Colorado 2025 Revaluation: Do Assessments Align with Market Trends?

Counties in the state of Colorado released updated values on May 1. These assessments are based on market values as of June 30, 2024—a two-year update from the previous assessments. The deadline to appeal your property’s valuation to the Assessor’s Office is June 9. However, Colorado also provides taxpayers with the opportunity to request an abatement after the tax bill is delivered. Appeal volumes are expected to be high this year, as property values have declined in several market sectors.

In a webinar delivered April 24 (available on demand), Ryan’s Colorado property tax experts identified market trends and anticipated assessment changes for various sectors of commercial real estate.

Market Trends

Office

Sales volume declined, vacancies increased, and net operating incomes decreased. Denver is one of the top 10 metropolitan areas in the U.S. for rising office vacancies, ranging from 24 to 41% depending on the market segment. Denver is one of the five most impacted markets for decreasing net operating income (NOI), as well as the highest percentage of office properties facing maturing loans. A surge in loan defaults looms.

Hotels

Although revenue per available room (RevPAR) has declined since last year, it has improved from the previous valuation date of mid-2022, when properties were still impacted by COVID. Average daily rates (ADR) have grown but have been largely offset by increased expenses. New supply is outpacing demand.

Multifamily

Overall vacancy reached a record high in Q2 2024. Average concessions have increased. Sale prices per unit declined 18.6% from mid-2002 to mid-2024.

Retail

The retail market is experiencing differentiation by asset class. Regional malls have been impacted by higher vacancies, while power center performance is dependent on anchor stability. Grocery anchored centers have been the strongest performers in this sector.

Industrial

Demand is relatively stable, and rents continue to increase, but oversupply, particularly in the Denver Metro market, is causing rising vacancies. Capitalization rates have increased.

The values of self-storage, manufactured housing, and single family have remained strong, while life science properties, restaurants, and many fitness centers are struggling.

Assessment Expectations

The new assessments for commercial properties are based on the assessor’s analysis of cost, market, and income data from July 1, 2022 to June 30, 2024. The assessed values for multifamily properties have been determined based on market data, comparative sales, and gross rent information from the same time period.

Analysis of sales indicates that a number of the 2023 assessments, particularly of industrial properties, were less than market value. For such underassessed properties, the revaluation may result in greater increases than expected. As sales volumes remain low, assessors may not have recognized the full extent of value declines. Assessments may not capture the impact of rising interest rates or expenses.

A record number of appeals in 2023/2024 have already resulted in a backlog. For those unable to review their assessments prior to the June 8 appeal deadline, Colorado provides a second opportunity to challenge your assessed value, called an “abatement.” An abatement can be filed for up to two years after the tax bill is issued: December 31, 2025 is the last date to file an abatement for tax bills issued in January 2023, and abatements for this year’s bills can be filed until December 2027. Although this provides a longer window to challenge the assessment, this path takes longer to resolve than typical appeals. In addition, the taxpayer will need to pay tax on the value being challenged.

This year, Denver will be one of the markets analyzed in the Ryan Benchmark Report for U.S. Properties Taxes, which compares property tax rates and taxes per square foot for comparable properties in several U.S. markets. Ryan provides a no-obligation review for commercial, industrial, or multifamily property taxes in Colorado. Please contact our Colorado property tax team for a review.