Navigating the Impact of Rising Property Taxes on Industrial Real Estate

In the realm of industrial property taxes, vacancy and rental rates are fundamental factors in determining gross profits in commercial real estate. However, net operating income is heavily influenced by expenses, with rising property taxes emerging as a significant burden. According to Savills, property taxes are increasingly squeezing both owners and occupiers, subsequently limiting rental rates. Although higher vacancy rates and stabilizing rents have provided some relief to tenants, the unexpected rise in property taxes is now a major concern for warehouse occupiers, particularly those bound by triple-net leases where they are responsible for reimbursing expenses.

The industrial market is facing pronounced pressure because of substantial tax hikes. Local governments have increased property taxes in response to significant property sale price increases—an average rise of 70.4% across 11 major markets in the U.S. and Canada over the past five years, compared to a mere 4.3% increase for other commercial real estate sectors. Consequently, industrial properties have experienced an average 29.6% rise in assessments, with property taxes growing by 21.3%. These tax increases are vital for local government revenues but represent a growing challenge for industrial property stakeholders, who are grappling with the resultant impact on their net operating income.

Ryan’s industry specialists understand your unique tax challenges and market dynamics. Our custom tax solutions for the industrial industry protect profitability and cash flow, delivering more than $3.2 billion in savings for our clients.