Philadelphia officials expect the total assessed value of office buildings across the city to drop by an estimated $1 billion as property owners battle financial woes and vacancy rates continue to rise. City finance director Rob Dubow said the sinking valuations had to be factored into Mayor Cherelle Parker's $6.29 billion proposed budget for fiscal year 2025 and the city’s five-year plan, as the plummeting value of office buildings means fewer property tax dollars flowing into city coffers. While Philadelphia does not lean on property tax revenue as heavily as some other big cities across the country, Dubow admitted the significant reduction of assessed values across the office market is "a big concern." Dubow attributed the projected $1 billion decline to a flurry of assessment appeals. The vacancy rate for Philadelphia office buildings is creeping toward 25%, and reduced leasing revenue and rising interest rates over the past two years have squeezed property owners with floating-rate loans. The uncertainty surrounding the future of office space has led to a lack of office building sales in the past few years. In turn, accurate assessments have become more difficult to achieve, industry experts say, because there’s little sales data to set current market prices. Parker has made a public push to encourage businesses to bring workers back to offices.
Source: Philadelphia Business Journal; 3/14/2024