Commercial values stay steady for most in county
The equalized value of all commercial properties in the county remained fairly flat over the past year. The fall was just a drop in the bucket, considering the state of the economy, as the total value only dipped by two-tenths of a percent.
But a drop this year may need a much bigger bucket next year.
“I anticipate this year we’re going to have more appeals on the commercial properties. Retail has seen a flattening out. We’ve seen increasing vacancies across the metropolitan area, and I think that’s a trend that is going to continue into 2010,” said Matt Woolford, deputy director of the Kent County Bureau of Equalization.
“So while the values were flat this year, I think there is going to be increased appeals activity, and that’s an area we probably haven’t seen the bottom of yet,” he added.
The 2009 equalized value of commercial properties in the county came in at $4.620 billion, down slightly by $8.8 million from the 2008 mark of $4.629 billion.
Eighteen of the county’s 30 municipalities had an increase in commercial values. The city of Grand Rapids saw the value of commercial properties rise by $83 million to $1.41 billion, a hike of 6.2 percent. But the largest percentage increases were recorded in Solon and Ada townships, at 15.8 percent and 11.2 percent, respectively.
A dozen cities and townships experienced a loss in commercial value, none bigger than Wyoming. The city’s 2009 value fell by 19 percent, cascading from $680 million in 2008 to $551 million this year — a tumble of nearly $130 million. But the city returned about $128 million worth of commercial properties to its industrial tax roll last year after moving those sites to the commercial roll the previous year.
No other municipality had a double-digit loss in commercial value. (See related chart.)
Some of the most recent construction, such as the medical-related facilities going up on Michigan Street, is considered commercial for categorization purposes. But these structures aren’t on the commercial property tax roll. Some have been given tax exemptions. Others, like the Michigan State University Medical School, are automatically off the roll because of their use.
“A lot of that type of construction doesn’t have an impact on the tax base,” said Woolford of the medical expansion.
One local commercial property owner, who asked to remain anonymous, told the Business Journal that retail properties are at risk this year. He also said some banks are considering re-appraising the commercial holdings that these lenders have financed. But he didn’t think a lot of buildings would get foreclosed this year because lenders are looking for reasons to avoid taking that action.
The national outlook for the commercial financial market is drearier.
Real Capital Analytics Inc. reported last month delinquent loans rose by 43 percent in the first quarter of this year to $65.9 billion — up by $46 billion just from the end of 2008.
The firm also said 3,678 commercial properties in the nation were listed as being in distress, and commercial values had fallen by at least 30 percent since 2007. Real Capital estimated that those values may drop by another 11 percent this year. Owners who financed their purchases with at least 60 percent debt were now close to having zero equity in their buildings.
Real Capital also reported that global commercial sales fell by 70 percent during the first quarter from the end of last year. As for sales in the county, Woolford said they have slowed over the last year.
“I don’t track the loan information per se, but what we have seen is fewer sales,” he said. “And the sales that are going are going for less than they have historically.”