The real estate market has significantly improved since the beginning of the Great Recession, as indicated by recent year-end reports, such as the ULI Emerging Trends 2013. As the U.S. continues to see modest gains in market fundamentals, the recovery will maintain throughout the year. Certain asset classes are seeing tremendous value increases, including the hospitality sector.
A Bill that would exempt commercial and industrial renewable generation equipment from property tax in the state of Connecticut has passed the State Senate. According to Power Engineering, Senate Bill 203 would extend an existing tax credit for residential renewable energy equipment to also include commercial and industrial installations. The Bill's leader, Senator Bob Duff, believes that this property tax exemption will prove to be a great incentive for more renewable development as the state tries to encourage more clean energy.
Retail owners and operators are continuing to look towards entertainment and restaurant tenants to fill spaces left vacant by failing traditional retailers. According to the National Real Estate Investor, the logic behind this is that while traditional retailers may be taken out by the Amazon's of the world, movie theaters and restaurants are more immune to online competition because they offer an experience that can't be duplicated online.
A proposed bill to lower the property tax on business equipment has advanced in the Montana House and Senate this week. According to the Missoulian, Senate Bill 96 aims to exempt from property taxes the first $100,000 worth of business equipment, up from the current $20,000. Additionally, the tax rate would go to 1.5% for the first $6 million worth of equipment, an increase from the current $3 million.
Due to the on-going political scandal in the Los Angeles County Assessor’s Office and the backlash of negative press resulting from the case, the Los Angeles County Board of Supervisors has proposed an ordinance to monitor and enforce more “transparency” in California’s property tax consulting industry. The Los Angeles District Attorney has described the scandal as a “pay to play” scheme involving campaign contributions to the Assessor in return for lowered property tax assessments for those same contributors.
In an effort to potentially raise billions of dollars in commercial property tax, California lawmakers are considering making controversial changes to Proposition 13. Under current law, dating back to Prop 13’s passage in 1978, property taxes are only reassessed upon transfer of ownership or, if title is held in a legal entity, change of control (obtaining a greater-than-50% ownership interest) in the legal entity. Once re-assessed, values cannot increase more than 2% annually. However, proposed legislation (AB 448) introduced by Assemblyman Tom Ammiano would not only require assessors to revalue targeted commercial properties more frequently, but would also bring them up to current market values. Under Ammiano’s bill, publically-traded companies would have their real estate assets reappraised every three years based on the notion that more than 50% of their issued stock trades over that period of time.
Budget sequestration has yet to impact U.S. hotel properties, but experts predict the effects will be more prevalent as we get farther into 2013. According to HotelNewsNow.com, the $85 billion in budget cuts the U.S. government must meet by the end of September will begin to intensify over the next few months, and will result in a strain on the hotel industry, especially around military bases and other locations with a high governmental presence.
559 properties sold to a tune of $6.5 billion in the first quarter marked a significant decline in New York City real estate investment. According to the National Real Estate Investor, these figures indicate a 37% decline in dollar volume from 2012 and a 45% decline in the number of assets sold. Much of this decline can be attributed to abnormally high activity in the fourth quarter of last year, with the 1,677 properties sold being the highest total since 2005.
Real estate executives across the nation are showing record-high optimism since the collapse of the financial market five years ago. According to a survey conducted at Akerman Senterfitt's U.S. Real Estate Summit, eighty-six percent of survey respondents shared a more optimistic outlook just after the first quarter of the year, a four percent increase over 2012. To no surprise, the broad consensus believes the multi-family sector would see the most deals in 2013.
The New York City Industrial and Commercial Incentive Program for property tax abatements may have died in 2008, but it is still stalking the City's finances to the tune of over $650 million this year alone. According to The New York World, there are more than 7,000 properties that continue to receive abatements on property taxes under the program that was launched in the 1980's to encourage businesses to locate or remain in New York City.
