When a corporation relocates or expands to another region, property taxes don’t usually factor into the decision. Your company, for example, may need to have a regional presence, so you choose a location in the Midwest for distribution purchases – regardless of how high the property taxes are there. Region selection is generally the first priority.
Commercial property taxes come into play once the region is selected and your company begins the due diligence process of selecting your new distribution center.You may select a few different buildings and compare, among other things, their property taxes.
But the truth is property taxes should play a bigger role in your location selection process. Read this article to find out why, and discover which areas with high property taxes aren’t ideal for growth.
How To Avoid Areas With Commercial Property Tax Hikes
If your company has the freedom to choose where to relocate without being tied to a specific region, you should consider which areas have the highest property taxes before you move. The five cities with the highest property taxes in the country are:
- Detroit, MI
- New York, NY
- Chicago, IL
- Providence, RI
- Des Moines, IA
There are a number of reasons why these areas subject companies to high commercial property taxes. New York, for example, has the most in-demand real estate in the world, so it’s able to charge higher property taxes without driving away business. Detroit, on the other hand, has a crumbling infrastructure and needs the revenue from property taxes to revitalize the city.
When you’re selecting a relocation spot, research is imperative. Dig into a potential city’s property tax history to determine if the area is prone to commercial property tax hikes.
Site Selection: How To Choose Where You Should Move
When German automotive manufacturer BMW wanted to open a new U.S. manufacturing location, it ultimately chose Spartanburg, SC, which went from being a small town with no major corporate presence to housing the largest BMW factory in the world.
In the early 1990s, when South Carolina was courting BMW to make the move, the state offered a $130 million incentive package, including tax credits and abatements, job training allowances and a $1/year lease for the 1,039 acres of land it occupies. The region would benefit from the increase in jobs, the relocation of BMW suppliers to the area to save on shipping costs and the long-term economic impact of BMW’s presence, while BMW would save hundreds of thousands of dollars in taxes.
Large companies moving to other regions are often drawn by tax breaks and incentives, and some areas of the country are willing to do whatever it takes to bring in jobs and reap the profits of community growth. When you’re looking for a site or a region to relocate to, consider which states have built an environment that nurtures growth through tax breaks and incentives for businesses.
Ultimately, research and thorough due diligence are the best way to determine where you should relocate. Flexibility is another key to finding a location that enables growth. Look at alternatives to major urban areas in the regions you’re interested in. Avoiding areas that are prone to commercial property tax hikes is less challenging when you put the proper time and effort into the process.
Learn more about how high property taxes impact your company’s bottom line.