Add sky-high assessments to the list of challenges facing commercial property landlords in the Dallas area.
Commercial valuations in Dallas County have risen by 21 percent since last year, despite evidence of a sluggish market, Bisnow reported, citing the Dallas Central Appraisal District.
There were double digit increases across all commercial sectors, although some asset classes were hit harder than others. The soaring valuations, unveiled in preliminary assessments, marks a stark contrast to the actual market conditions perceived by property owners.
“I’m not shocked by the fact that notice values were higher because the appraisal district tends to be aggressive,” Meritax Advisors partner Ryan Chismark told the outlet. “However, I’m disappointed that they’re higher because of where we actually are in the market.”
Commercial property sales plummeted by 58 percent last year amid rising interest rates, tight lending standards and widending buyer-seller discrepancies. The lack of recent comparable transactions has led appraisers to rely on outdated cap rates, drawing criticism from property owners and consultants.
Industrial properties have seen the largest increase over the past year, estimated at over 50 percent on average, with some lower-tier properties doubling in value year-over-year. Chismark suggests that the surge in industrial values may stem from historical undervaluation, prompting the district to recalibrate assessments.
Multifamily and retail properties also experienced hikes of 20 percent and 10 percent, respectively. Even for the struggling office sector, which is still grappling with soaring vacancies amid the remote-work era, valuations are 5 to 10 percent higher than they were a year ago.
Jon Redmond, manager of the U.S. real property tax division at Altus Group, was surprised by the relatively modest rise in retail values, given the sector’s steady recovery from the pandemic.
“Even in a terrible market, we are always going to protest,” he said. “But I don’t think [retail owners] will have the sticker shock that office or industrial clients will.”
The protest and litigation process routinely results in lowered assessments, with over $9 billion shaved off preliminary assessments last year alone. Chismark is optimistic that despite the anticipated contention, most owners will eventually find acceptable resolutions with the central appraisal district.
—Quinn Donoghue
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