The Iowa Senate has approved a $250 million commercial property tax credit plan aimed to help smaller and main street businesses. According to the Sioux City Journal, backers say the measure would enable all businesses to be taxed at a lower rate on the first $324,000 of their assessed property value, while commercial entities would have property values above that threshold taxed at the current 100 percent rate.
While the top real estate markets across the nation continue to benefit from favorable demographics and an improving economy, tech and energy booms along with population shifts are allowing the recovery to spread to secondary markets. According to the National Real Estate Investor, a growing set of real estate experts are looking to smaller markets for opportunities since they are likely to rely on a single industry. This makes investments easy to forecast as a smaller market may see quick turnarounds and growth as their primary industries improve.
The demand and prices for land lots all across the nation continues to rise as the economy steadily improves. According to The Wall Street Journal, the rebounding housing market has sparked a sharp rise in land prices, creating big profits for land investors but putting pressures on builders to further increase the price of new homes. On average, across the US, land values rose 13% in 2012, the first annual gain since 2005.
Commercial real estate continues its consistent growth despite the sluggish economy and indecision of governmental sequestration. According to the CCIM Institute's Quarterly Market Trends Report, in 2012, commercial real estate investment sales increased for the fourth consecutive year, with an uptick of 18% year-over-year in sales of properties less than $2.5 million. Quarter 4 of last year alone saw a post-2007 record for investment activity of $98 billion in total sales.
While most property owners would welcome a plan to increase the accuracy of tax assessments, the legislation currently pending before the Council of the District of Columbia features some changes that may change their minds. According to the National Real Estate Investor, the plan to provide DC assessors with the most up-to-date information available would also require them to conduct their assessments within two months instead of six, and reduce the time they have to handle initial administrative appeals from four months to six weeks.
Taxpayers that paid Pennsylvania or Philadelphia real estate transfer tax on certain transactions involving real property located in Philadelphia during the period of July 1, 2012 through January 5, 2013 may be entitled to refunds.
Due to the fact that the present day workforce doesn't need to be near each other to get things accomplished anymore, there seems to be almost nowhere for office and retail demand to go but down. According to The Denver Post, collaboration and purchasing now largely happen in the digital world, where everything you need to know about an organization, person, or product can be found with a few clicks of the mouse.
The gradual real estate recovery across the nation has yet to lift the property tax revenue of many cities, a bad sign for municipalities that rely on taxes as their chief source of income. According to the National League of Cities in their survey of local economic conditions, officials in 65% of the cities consider commercial property vacancies a problem, and those in 57% say commercial property values are still a concern. The 18-24 month lag between real estate market improvements takes time to register in local budgets and coincide with property tax collections.
Due to lack of confidence in the future performance of traditional commercial real estate property types, many investors are beginning to set aside capital for alternative assets. According to the National Real Estate Investor, such assets, including student housing, seniors housing and medical office buildings, among others, have broad demographic trends supporting their success, proved immune to the recession and offer higher yields than comparable properties in other sectors.
The North Dakota House has approved a bill that will require voter approval before tax exemptions can be granted to retail sector businesses. According to The Bismarck Tribune, the original state law was intended to allow exemptions for primary businesses, but over the years many smaller cities have approved exemptions for retail sector businesses. The approved bill will only apply to cities with a population under 40,000.
Boston, Massachusetts property tax abatement applications have decreased by 38.1% over the past three years to 2,349 in 2013. According to Banker & Tradesman, even though business value increased by 3.5% during the past three years, commercial abatement applications decreased by 34.6%. Residential values increased 6.9% while residential abatement applications decreased by 40% during this time.
Construction spending bounced back in February after a lackluster start to the year. According to data by the Associated General Contractors of America, gains took place in almost all monthly and year-over-year spending totals. Total construction spending for the month was $885 billion, up 1.2% from a downward-revised January level, and 7.9% from a year earlier. However, while public construction increased 0.9% for the month, it decreased 1.5% year-over-year.