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The Impact of Chicago’s New Property Tax Assessments on Commercial Real Estate Owners
- aaronstrauss1227
- Mar 12
- 2 min read
In 2024, Chicago underwent a comprehensive property reassessment that has notably shifted the property tax landscape, particularly affecting commercial real estate owners. These changes have significant implications for property investors and managers in 2025 and beyond.
Overview of the 2024 Reassessment
Cook County conducts property reassessments triennially to align property values with current market conditions. The 2024 reassessment revealed a substantial increase in the assessed values of commercial properties compared to residential properties. Specifically, the assessed value of commercial properties in Chicago increased by more than residential properties, leading to a shift in the tax burden. Prior to the reassessment, homeowners held 51% of the assessed value share in Chicago; post-reassessment, this share decreased to 49%, indicating a relative increase in the commercial sector's tax responsibility.
Key Factor Driving Increased Commercial Assessments
One key factor contributed to the rise in commercial property assessments:
Market Dynamics: A robust market for multifamily apartments and industrial properties led to significant valuation increases. Multifamily properties saw a 34% rise, while industrial properties experienced a 65% increase. In contrast, office buildings, hotels, and retail spaces saw a more modest 22% increase.
Implications for Commercial Property Owners
The reassessment has several direct consequences for commercial property stakeholders:
Increased Tax Liability: Higher assessed values translate to increased property tax bills, impacting cash flow and net operating income. Property owners may face challenges in maintaining profitability without adjusting operational strategies.
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Lease Negotiations: For properties with net leases, where tenants cover property taxes, increased assessments can lead to higher occupancy costs. This scenario may necessitate renegotiations or could result in tenant turnover if the escalated costs become untenable.
Market Competitiveness: Elevated property taxes could deter new investments or prompt existing investors to reconsider their portfolios, potentially influencing property values and market dynamics in Chicago.
Strategies for Mitigating Tax Increases
Commercial property owners can adopt several approaches to manage the impact of increased assessments:
Appeals Process: Engage in the appeals process to contest assessments. Historically, the Cook County Board of Review has granted reductions upon appeal, which can alleviate some tax burdens.
Operational Efficiency: Implement cost-saving measures to offset higher tax expenses, such as energy-efficient upgrades or renegotiating service contracts.
Lease Structuring: Consider lease agreements that share tax liabilities with tenants, ensuring transparency and predictability in tax-related expenses.
Future Outlook
The property tax landscape in Chicago remains dynamic. In late 2024, Mayor Brandon Johnson proposed a $300 million property tax increase to address budget deficits. However, facing opposition, the proposal was later revised, eliminating the property tax hike and introducing alternative revenue measures.
Commercial property owners should stay informed about such policy developments, as they directly influence tax obligations and investment strategies.
Conclusion
The 2024 property tax reassessment in Chicago has significantly impacted commercial real estate owners, increasing tax liabilities and influencing investment considerations. By proactively engaging in assessment appeals, optimizing operations, and staying abreast of policy changes, property owners can navigate this evolving landscape effectively.
