After several weeks of negotiation, New York legislative leaders and Governor Andrew Cuomo finally reached an agreement on the state's 2014-15 fiscal year budget. The NY assembly has begun debating the $137.9 billion budget proposal, and a decision is due by midnight, as the new fiscal year officially starts at 12:01 a.m. Tuesday. The tentative budget deal keeps growth in all spending levels below 2 percent, provides funding for statewide pre-kindergarten programs, introduces property tax relief for homeowners, and cuts business taxes for manufacturers.
Michigan Governor Rick Snyder signed a package of bills today clarifying the elimination of the personal property tax on business, after the bills passed on 35-2 votes in the Senate yesterday and by similar majorities earlier this week. The tax on businesses and manufacturing equipment and furniture has been a controversial topic for quite sometime for Michigan business and local authorities.
The U.S. Internal Revenue Service said that bitcoins, the best-known virtual currency, should be treated as property and not as currency for property tax purposes. In a statement, the IRS said that tax principals applied to property transactions should be applied to transactions for bitcoins, which means the virtual currency would be taxed as ordinary income or as assets subject to capital gains taxes, depending on the situation. Bitcoin, which began circulating in 2009, is generated by computers and lacks control by any government or central bank. The currency been under a lot of scrutiny since a Tokyo-based exchanged filed for bankruptcy after losing approximately $650 million worth of customer bitcoins, which has led to calls for more guidance on U.S. tax treatment.
By Cameron Moore, Area Leader / Principal, Atlanta
The New Jersey Legislation is acting to renew a law, which has helped slow the growth of property taxes, just one week before it is set to expire. The state Assembly’s budget committee will vote on a bill (A3067), that would temporarily extend an annual salary cap on interest arbitration awards. The Senate's state government committee also has scheduled a vote on its own version of the bill (S1869).
Some local government officials are pushing to lift Nevada's property tax cap that was enacted by the Legislature in 2005 when land values were soaring, but state legislators appear to be hesitant to make any wide-sweeping formula changes in the 2015 session. Assembly Speaker Marilyn Kirkpatrick wants to fix a "loophole" in the commercial property side of the tax cap that could generate some additional revenue for the cash-strapped local governments. However, she is not trying to make fundamental changes to the 3 percent annual increases allowed for residential property and up to 8 percent for commercial property, and Gov. Brian Sandoval said he is not considering the idea of changing the property tax cap law either as he prepares his 2015-17 budget.
In January, Montgomery County Councilman Roger Berliner introduced a package of "green" bills aimed to drive the private sector to improve the energy efficiency of its real estate. However, because the real estate community voiced a number of concerns with the proposed energy benchmarking and auditing bill, Berliner is now proposing amendments to the bills in favor of the private sector. One of the original bills included an energy benchmarking requirement that would go into effect almost immediately for the largest residential and commercial buildings, as well as a mandate that property owners have their buildings audited and retro-commissioned to encourage less energy consumption.
San Francisco's office market is hotter than ever, and competition for the best "skyline" (or select Class A) space in the city is pushing rents to record highs near $100 per square foot. Investors are still flocking to get their hands on trophy properties, and tenants continue to fight over the best trophy spaces. But the real competition is for the handful of very large blocks of space (100,000 square feet or larger) left on the market, which can accommodate significant tenant expansion or new major tenants.
Good news for the hospitality industry: U.S. hotel occupancy rates will finally recover to pre-recession levels in 2014, according to the recently released March 2014 edition of PKF Hospitality Research, LLC’s (PKF) Hotel Horizons forecast report. However, many industry participants are wondering whether the level of performance is actually "good news" or not, and are concerned that an oversupply of new lodging units will become an in issue down the road. The lodging industry experienced extremely negative impacts of overdevelopment in the 1980s and 1990s, but today's property cycle presents a different scenario, according to PKF. The long-run average annual change in supply has been 2.0%., and they do not expect to see the national annual supply growth exceeding that level until 2017.
By Judson Bracewell, Associate, Atlanta
& Adrian Dekker, Senior Managing Consultant, Atlanta
The year is off to a good start for the retail sector, investment sales volumes are up and cap rates are reaching all-time lows. According to the National Real Estate Investor (NREI), in January, the most recent month for which data is available, year-over-years sales volume in the retail sector jumped up 27 percent, to $4.6 billion. Most of the activity (57 percent) involved sales of shopping centers, but there were a few malls that traded hands as well. Due to favorable interest rates, exceptional cost of capital and high demand, many industry experts expect 2014 to be a great year for retail investment sales.
