Law Offices of Wade E. Norwood

California Commercial and Industrial Property Tax Update – 2010

California Hotels and Recreational Properties

Hotels, resorts, golf courses and other recreational properties have been hard hit by the economy. Unless a hospitality or recreational property has an old base-year assessment, and therefore a low assessed value, a property tax appeal may provide a significant cost-cutting opportunity. The decline in the value of such properties is supported by clear market indicators. For example, hotels are experiencing higher vacancy rates. Golf courses are experiencing lower rounds played and lower green fees. Moreover, capitalization rates have risen. All of this justifies lower property tax assessments, which are supposed to be no more than the current fair market value of a property.

Decline in Real Estate Values Hits Commercial and Industrial Properties

In prior years, evidence of a decline in value of commercial and industrial properties was sparse. In late 2007, the economy was already struggling. But proving that there had been a decline in the market value of commercial and industrial properties was difficult due to the lack of sales and slow changes in capitalization rates. 

Throughout 2009, and now in early 2010, commercial/industrial property values have declined. Evidence clearly supports property tax reductions. Bankruptcies of major companies like Circuit City, General Motors, Chrysler, and Linens & Things indicate how deeply this recession has hit. Higher vacancies, lower net income, higher capitalization rates, and lower sale prices for commercial and industrial properties provide proof that the fair market value of commercial and industrial property has declined. This new evidence makes it possible to obtain substantial property tax relief from an assessment appeals board for the 2010 tax year. Anyone who purchased commercial or industrial real estate after 2002 should consider a property tax appeal this year.