Looting, violence, and civil unrest in Chicago may cause commercial property values to plummet as people abandon the city, and business owners re-evaluate their properties.
Will People Leave the City?
Many offices in buildings throughout the Loop remain vacant as businesses have been slow to bring back employees who have been working at home since mid-March. Many businesses that rent space downtown are rethinking their leases, and some renters are re-evaluating the decision to live close to the area after many weeks of looting and violence.
In fact, at the City Council meeting in August, 15th Ward Alderman Raymond Lopez, in his resolution that the City Council call “on the governor of Illinois to mobilize the National Guard to augment and assist the Chicago Police Department,” cited real estate as one of the sectors he wanted to protect. “The continued attacks against Chicago’s collective safety will impact our residential real estate, current and future investments in our communities, and our city’s future economic development,” the resolution read.
The multiple listing system numbers indicate a large drop in buyers for city properties and an increase in sellers.
If a commercial property has a lot of vacancies or vacancies for a long period of time, that will lower the market value, which would more than likely decrease the property taxes for that property.
Commercial property owners can start to prepare now for next year’s 2020 property tax bill by gathering the following information, which are the components of a vacancy shortfall deduction:
- Direct costs, which include improvements that would need to be made for a new tenant
- Indirect costs, which include lost rent or concessions made to bring in a new tenant
- Entrepreneurial incentive, which recognizes that to stabilize occupancy, there is extra risk, skill, and effort required to find tenants.
In addition, Cook County Assessor Fritz Kaegi announced that his office will be reassessing properties across Cook County using a “COVID-19” adjustment as markets and property values have been substantially impacted by the pandemic. The first decreases will be on assessed values of properties in the south and west regions of Cook County. The reduction on apartment buildings that contain two and six units is estimated to be around 10% and 15.2%.