M id A tlantic Real Estate Journal — Southeastern Pennsylvania — October 21 - November 17, 2022 — 15B S outheastern PA
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New Assessments for Philadelphia Commercial Real Estate: A Closer Look Some Property Value Increases May Not Be In Line With The Overall Market
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over projected for all types of commercial real estate. How- ever there is no question that multifamily properties, from new construction to aged prod- ucts, are taking the biggest hit when it comes to the higher assessments. In some cases the assessment is 30-40% higher than the actual market value. This general trend could be the result of the city trying to make up for lost revenue from wage and occupancy taxes. Even though Philadelphia does rely more on residential property and wage taxes than most major cities, the impact will still be felt.
here has been much reported about Phila- delphia’s property re-
Another trend we see is the non-materialization of the pro- jected jolt in the office market. Although there has been an upward trend in office workers throughout 2022 per Placer.ai, the Center City District’s Octo- ber report says office workers had returned to 57% of their September 2019 levels for an overall average of 75%. This was not the expected outcome after so many efforts were put into getting workers back into the city, especially after Labor Day. Many experts believe that oc- cupancy rates will never again reach pre-pandemic levels. This has profound implications
for real estate markets, which are highly sensitive to changes in interest rates. In an effort to keep inflation under control, Federal Reserve officials have been hesitant to raise rates too quickly. However, this policy may only serve to delay an in- evitable market correction. The implications of lower revalua- tions is significant, especially as current studies are saying occupancy rates will remain permanently lower than before March 2020. Increasing interest rates and cap rate changes complicate matters even more for over- assessed properties. Higher
cap rates generally carry more risk for owners, decreases in NOI, and increases in cash outlays. With higher interest rates added into the mix, own- ers have less ability to offset their risks through sales or re-financing. Lastly, with the market always on the move, the current market value of many properties is lower than when the assessments were done. Consequently there is a gap between the assessed values and the present day market value. Carlo L. Batts, MAI is principal of Rittenhouse Appraisals. MAREJ
assessment for tax year 2023. In the spring of 2022 the Of- fice of Prop- erty Assess- ment (OPA) announced that the com-
Carlo L. Batts
pleted reassessment raised the value of property in Philadel- phia from $170 billion to $204 billion for 2023. However the accuracy of the new assessments has been under question, especially in north, west, and southwest neighborhoods — which are the city’s poorest areas. This is a repeat of what was found in a 2019 study done by the Office the Controller. The Office also noted “little progress in im- proving assessments for single- family residential properties in these areas” and that the 2023 reassessment shows the largest increases in these areas. Accurate assessments are the foundation on which a fair property tax system is built and every owner should pay an equal share of the property’s market value. Philadelphia has a flat tax rate for all properties and owners due to the state’s uniformity clause which pro- hibits different tax rates for different property types. While news has focused on the impact on residential prop- erties, inaccuracies in assess- ments also extend to commer- cial properties. As we continue to work with our clients to analyze and understand the new numbers we see some key trends emerging. In general assessments are SIOR Philadelphia Chapter Awards Three Scholarships PHILADELPHIA, PA — The Philadelphia Chapter of the Society of Industrial and Office Realtors and the SIOR Foundation have awarded scholarships at three Pennsylvania universities. Scholarships, in the amount of $4,000 per student, were awarded to: • Zachary Moussa, Drexel University • Colin Park, Villanova University • Sam Ridilla, Temple Uni - versity MAREJ
Commercial Real Estate Serving the Greater Delaware Valley Appraisers
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