Aging office space constructed 25 years ago usually lacks the amenities and infrastructure needed to compete for tenants in today’s labor market.
Workers today demand amenities such as strong Wi-Fi signals beaming from every corner, plenty of natural light and open space for collaboration, and aesthetic features like vaulted ceilings with exposed brick and pipe.
To accommodate the millennial generation poised to overtake Baby Boomers as the largest generation in the workforce, a new set of workplace solutions and standards are being ushered in. Offices with open floor plans designed for collaboration and creative thinking are replacing spaces filled with old-school cubicles. Some corporate settings, like Google’s headquarters, are famously outfitted with fully stocked kitchens around every corner, slides instead of stairs, nap spaces and ping pong tables.
Some commercial real estate owners and renters are stripping buildings down to the brick walls, and ripping out ceilings to expose piping and ductwork in an effort to make their space appeal to modern tastes.
Making physical and technological improvements to aging commercial real estate can boost its value and keep it competitive.
Unlocking Trapped Value In Aging Office Space
According to architecture and engineering firm Page Southerland Page, Inc., “The question aging asset owners have to ask themselves is: who will help me unlock the trapped value in my asset to remain competitive?”
Trapped value isn’t necessarily restricted to a desirable brick facade hiding beneath a sheetrock wall.
Your aging office space could hold a wealth of hidden value in the form of commercial property tax saving opportunities. Money you save on commercial property taxes could be directly reinvested into your property to fund capital improvement projects to make the space more appealing.
Commercial property taxes are widely overlooked as an occupancy cost, but the savings generated from effective property tax management could be enough to finance the upgrades necessary to keep your aging real estate competitive.
Let’s say you own an older, three-story office building without an elevator. You could justify that lacking an elevator hurts your ability to attract tenants and argue for a reduction in the building’s commercial property tax value due to the functional obsolescence of the space.
A lower tax assessment value garnered through obsolescence translates directly into commercial property tax savings.
Commercial Property Taxes: Proceed With Caution
As you make upgrades it’s imperative that you’re aware of the associated tax implications. For example, depending on where you own property, you may have to pay taxes on the personal property you’ve acquired during the upgrade process. That’s why it’s prudent to first seek advice from a commercial property tax consultant.
Modern office space is changing to accommodate a younger generation of workers and new ideas about workplace productivity. As workplace expectations evolve, retaining and generating value from aging commercial real estate will continue to be a challenge for many property owners, but it’s not something you have to face alone.
Learn more about commercial property taxes and the true cost of occupancy by reading RPTA’s free e-book, The Corporate Taxpayer’s Guide To Reducing Commercial Property Taxes.