Introduction

Colorado Commercial Property Values

The estimated average increase in total commercial property value in 2023 is 26% based on a survey of initial value from county assessors. County increases vary between a low of 0% and a high of 62%. Commercial property valuations by county are provided in the table at the end of this document. This increase would represent the largest annual increase in both value and property taxes for commercial properties in the state annual report records going back to 1993.  As shown in the following graph, the total value of Colorado commercial property is estimated to be $187B in 2023 using county assessors’ estimated increases. If total commercial property values grew at the long-run biennial rate of 11.6%, the 2023 total value would be $157B.

In the graph above, the black line shows the total value of commercial property in Colorado if it had grown based on the commercial real estate price index for the U.S. The change in value from 2022 to 2023 differs dramatically from the total value based on both the county assessors estimates and the long-run biennial growth rate. It highlights that the change in commercial property values in Colorado is abnormal in all aspects.

The difference in total value in 2023 of commercial property between the county assessors and the long-run biennial total value of commercial property is $30 billion. While rents are largely dictated by the market, commercial landlords typically pass on changes in property taxes to tenants. However, with historically high vacancy rates, it is harder to recover costs increases through increased rents. They will either bear a larger portion of the increased property values, or the remaining tenants will. Regardless of who pays the increased property taxes, they eventually result in higher prices for goods and services as businesses attempt to maintain profit margins, impacting consumers and economic growth.

Small businesses can expect to be severely affected by these increased commercial property taxes, with a recent NFIB survey showing that 63% of small business owners consider property taxes to be very/moderately burdensome.[i]

Estimated Commercial Property Tax Increases

Using the current mill levy for each county and the estimated value of commercial property, the estimated tax revenue from commercial property was $4.7 billion based on county assessors’ total commercial property value, and $3.9 billion based on the estimated total property value using historical biennial growth rates. The difference between the two estimates is $776 million.

Economic Impact of Historically Abnormal Commercial Property Tax Increase on the Colorado Economy

Considering the $776 million difference in commercial property tax revenue to be ‘abnormal’ in comparison to historical changes in commercial property tax revenue in Colorado and the U.S., it can be expected to have an impact on the Colorado economy when vacancy rates are historically high and rents that are typically tied to the consumer price index vary drastically from increases in commercial property valuations.

Using REMI, a dynamic general equilibrium model of the Colorado economy, CSI estimates the impact of the $776M abnormal commercial property tax increase on employment, GDP, and personal income per household.  The results are shown in the following table. Higher commercial property taxes result in 7,520 jobs lost, a $177 million reduction in GDP, and a $223 decrease in personal income.

[i] https://assets.nfib.com/nfibcom/NFIB-Tax-Survey-Full-Report.pdf