Interest rates and the economy is the chief concern for the real estate industry in 2018 and 2019, according to the Counselors of Real Estate, which released its annual Top Ten Issues Affecting Real Estate List. As interest rates rise, the commercial and residential real estate markets are already experiencing changes – decreasing demand for commercial property, and higher home mortgage rates. Rate increases also limit value appreciation for commercial real estate and make housing less affordable. Lack of wage growth for all but the wealthiest population segment is dampening housing demand, and limiting consumer spending that the economy needs for growth.
The recently enacted U.S. tax reform is poised to benefit the U.S. multifamily investment market, according to a new report from CBRE that analyzes the implications of tax reform on the multifamily sector in the largest 35 U.S. markets. Tax benefits of renting vs. buying a home will increase in 29 of the 35 largest U.S. markets—up from just 15 markets before tax reform.
The $1.3 trillion omnibus spending bill that was passed last week contained the first expansion of the Low Income Housing Tax Credit (LIHTC) program in more than 10 years. The measure increased HUD’s budget by more than 10% and increased the number of LIHTCs that are available by 12.5%, making a significant impact in states such as California and New York where tax credits are a limited resource. The expansion was particularly welcome as it will help offset the effects of the Tax Reform bill that passed last year.
By James Sutton, Regional Director - Central South, Dallas
& Bill O’Quinn, Senior Managing Consultant, Dallas
To say the multi-family market in the Dallas-Fort Worth metropolitan area is performing well would be an understatement. Deliveries were up 14 percent in 2017, vacancies were down 4 percent, rental rates were up nearly 7 percent, and cap rates were down almost 20 basis points. From a property tax standpoint, factoring all of these variables into an income approach to valuation would support higher assessed values at the appraisal district level. While this may be the case, there is another valuation method that needs to be considered before giving up on your property tax appeal.
More than 4,000 new apartments are forecast to hit the Los Angeles market this quarter, according to CoStar, as the first wave of as many as 30,000 in the next three years. Much of the construction is concentrated downtown, where it’s easier to build than in other parts of L.A., and almost all the new apartments will be at the higher end of the market. Signs of rent weakness are emerging as construction approaches peak, and L.A. landlords could be facing similar pains as as their counterparts in Manhattan, where a flood of supply has started to drive down rents.
By Alex Pace, Managing Consultant, Dallas
Mixed-use properties continue to gain popularity in response to the growing desire for the convenience and walkability of urban living. Savvy real estate developers and owners understand that providing a vibrant mix of office and living space, restaurants and retail under one roof allows them to meet – and capitalize on – a variety of consumer needs. While implementing a “live-work-play” concept certainly adds value to a project, the relatively new and complex nature of a mixed-use property is creating valuation challenges for Appraisal Districts that could be costing you.
By Carlos Villatoro, Senior Managing Consultant, Dallas
It is no secret that significant commercial real estate investments continue to pour into the great state of Texas. However, if an owner isn’t lucky enough to receive major tax breaks from local jurisdictions as an incentive to invest here, they will have to accept some of the highest effective property tax rates in the country. The tradeoff is that Texans enjoy a relatively low sales tax rate and zero state income tax rate. Fortunately, the Texas Property Tax Code offers multiple appeal recourse avenues, which allow owners and tenants alike to review the property tax liability from a fair and competitive standpoint.
The commercial real estate industry will benefit as a whole from the tax code overhaul signed into law Dec. 22. But some sectors will benefit more — and sooner — according to top economists polled in a Bisnow article.
- Retail: The retail sector will likely be the biggest beneficiary, Colliers Chief U.S. Economist Andrew Nelson said, because of the lowering of the corporate tax rate. The tax reform law reduces the corporate tax rate to 21% from 35%, but because of deductions, not all types of businesses had effectively paid that same higher rate. "Retailers traditionally pay a high corporate tax rate because they don't have the same kind of deductions as other sectors," Nelson said. "When you lower the corporate rate overall, retailers tend to benefit a lot."
Property tax professionals lend their expertise on tackling student housing property taxes.
By Amy Bigley Works | Student Housing Business
Managing property taxes and ensuring the best valuation can be challenging for any commercial real estate property type, but for student housing owners and operators the process can be even more daunting. Student Housing Business spoke with student housing property tax experts to gain insight and recommendations for coming out ahead in the property tax and property valuation. Larry Backus, North Texas market leader, was one of the experts to share his knowledge and expertise on property tax for the student housing industry.