The drop in value has caused the county to propose a 4.5% increase in the property tax rate after a 4.2% increase last year.
Apartment vacancies fell to 4.9% in the first quarter, the lowest rate since the fourth quarter of 2001. According to Reis Inc., national vacancies have improved beyond the benchmark 5% level used as a rule of thumb by apartment landlords: for most markets, once vacancies tighten below 5%, effective rents tend to spike as landlords perceive that tight market conditions allow for greater pricing power. With overall vacancies below 5%, expect rent growth to continue to accelerate.
Iowa Governor, Terry Branstad, wants 2012 to be the year to reform the state's commercial and industrial property taxes, which are among the highest in the nation. According to Branstad, the higher tax rate puts Iowa toward the bottom of the nation in terms of new business start-ups. The goal for Branstad is to lower Iowa's commercial property tax rate by 40% over the next eight years, arguing that the higher taxes are hindering job growth.
In a time where commercial property values in New York State are falling, companies are saving money by contesting the assessed values of their buildings. According to The New York Times, negotiated remedies to over-assessed properties can be a lump sum repayment, but some companies opt for a new, fairer assessment that can be spread over several years allowing a business to avoid paying property taxes until the repayment is complete.
Manufacturing growth picked up across the nation last month, but new construction continues to struggle as spending suffered its biggest drop in seven months. According to data from the Commerce Department, U.S. construction spending fell 1.1% to an annual rate of $808.86 billion, the lowest level since October as investment in private and government projects fell. In addition, the January construction numbers were adjusted to show a 0.8% fall instead of the previously recorded 0.1%.
The Denver, Colorado commercial real estate market continued improving over the first quarter as the office, retail, and industrial sectors all absorbed more space than was left vacant. According to the Denver Business Journal, the office sector led the way with 285,000 square feet of positive absorption in the first quarter and a drop in vacancy from 19.3% to 17.9%. This solid absorption is expected to continue throughout the remainder of 2012.