Commercial property owners in Washington, D.C. may face sticker shock over the District’s new assessment method. The system has been a source of controversy and rampant appeals, as assessors evaluate buildings’ rent rolls, occupancy rates and other key data to come up with annual property valuations. However, the District will be using a different assessment method based on market value for 2015. The market value method bases property valuations on the open market—what investors bought or sold properties for—rather than what’s actually going on inside those buildings at the current time. Unfortunately for many D.C. landlords, the switch couldn’t come at a worse time. Due to a significant amount of federal agencies and private companies reducing the amount of space they lease over the past year, landlords have had to offer incentives to lure new tenants, like free rent or tenant improvement costs. However, under the new assessment method, these factors won’t be taken into consideration.
The Fort Worth, Texas skyline has seen a number of new investments in the past year. The city is in a great position, with a lot of new space and new opportunities. Similar to Dallas, Fort Worth is very healthy overall and there's a lot of new construction taking place. The larger North Texas region as a whole is experiencing positive job growth, and Fort Worth has been a big economic generator of jobs.
By Matthew Fossey, Texas Area Leader / Principal, Dallas
The House Revenue and Taxation Committee has voted to introduce a bill that is intended to be the next step in phasing out all personal property taxes on business. Last year, the Legislature started that process with House Bill 315, which exempted businesses from paying the first $100,000 owed in personal property tax in each Idaho county where the tax was assessed. The law also exempted any personal property valued at less than $3,000. The tax relief has been sought after for some time, and last year's efforts came from business lobbies such as the Idaho Association of Commerce and Industry and the Idaho Chamber Alliance; and those groups are also behind this year’s effort cosponsored by House Speaker Scott Bedke (R) and House Majority Leader Mike Moyle (R).
Approximately 20,000 property-tax appeals are backlogged in Philadelphia, delaying millions of dollars in tax payments to the city and School District. In the most recent battle between the Nutter administration and Board of Revision of Taxes (BRT), several board members appeared to be holding out for a pay increase to work harder at their jobs, and City Council is poised to give them the boost, to $70,000 a year.
The New York City real estate community has been experiencing ever increasing property taxes, and it's raising concerns for new mayor Bill de Blasio. Globe Street reports that things are only getting worse, as union back pay and citywide pre-kindergartern will likely cause major increases to the City's already robust $70 billion budget. When additional revenue is needed, property taxes is often the place the mayor turns to. And despite Mayor de Blasio saying he does not want to increase the tax rate, the City’s Department of Finance showed tax-assessment rolls are due to rise by 8% beginning in July, the second-highest gain since 1996. This points to a common scenario, in which politicians say tax rates will not increase, but raise property assessments instead. For fiscal year 2015, the Citywide Market Value of properties increased 6.6% to $914.8 billion.
The Washington, D.C. hotel sector's performance was lackluster in 2013, and the market has been suffering for quite some time. According to data from STR, parent company of Hotel News Now, occupancy during 2013 declined by 2.2% to 66% for the D.C. market. Average daily rate grew by just 0.5% to $144.58, and revenue per available room fell by 1.7% to $95.46. A major reason why Washington's hotel is market is struggling is due to a demand fallout from U.S. government business. More of the same could be in store for the city during 2014, and some industry experts identified D.C. as being one of the markets expected to underperform during 2014.
By Michelle Galaida, Senior Managing Consultant, Cleveland
& Walter Rapacz, Senior Managing Consultant / Principal, Cleveland
New office and industrial building construction is on the rise in metro Detroit as tenants seek specific kinds of space, or desire to be in particular locations. There are 8.4 million square feet of proposed office buildings and 8.5 million square feet of proposed industrial space construction in Wayne, Oakland, Macomb, Livingston and Washtenaw counties. While the timelines for many projects will be determined by landing tenants, the demand to build new is a result of large, top-tier companies growing and demanding more sophisticated amenities and features.
This year, median residential and commercial real estate assessed values in the Phoenix area have increased by double-digit percentages for the first time in seven years, which points to a real estate market recovery. All property types, from vacant land to apartments, experienced value improvements this year. In fact, this was the first time since 2009 commercial property values have increased. With such dramatic improvements in one year, it is evident that the Phoenix real estate market is healthy and on a road to recovery.