Commercial real estate (CRE) is increasingly reliant on live, actionable data and technology as the basis for making smart decisions. Many platforms capture, integrate and analyze data to help manage your cost of occupancy.
But how do these tools track your largest cost of occupancy — property taxes? Most systems track property tax bills as a fixed expense but you need the human touch to determine if the assessed value, the basis of your tax bill, is reflective of market value.Every occupier pays real estate taxes and many pay personal property taxes on FF&E (furniture, fixtures & equipment) and inventory. If CRE executives or CFOs don’t track property taxes and aggressively manage assessed values, your cost of occupancy could be artificially high, making you uncompetitive with your peers.
Giving CRE Data The Human Touch
Whether you’re getting CRE data for your organization through an old-school spreadsheet or a sophisticated cloud-based server that transmits up-to-the-minute data to your smartphone, a human touch is still necessary to gain the most value from the data.
Today, many companies have solutions that enable them to track key performance indicators (KPIs) such as the total cost of occupancy, cost per FTE (full-time employee), revenue per employee and more. These metrics allow an organization to measure and align expenses down to the total cost an individual employee has on the business.
CRE data drives businesses to make big decisions. For instance, in an effort to reduce occupancy costs, a large lighting manufacturer in the Northeast decided to decommission plants and combine processes and production facilities. It made these decisions through insights gleaned via CRE data.
While that visibility is valuable, it’s critical that the data is interpreted for it to truly be meaningful. Once key metrics are defined and mapped, human experience and knowledge are necessary to make the right decisions. Every metric may point you toward locating your new facility in a particular location, but no cloud solution or KPI dashboard is going to help fine-tune your decision based on commercial property tax savings advantages.
Moreover, one of the biggest mistakes corporations make with CRE data is letting their calculations assume too many fixed costs, leading to missed opportunities for cost reduction.
Remember The True Cost Of CRE
Commercial property taxes — the largest cost of corporate occupancy — are not necessarily a strict, non-variable cost. Yet when it comes to data analysis, property taxes are treated as fixed costs, especially if you’re relying on purely computer-generated information. The data does not include the occupier’s statutory right to appeal assessed values.
Commercial property taxes are only a fixed cost if you pay the bill without question. Blindly relying on your CRE data for property taxes may cause you to miss opportunities to raise question and file for appeals.
By appealing the taxing authority’s value assessment, your property taxes become a variable cost with the opportunity to be reduced, delivering real property tax savings year over year. You cannot book anticipated savings under FASB and GAAP accounting rules but a tax refund is still a cost savings to the bottom line.
Think about it this way: A computer scanning through a database isn’t going to know that Bob Smith and Robert Smith are the same person. Humans naturally see patterns, draw connections and recognize outliers. The human touch could translate into significant savings opportunities.
So while you should collect as much data as possible to track your cost of occupancy, don’t overlook the important of working with a commercial property tax consultant. Having that human touch could make the difference between paying your fair share of property taxes and overpaying your taxes.
Download RPTA’s free whitepaper, “7 Signs You Might Be Overpaying Your Commercial Property Taxes" for more insights into the commercial property market and to learn how to uncover hidden property tax savings.