Metro Vancouver homeowners aren’t alone in their angst over skyrocketing property assessments — commercial property owners have experienced similar volatility in the valuation of their holdings, with potential financial impacts in terms of property taxes, according to industry experts.
“It’s the most volatile I’ve seen it in perhaps 20-plus years,” said Phil Gertsman, a senior tax expert for the property consulting firm Altus Group Ltd.
Even some of the region’s biggest, most well-established shopping malls and office towers experienced substantial changes in their assessed values.
Pacific Centre Mall in downtown Vancouver, for instance, saw its assessed value shoot up 18.4 per cent from 2015, to $1.63 billion on its 2016 assessment, data from BC Assessment shows. Guildford Town Centre in Surrey saw an 18.41 per cent increase to $507 million.
The Sun obtained a list from BC Assessment showing the most highly valued commercial properties across the region, from which it derived a Top 20.
Properties under construction showed the biggest percentage increases in their assessed values because they reached completion in 2015, but it is properties with future development potential that have seen the most concerning volatility.
“What I can say is that increases of between 10 and 20 per cent (on assessments) of commercial property in the City of Vancouver are very common,” said Jason Grant, BC Assessment’s area assessor for the greater Vancouver district, but added that it is difficult to make a blanket statement about the increase given the different types of uses in the commercial class.
Grant also noted that the 16 per cent increase in the City of Vancouver’s total commercial assessment is almost as steep as the increase in residential assessments.
“That’s certainly significant, higher than its been in many years,” Grant said.
And the properties that saw the biggest increases, in excess of 20 per cent, were those that were purchased for eventual redevelopment or are located on major thoroughfares.
Gertsman, an executive vice-president at Altus responsible for the company’s tax services, said increases of 30, 40 and even 50 per cent are not uncommon among the firm’s clients who hold property in areas where values are driven by development potential and not existing uses.
That is a particular concern for existing commercial tenants in those areas, said Scott Bowden, director of property tax services at commercial brokers Colliers International.
Municipalities typically adjust tax rates downward to account for rising assessments so they don’t reap an unintended windfall from increasing property values.
However, in areas where planning changes increase density for mixed-use development or there is a significant alteration of property use, values can rise “exponentially,” causing a disproportionate shift of that tax burden to those properties, which winds up being passed on to existing tenants that have nothing to do with driving the higher values.
And with commercial property-tax rates that are three to four times higher than residential tax rates, depending where you are in Metro Vancouver, Bowden said shift can have a significant impact.
Bowden said some of his firm’s clients near the intersection of Clark Drive and Powell Street have seen their assessments nearly double in the last two years because of development interest, and areas along Broadway and in the West End have also experienced dramatic increases in assessments.
“BC Assessment is basing those assessments on sales, they’re not just making these numbers up,” Bowden said. “But we’re seeing that kind of assessment growth.”
Metro Vancouver has been a hot real estate market for a long time, with more buyers than sellers and with “a lot of different types of investors” looking to gain a toehold in what is viewed as a safe real estate market, said Michael Gill, principal with the commercial realtors Avison Young.
“If we had more product to sell, you’d see more transactions,” Gill said.
And with values rising, Gill said commercial property owners watch their assessments as closely as homeowners do. “They might watch them more closely,” he said.