The Property Taxman Cometh

I was doing a bit of research to improve my understanding of the financials involved with tenant representation and came upon this older article on CFO.com about corporate property taxes, entitled Poor Move.  Here are the key points from the article:

  • As of the date of the article (02/01/04), property taxes were the single largest non-federal tax obligation for companies, weighing in at 38.3 percent.  Given the significant increase in $/sf prices paid for commercial buildings in the last 18 months, I suspect that this still holds true today, since property taxes are assessed based on FMV.
  • Corporations should seek reductions in property taxes at the time they are considering a relocation.
  • You’ll be paying property tax whether you own your building or rent your commercial space.
  • If you are a major tenant in a building, ensure that your lease obligates the landlord to “go to bat” to reduce property taxes should they change substantially.  If your lease doesn’t have that, bear this wisdom in mind when your lease is up for renegotiation or you relocate.

My hope is that CFO Magazine revisits this article in the 2007/2008 time frame.  My theory is that the only change will be higher rates today.

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