The Seattle, Washington-area office market has experienced a steady decline in vacancy rates and a rise in direct asking rents, two indicators of strength and economic upturn, setting it apart from others nationally, according to the Puget Sound Business Journal and a study compiled by Cushman & Wakefield. Not only is Seattle outperforming the rest of the country, but thanks to thousands of jobs becoming available due to the millions of square feet of construction underway, the economy will continue to prosper. The largest decreases in office vacancy were seen in the Denny Regrade and Pioneer Square/International District. And according to the study, Seattle central business district will continue to see rental rates increase and vacancy rates decrease with tech companies such as Amazon, Zulily and Google continuing to shape the economic and physical layout of the Puget Sound.
On October 17, there was nationwide sigh of relief as the 16-day government shutdown finally came to an end. While totaling the damage from the federal gridlock will be an ongoing process, the American economy took a hard hit—especially in the hospitality and travel industry. According to the U.S. Travel Association, reopening the federal government ended an estimated loss of $152 million per day (that’s more than $2.4 billion total) in travel-related economic output and provided increased financial security to as many as 450,000 American workers who are supported by travel. The American Hotel and Lodging Association (AH&LA) calculated a loss of $115.2 million in economic activity in the lodging industry alone, and billions of dollars more in lost collective income and visitor spending.
Atlantic City, New Jersey city officials say the city could be facing bankruptcy after the New Jersey Tax Court ruled in favor of Borgata Hotel Casino & Spa's (the city's largest employer and taxpayer) $48.8 million tax reduction last week. The city's potential refund to Borgata represents 20 percent of the city's annual revenue. According to Philly.com, though city officials say they plan to appeal to the Appellate Division of Superior Court, they fear the tax court ruling will instigate a new round of tax appeals by casinos, hoping for similar results. Atlantic City's substantial decline in gaming revenue since 2006 has already triggered a wave of successful tax-assessment appeals by several casinos between 2009 and 2012. At least two - Atlantic Club and Golden Nugget - said last week they planned to seek new assessments to lower their tax liability even more.
Hillsboro, Oregon's computer data centers (both open and in construction) receive major tax breaks when they are located in enterprise zones, but require little public accountability and disclosure. According to the Hillsboro Tribune, Oregon’s 63 enterprise zones are designed to attract investments by exempting businesses from 100 percent of local property taxes on new investments for up to two years while construction is in process, and up to five years after that if they are growing employment in the zone. Because IT equipment in a data center must usually be refreshed within five years, the net effect is that there is no tax — neither sales nor property — on such equipment in enterprise zones.
In a recent report from New York Comptroller Thomas DiNapoli, it was found that more than a quarter of New York state's real property is exempt from the tax rolls. The total value of non-taxed properties is $680 billion, and the value increases to $826 billion for properties exempt from more than one type of local government or school district taxes, according to Buffalo Business First.
Commercial, industrial and residential property owners in Atlantic City, New Jersey are facing an even greater property tax burden as casinos threaten to drive down their assessment values. In the most recent case, the Borgata casino won a major victory from the New Jersey Tax Court, reducing the property assessment from $2.26 billion to $880 million and $870 million in 2009 and 2010, respectively, which rewards them nearly $50 million in tax refunds.
On Tuesday, Amazon, Inc. announced plans to build a 1 million-square-foot warehouse in Southeast Baltimore. Government incentives, of course, came along with the plans projected to create 1,000 jobs. According to the Baltimore Business Journal, the Maryland Department of Business and Economic Development will provide Amazon with a $1.25 million conditional loan, and the company is also eligible for a number of tax credits for creating jobs. Because the project is located inside a state Enterprise Zone, Amazon will receive a tax break for five years, which then declines by 10 percent annually. In addition, projects located within an Enterprise Zone also receive a $1,000 credit for every new employee hired, and Amazon is eligible for a tax credit for every permanent full-time employee it hires paying at 150 percent of the minimum wage.
With the November 5, 2013 voting date quickly approaching, Colorado's Amendment 66, a $950 million tax increase for education, continues to be a controversial topic. The amendment would increase state individual income taxes and create a two-bracket system, rather than using the current single rate (4.63 percent) that applies to all incomes. Under Amendment 66, the individual income tax would increase to 5.0 percent on incomes less than $75,000, and 5.9% on incomes above $75,000.
Still reeling from the loss of thousands of jobs due to the 2008 recession, Wichita, Kansas has doubled the amount of property tax exemptions granted to businesses, from roughly $11 million in 2009 to $25 million in 2012. Job creation figures from the abatements are not available, as it would require a research project the urban development staff has yet to conduct. However, The Wichita Eagle analyzed 10 years of City Hall tax abatements, which are primarily (though not exclusively) dominated by aviation companies, obtained through the Kansas Open Records Act.
Despite businesses continuing to lease office, industrial and retail space with more momentum, prices for U.S. commercial property plateaued in August, according to CoStar Group, a leading commercial real estate information company. CoStar's report said it is a result of investors reacting to signals that the Federal Reserve was considering plans to begin tapering its elevated bond purchasing activity once the economy fully achieves firm footing. Although the high activity has been sought after for quite some time, investors are considering the economic impact from the Fed's reductions, which many anticipate will increase interest rates and borrowing costs.
