Chicago Braces for First Post-Pandemic Property Tax Assessments

As Chicogans gear up for their first property tax assessments since the onset of the pandemic, Cook County Assessor Fritz Kaegi is left with the tricky task of determining valuations during a period marked by commercial distress and sluggish sales.

With fewer than five major office buildings changing hands last year, and those that did being sold at substantial losses ranging from 50 to 90 percent, determining accurate property values has become increasingly complex, Bloomberg reported.

Kaegi is considering excluding distressed sales from his calculations due to the challenges posed by those transactions.

“If there’s some kind of duress or serious time pressure where they couldn’t be properly shopped, that’s one of those things that might make you take that value with a grain of salt, just as you would any other asset that trades under distress conditions,” Kaegi told the outlet.

The potential exclusion of distressed sales raises concerns about the fairness of tax burdens, particularly for property owners who are still grappling with the economic repercussions of the pandemic.

The valuation of properties in downtown Chicago is integral to determining how the tax burden is distributed among residents and businesses, and recent transactions paint a grim picture. For instance, a 41-story building on Michigan Avenue sold for roughly 50 percent less than when it last traded in 2017.

Critics, such as Farzin Parang, executive director of BOMA Chicago, question whether Kaegi will acknowledge the drastic depreciation of downtown office buildings. High-profile exits, such as billionaire Ken Griffin’s relocation of his hedge fund to Miami in 2022, exacerbate concerns.

Chicago’s office vacancy reached a record high of 23.8 percent in the fourth quarter. That’s significantly higher than the 13.1 percent vacancy at the end of 2019. However, newer “trophy” buildings are reportedly faring better, offering a glimmer of hope amid the broader market downturn, the outlet reported.

Kaegi’s office is diligently sifting through data to inform property assessments, a process complicated by the unpredictable market conditions. In navigating these complexities, Kaegi’s team is engaging with stakeholders and meticulously analyzing vacancies, rents and sale prices.

Property assessments, conducted every three years in Chicago, are eagerly awaited as they will shape tax policies and address pension deficits. Total assessed property value increased by 31 percent to $47 billion from 2018 to 2021, with the bulk of that increase coming from nonresidential properties, according to the Cook County assessor’s website.

—Quinn Donoghue