The pandemic has changed so much of American life, including the way we shop. E-commerce sales had been growing before Covid-19 forced its way into our lives – e-commerce’s share of total retail volume reached 11 percent in 2019. The pandemic accelerated the trend, however: e-commerce accounted for 14 percent of total sales.
Fighting for fair assessments
The increasing pressure from e-commerce has resulted in more frequent use of “dark store theory” – a legal strategy used by big-box retailers to fight for fair commercial property tax assessments.
As regular readers of our Minnesota Commercial Property Tax Appeals Blog know, dark store theory argues that big-box properties should be valued as if the store is empty (or “dark”). Retailers point out that design features (size, layout, signage, façade) are all tailored to fit the original user and that the property is, therefore, less valuable to a subsequent buyer.
Big-box retailers argue that the appropriate valuation method for these unique properties is the sales comparison method. Standard & Poor’s reports that “big box stores typically sell at only a fraction of the construction cost or of the income generated by the in-use property.”
The financial services firm says successful commercial property tax appeals are “the hallmark of dark store theory” and that use of the theory “has resulted in widespread and pervasive store devaluations.”
Because municipalities that lose commercial property tax appeals suffer a loss in revenue, a couple of trends have emerged: there has been a shift in tax burdens in some municipalities from commercial to residential properties, and legislators in multiple states are pondering tax code revisions designed to keep tax burdens on big-box retailers in place.