The property tax rate in Houston, Texas will remain at the current rate, after the City Council voted on Wednesday. Although the rate will be the same, $.63875 per $100 of taxable value, it will yield a 6.42 percent increase in tax revenue for the city. According to the Houston Business Journal, the ad valorem tax revenue calculation, however, has been up for debate on conservative talk radio. In the Oct. 16 meeting, Councilwoman Helena Brown of District A, called for an amendment to the proposed property tax rate that would lower it by 1 cent.
With activity soaring in the Baltimore, Maryland industrial sector, the city has become one of the strongest second-tier markets in the country, according to the Baltimore Business Journal. In just the third quarter, there have been more than 2.5 million square feet of warehouse under construction and 1 million square feet of positive absorption, and the industrial sector is seeing a sustained pace of development and leasing is likely to extend well into 2014. The activity has contributed to a lowered average capitalization rate of 6 percent; a declining regional vacancy rate that now stands at 9.7 percent; and a slow climb in rental rates that now average $5.49 per square foot.
A thriving economy in Santa Clara County, California has lead to the highest property value growth in the state. According to San Jose Mercury News, California's State Board of Equalization announced Monday that Santa Clara County's 8.3 percent growth in assessed residential and commercial property values for 2013-14 is the highest in the state. It all happened in just the last 18 to 24 months, too. In June, the assessed values in the county had grown by nearly $26 billion over the previous year -- from $308.8 billion in 2012 to $334.6 billion. That marked the second-highest dollar increase in county history, and all 15 cities in the county recorded increases of assessed value growth above 6 percent.
The hotel market in Nashville, Tennessee is experiencing a development boom, thanks to the opening of the Music City Center, a brand new 1.2-million square foot convention center, located just a block away from the honky-tonk heart of the city, lower Broadway. Along with Nashville's cultural scene, hotel development has been thriving, with Omni recently opening an 800-room convention center hotel and many other brands following suit (and many other full-service hotels, such as Marriott and Westin, rumored to do the same).
In an effort to address complaints about the Texas property tax system, House Bill 585, authored by San Antonio Rep. Mike Villarreal (D) and Austin property tax agent Jim Popp, is an attempt to resolve issues of bias, lack of responsiveness and transparency of the Appraisal Review Boards (ARB) and local appraisal districts. Issues include an inability to resolve small procedural issues without suing, as well as an inability to remove ARB members that show biases. The goal of HB 585 is to increase transparency and accountability within ARBs and clarify law concerning board members and board hearings. One requirement of HB 585 is to create model hearing procedures of ARB and to seek public comments via an annual survey to ensure ARB’s follow these procedures and to hold them accountable to practice fairness and efficiency. Any public comments of “clear and convincing evidence of repeated bias or misconduct” would result in the removal of an ARB member. In addition, ARB members must complete a training course and file a statement that they will abide by the law in conducting hearings, and the chief appraiser must be a certified RPA and complete annual professional ethics, including maintaining independence of appraisal from political pressure.
According to the Tax Foundation's annual report, New York ties New Jersey for the worst business tax climate in the country. This is the second consecutive year New York has ranked the lowest of the 50 states. One of the biggest setbacks to the state's score is the high and progressive individual income tax. High property taxes are also a major contributor to the unfriendly business climate. The top ranking states - Wyoming, South Dakota and Nevada - on the other hand, have no corporate or individual income taxes.
Good news for Allegheny County residents: there will not be an increase in property taxes in 2014. On Tuesday, county Executive Rich Fitzgerald proposed an $817.3 million operating budget to County Council. He cites higher wages, inflation and increased supply, health care and benefit costs as reasons for the approximate 2.2 percent increase from 2013. Fitzgerald took a number of steps to reduce costs and increase efficiency in order to not raise the property tax.
For the next six months, it is expected that multifamily properties in Sacramento, California will continue adding value and inventory. Although still behind the economic growth seen in the Bay Area, Sacramento's local economy is recovering, and wise investors should take note.
As the government shutdown continues, it is taking a toll on the leisure and business travel industry throughout the country. From the Statue of Liberty to the Grand Canyon National Park (which averages 18,000 tourists a day in October), travelers are unable to visit national landmarks and hoteliers are left to deal with the damage. Economic activity is disrupted in communities both small and large that are dependent upon travel spending for employment and tax revenue. The lodging industry has been a major contributor to recent economic progress and job creation, but is threatened by the shutdown, which could create significant and immediate harm to the economy.
Major utility companies in Washington D.C. including Washington Gas, Dominion Virginia Power and Pepco are threatened by a temporary hit in earnings if the federal shutdown continues for an extended amount of time, according to the Washington Business Journal.
The New Jersey commercial real estate market is gaining momentum for the first time since its recession. Economists forecast improvements in the state's leasing of office, industrial and retail space. With the upward trend, it seems that New Jersey is finally beginning to recover from its recession and post-recession slump.
Last month, construction spending reached a four-year nationwide high of $901 billion. However, this month's figure remains unknown. According to the Baltimore Business Journal, the Associated General Contractors of America was supposed to come out with its monthly spending report today, but instead released a statement saying the August figure is unknown because the U.S. Census Bureau didn't disclose the figures (and shutdown the website entirely) as a result of the federal government shutdown that kicked in at midnight.
Commercial property owners successfully appealing their tax valuations are on the rise in Austin, Texas, putting the burden on homeowners to make up for the shrinking tax base. As one of only four states that are not required to disclose the property sales price, it creates a lot of difficulty to assess a fair market value in Texas.