For more than a year, the pandemic has raged across the nation’s $16 trillion commercial property sector, darkening skyscrapers, shuttering shopping malls and shrinking restaurants down to takeout services. Social distancing measures and telecommuting have put additional downward pressure on the numbers of workers in office buildings not only in Minnesota cities but in downtowns across America.
The New York Times recently referred to the empty buildings as “a fiscal time bomb for municipal budgets,” which are “heavily reliant” on commercial property taxes and are facing revenue losses of up to 10 percent this year.
The publication reports that “a sharp decline in the value of commercial properties is expected to take a big bite out of city budgets when those empty buildings are assessed in the coming months.”
Help for cities is on the way
The recently passed $1.9 trillion stimulus package includes relief for states and local governments, however. States and the District of Columbia will split $195 billion, while counties and cities will divide approximately $130 billion in aid.
The Times reported that credit rating firm Moody’s has projected that commercial property values will decline by about 7.2 percent nationally from their levels before the pandemic. The two categories hit hardest are the office and retail sectors. Offices will decline in value by 12.6 percent and retail will drop by 16.5 percent by the end of the year.
The news report said it will become clearer in coming months just how deep the fiscal pain will be for cities, as commercial property assessments arrive and owners of properties with inflated values appeal their tax bills.