Storylines about increasing U.S. production and reducing dependency on foreign suppliers dominate discussions about oil and gas markets. But there’s a butterfly effect taking place on the supplier side that’s making an impact in some unexpected places, including commercial real estate.
We’ve seen an increase in domestic oil production, but no equivalent rise in oil demand, and OPEC isn’t reducing its supply. The result is a flooded marketplace where oil prices are falling due to lack of demand.If you’re running an oil company, what’s the first thing you do when your supply exceeds demand? Start cutting costs. In North Dakota, for example, oil drills are sitting dormant and oil workers are losing their jobs due to the downturn in demand for oil.
The effect of these cost-cutting endeavors ripples out to the vast network of businesses supplying oil companies with goods — manufacturers that make machinery and equipment used on oil rigs and refineries, chemical additive providers, and the manufacturers of uniforms, safety goggles and steel-toed boots, just to name a few. Such businesses face significant economic ramifications due to fluctuations in the oil and gas marketplace.
Commercial Real Estate: An Unlikely Advocate For Your Dollars
If an oil company cancels three large orders from your steel manufacturing business, you may need to deploy some of the same cost-cutting strategies as the oil companies.
Let’s say the lack of market demand causes you to eliminate your third shift or discontinue production on Fridays. If you’re still looking for ways to cut costs further, the four walls that surround you might contain a solution.
Your commercial property tax bill could be lowered substantially, especially if you’ve eliminated shifts, furloughed workers or made operational changes as a direct result of market fluctuations.
Many businesses treat commercial property taxes as a fixed cost to be paid every year. But commercial property taxes are not necessarily static; you’re able to appeal your commercial property tax assessment and fight for lower payments based on depreciation, economic obsolescence and other outside factors that affect your business.
If you’re in a position like the steel manufacturer above and one of your biggest customers cancels a large order, what happens? Equipment sits idle, commercial space goes unoccupied or unused and it’s more challenging to sell your product in a stressed market. These are all variables that should be factored into your commercial property tax assessments.
Why should you be paying the same taxes on underutilized commercial property as you would when you’re operating at capacity?
You shouldn’t! You’re obligated to pay no more than your fair share of commercial property taxes. If you can quantify and present a credible tax valuation analysis to your taxing authority, you’re in a position to attain commercial property tax savings. These savings could help keep you in business as you seek new ways to sell your product and avoid laying off workers.
As the economic climate keeps changing, it’s important for businesses to understand every option available for cutting costs. Commercial property taxes are an often-overlooked path toward significant savings.
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.