Some landlords’ nightmares have become reality, as Cook County Assessor Fritz Kaegi released initial assessments last week for a large chunk of Chicago, providing hints to commercial and residential tax bills to come.
Property values in more than a dozen neighborhoods west of the Central Loop, including the buzzing Fulton Market district, have increased by an average of 27 percent, Bloomberg reported.
The total assessed value in the west Chicago area has surged to approximately $10 billion, up from about $8 billion the previous year.
The assessments offer preliminary indications of tax obligations for businesses and residents, although these figures may change significantly after appeals to the Board of Review. Kaegi’s reassessment marks the first comprehensive evaluation of downtown properties since 2021 and gauges the impact of factors like rising interest rates and diminished demand for office and retail space.
Residential property values in west Chicago jumped by 21 percent, commercial property values by 25 percent, and industrial property values by a staggering 71 percent. The assessor’s office calculated values based on factors like property use, income estimates, vacancies and expenses.
Kaegi’s recent assessments of more than two dozen prominent West Loop office buildings reflect a nearly 16 percent drop in value compared to his 2021 estimates, Crain’s reported.
Many argue that West Loop properties have depreciated far more than Kaegi’s assessments suggest. The remote-work era has contributed to record high office vacancies of more than 25 percent, and high interest rates have crushed property values, compounding challenges facing office landlords.
Farzin Parang, executive director of the Chicago Building Owners & Managers Association, highlighted significant losses in downtown office sales, with some properties experiencing value drops between 50 and 89 percent compared to pre-pandemic levels.
“We urge the assessor to acknowledge this reality and refrain from subjectively adding challenges to an industry that is essential to our entire city’s revitalization, economic growth, and job creation,” Parang told Crain’s.
Since his tenure began in 2018, Kaegi’s approach to assessments, which has generally favored increasing commercial property values over residential ones, has drawn criticism from landlords who accuse him of deterring real estate investment in Chicago. Despite acknowledging some difficulties in the office sector, Kaegi’s assessments imply the situation is less dire than perceived.
The disparity between Kaegi’s assessments and the Board of Review’s figures, partly due to differing valuation methods, adds to landlords’ frustrations. The unpredictability of final assessments complicates financial planning for property owners. For example, the building at 300 South Riverside Plaza was assessed at over $305 million, about $70 million more than the Board of Review’s 2023 figure.
Kaegi downplayed the broader tax impact of lower office valuations, citing that downtown offices constitute less than 20 percent of Chicago’s tax base. However, it could strain tax-increment financing districts, complicating budgetary plans for Mayor Brandon Johnson. Rising assessments for downtown apartments might also lead to higher rents, exacerbating the city’s affordable housing crisis.
Residential assessments across Chicago are expected to rise, increasing tax burdens among homeowners. In Rogers Park Township, the first reassessed area, residential property values rose by 26 percent from 2023 figures.
—Quinn Donoghue
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