The conversion of obsolete office buildings to new uses is a growing trend in many markets, especially in dense urban centers. Unfortunately, properties under reconstruction can continue to incur hefty property tax bills, even when the asset lacks a rent stream to help offset the owner’s costs. The right arguments can help these taxpayers reduce their property tax liability during a building conversion, however, and set the stage for an accurate, fair assessment of the asset’s adjusted market value under its new use. The taxpayer’s challenge is to understand how reconstruction affects market value and to show assessors how those forces affect taxable value. Obsolescence and opportunity Demand for office space was already faltering when the COVID-19 pandemic accelerated occupancy declines. Since then, remote work and space sharing among office workers has further reduced the amount of offices companies need, with many tenants returning space to property owners as leases mature. Normally, appraisers value multitenant office buildings under an income approach, attributing rental income per square foot as a starting point for valuation. When the space loses market viability, the per-square-foot rent variable declines and lowers the net valuation for tax purposes. Expanding this result over an entire central business …
