CREJ - Retail Properties Quarterly - February 2015
2015 could shape up to be an especially important year for property tax purposes for retail and commercial property owners. There is a strong likelihood that retail and commercial property owners could see significant increases in property tax valuations given the improving real estate values and general economic conditions in Colorado over the last three years. We have seen several indicators of an improving real estate market and strengthening economy. For example, according to the Colorado Secretary of State’s Quarterly Business and Economic Indicators, state employment, wealth and building activity signal sustained economic growth; employment increased 2.8 percent year over year in second-quarter 2014 (reaching a new high of 2.4 million in June 2014); and annual foreclosure filings and sales decreased significantly in second-quarter 2014 (24.7 percent and 41.5 percent, respectively). County assessors re-determine property values every two years. This two-year period is referred to as a reassessment cycle. Under Colorado law, county assessors are required to value properties based on data from an 18-month data collection period. County assessors will revalue properties this year using a data collection period of Jan. 1, 2013, to July 1, 2014. The valuations for both years of the reassessment cycle (2015 and 2016) will rely on the same data collection period. As such, property owners should pay particular attention to their 2015 property tax valuations when notices of valuation are issued in May because absent unusual circumstances, such as new construction, the valuations property owners receive in May will be used to determine their property taxes for the 2015 tax year and for 2016 as well. County assessors may consider the income approach, the market approach or the cost approach to valuation for retail and commercial properties. The following is a brief explanation of these three approaches to valuation, and the impact of the data collected for each approach on 2015 revaluations.