Commercial property owners in Denver are seeing less of a change in valuations this cycle than residential property owners.
The median commercial property increased 17 percent in value compared to two years prior, while residential properties saw a median increase of 33 percent, according to the Denver assessor.
The hospitality and retail sectors led the way on the commercial side, Assessor Keith Erffmeyer told a Denver City Council committee on Tuesday. Hotels and motels saw a median 33 percent increase, while retail properties saw a median 17 percent increase.
Erffmeyer said those sectors were “really regaining what they had lost in COVID.”
“That’s kind of a bounceback to where they were,” he said.
Warehouse properties in the city saw a median 16 percent increase. The median change for office buildings in LoDo and the Central Business District, however, was an increase of just 0.5 percent.
That reflects the lingering impact of the pandemic on office building owners, who are seeing many tenants downsize, sublease or barely use the space they’re paying for as more employees work remotely.
Marquee towers like the Wells Fargo Center and Republic Plaza have loans in special servicing. Trepp, a firm that tracks commercial real estate loans, told its clients on April 18 that the 56-story Republic Plaza is now valued at $298 million, down from $535 million in 2012, although it noted that the current valuation is still greater than owner Brookfield’s $241 million loan against the structure.
“There’s still a lot occurring in the commercial real estate market, particularly in downtown areas around the country, and Denver’s no different — still looking for what stability looks like there,” Erffmeyer told council members.
Apartment buildings saw a median 45 percent increase in the latest cycle. The assessor classifies those properties as residential, not commercial.
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Despite the lingering uncertainty in the office sector, the fact that commercial properties overall increased in value is notable. The previous cycle, whose values were based on the early days of the COVID pandemic, was the first time since the Great Recession that the government’s overall valuation of Denver commercial properties decreased.
In Colorado, assessors value all properties in the state every two years, so the increases are based on the most recent valuations in 2021.
The valuations reflect transactions and market conditions from January 2021 to June 30, 2022. Local county assessors released the aggregate data this week. Their offices are supposed to mail notices regarding individual property valuations by May 1.
Property valuations are one of three factors that determine how much a property owner pays in taxes. The other factors are the assessment rate set by the state Legislature and the tax rate or mill levy set by various taxing authorities.
