Remote and hybrid work have become standard for many office workers. It is a fundamental change in our culture, and it has created extensive uncertainty and crisis in the office market, particularly in the major markets. With office buildings being leased at 50% occupancy – or less – and no new prospects coming in, it becomes impracticable for landlords to maintain their buildings.

Landlords Spend to Attract Tenants

Competition for rentals is intense. Frequently, the only way to secure new tenants is with substantial upgrades that will appeal to younger workers that companies are trying to lure back to the office. Even with that investment, offices may remain vacant.

“Spending $20 million on upgrades to office space is no guarantee that the tenants will arrive,” said David Wolfe, co-managing partner of Skoloff & Wolfe, P.C., “And despite that huge investment, the value of the building may not increase. In fact, regardless of what investments the landlord makes, the market value of these buildings can remain stubbornly low compared to previous values.” 

Improving Property Can Mean a Tax Increase

Making these upgrades, however, can trigger a tax increase as assessors are disposed to increase the value of the property as a result of spending. The attorneys at Skoloff & Wolfe, P.C. are working to educate assessors on the reality of the office market. Assessments must go down, regardless of investment in improvements, because the buildings may be worth only a fraction of what they used to be worth.  In many cases, even though a building has been modernized, it may still not rent.  If it is leased, frequently, the new rents do not reflect any premium for the amount spent on the improvements.  

The tax law team at Skoloff & Wolfe, P.C. has been working to increase awareness among assessors of the steep challenges in the office market. The confluence of factors: vacancy levels, decreased rental activity, smaller office footprints, work/life trends, and tightness in the credit markets, all contribute to a decline in the stabilized value of these office buildings.

Skoloff & Wolfe, P.C. Achieves Tax Relief For Landlords

In the last six months, Skoloff & Wolfe, P.C. has obtained hundreds of millions of property tax assessment reductions on behalf of their office clients.*

“The goal is to obtain a sustainable level of property tax so that the business model of owning suburban or urban office buildings remains viable,” explains David. “I am proud to say that we have been able to help our office clients gain substantial tax relief on their properties.”

Property tax is typically the largest of landlord expenses, so keeping that to a sensible number is crucial.

Tax Relief for Properties in Transition

Landlords are also exploring converting their property or repurposing it for industrial use or multifamily housing. In these cases, the attorneys at Skoloff and Wolfe, P.C. help clients examine the property tax impacts associated with these decisions and to maximize the potential relief they can obtain while working through these issues. 

Tax Projections for Acquisition and Disposition

As office assets once again return to the market, the team is working with potential buyers and sellers to quantify the risks with a detailed analysis of local jurisdictions before the sale. Skoloff & Wolfe, P.C. attorneys perform property tax due diligence to further protect the parties’ investment.  

For help with any property tax-related issue, contact Skoloff & Wolfe, P.C. 

*Results may vary depending on your particular facts and legal circumstances.