When people see businesses in an area thriving, they often assume that it is all positive.
Yet a report from Canada suggests this might not be the case.
As businesses do well, the price of the real estate those businesses occupy rises. For example, you set up a small cafe in an area that previously had none. Other entrepreneurs notice you are always full and believe there is room for them too. Pretty soon, your street has built up a reputation for being the place to go for food in town.
Everyone wants to get in on the act and as demand for the property rises, so does what people are willing to pay to get a space there.
As property values rise, so do the commercial property taxes in the area because they are calculated based on property value.
Yet as with any business calculation, there comes a tipping point. You can only serve so many customers a day in your cafe, and the more property tax you pay, the harder it becomes to stay profitable.
It can lead to complicated decisions as a business owner. For example:
- Can I afford to keep the same number of staff, or do I have to cut hours to meet the higher tax bill?
- Will customers be willing to pay more for a coffee to cover my tax rise, or do I need to look at cutting staff or some other cost-saving measure?
- Can I afford to improve my property if it will increase my property value and, therefore, my tax?
Before you know it, the face of the area has changed forever. The only people that can still afford to pay the leases and property taxes are the big corporations.
You cannot control your area’s future as a commercial property owner. Yet, you can speak up when you believe property taxes are unreasonable. Getting legal help to do this will be crucial to the success of your business and perhaps the character of your area.