Gary H. Smith
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How Are Commercial Properties Valued in Illinois

By Gary Smith
How Are Commercial Properties Valued in Illinois

Illinois property taxes are a labyrinth of numbers. For commercial properties, especially, it is often unclear how the value is assessed to arrive at the property tax amount. There are a number of considerations the Cook County Assessor’s department uses to arrive at those numbers.

What Information Goes Into Commercial Real Estate Assessments

All property in Cook County, whether residential or commercial, is assessed every three years on a rotating geographic basis. Many commercial properties are actually made up of multiple parcels that are each valued independently, meaning, they might have retail space, a parking garage, and office space all in the same building, but those three spaces are valued independently because of the different uses.

The Cook County Assessor’s office uses an income-based approach, which relies on mass appraisal. This appraisal method differs from what investors use to appraise a property, mainly because investment appraisals are based on a specific property and look at the historical vacancy, rent, and expenses information.

The mass appraisal system instead looks at a group of similar properties and looks at the current market vacancy, rent, and expenses. 

In addition, the Cook County Assessor’s office uses an unloaded cap rate. Unloaded refers to net income after real estate taxes are capitalized by the market cap rate. Cook County property taxes are not fixed, meaning they change yearly based on the amount of dollars requested by local municipalities in the form of levies. The equalized assessed value also changes each year.

The Cook County Assessor’s office has township-level reports that contain the data used in its commercial valuations, on its website.

Potential Changes for 2020

The Cook County Assessor’s Office intends to make the following changes to commercial real estate assessment work this year:

  • Launch a Market Advisory Council that would include private sector market participants to offer feedback on methodology and cap rates.
  • Produce an Annual Report with information on methodology, assessments, and market data. This will also include updated township-level reports on North Suburban assessments with post-appeals data and changes from the Board of Review.
  • Launch an online Real Property and Expense tool, which will depend on market participants providing commercial income, expense, and vacancy information, to provide better bulk data on a local level, which will help with the assessment process.
  • Allow commercial property owners to submit appeals online with supporting documentation.