Hold on to your hats, Kaegi tells city owners of commercial property as Office preps release of West Chicago reassessment

May 08, 2024 8

Downtown owners of commercial property expecting a gentle reassessment this year might be in for a rude awakening. 

Cook County Assessor Fritz Kaegi recently told Crain's his Office does not see so dire a situation in city commercial real estate as the numbers might suggest.

With that, commercial property owners should expect assessments to continue to rise, despite record-high vacancy rates and headline-making major office space and other commercial property sales occurring at a fraction of their selling prices from years ago.

As examples, last week the sale of a 72,000-square-foot office buildng in the West Loop, 118 S Clinton Street, for a mere $5 million drew headlines, and, last month, Los Angeles investors Brog Properties scooped up 216 W Jackson Blvd. — a 185,000-square-foot office affair — for only $2.6 million, 90% less than it sold for in 2013 (!).

Paraphrasing Kaegi, Crain's reports, "overall public sentiment about plummeting property values in Chicago's urban core over the past couple years is worse than his office sees it" and the office takes "a generally positive outlook on downtown commercial real estate market as effects of the Covid-19 pandemic subside."

Kaegi said this by way of palliating residential homeowners in the County, who would pick up more of the County's total property tax bill in proportion to commercial assessment contraction. But whatever it achieved to that end could scarcely be heard above the loud complaints of commercial real estate investment interests, who accuse Kaegi of ignoring data to curry favor with voters.

Farzin Parang, executive director of the Chicago Building Owners & Managers Association, diagnosed a "severe economic crisis" in downtown office space and said recent sales indicate a 50 to 90 percent value drop.

"Despite these clear facts, Assessor Kaegi repeatedly ignores data when he finds it politically inconvenient, suggesting a disregard for objective assessment methods relative to commercial office buildings," Parang told Crain's. 

For its part, the Assessor's Office simply told Crain's it is an extremely difficult time to come up with values, but Kaegi did suggest in comments to the paper that the decline in values his Office is seeing is not quite so high but rather perhaps 20 to 40 percent since the last reassessment of Chicago in 2021.

For the city reassessment so far in 2024, only one of Chicago's seven Townships — Roger's Park — has been reassessed, showing a total assessment increase across all property types of 26 percent. So there remains a long way to go, and, for our part, PTS will be in touch with all city owners in our files when reassessment finally comes along.