Chicago Property Tax Update: What you need to know

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On June 13, 2017 the 2016 property tax rates, calculated by the Cook County Clerk’s office, were released. This is the final step in the tax process before bills are mailed. The average City of Chicago residential taxpayer should expect to see a roughly 10 percent increase in their property tax bill and commercial property owners (or their tenants) should expect an increase of approximately 9.3 percent in their property taxes.

property tax

1. Average composite tax rates are shown. Actual tax rates may vary. 2. Tax bills based on an average commercial property with a market value of $270,000. Actual tax bills will vary. Source: Cook County Clerk David Orr. Memo dated June 13, 2017.

Tenant implications

While this tax increase was not unexpected, commercial property owners and tenants should be prepared for the implications on their expenses this billing cycle. For tenants that have triple-net (NNN) leases, these tax increases will have immediate impact on their operating costs. For those tenants with gross (FSG) leases, the tax increases will fall to the property owners, but over time will inevitably be passed through to the tenants at the time of lease renewal or lease rate negotiation.

What goes up, must…keep going up

In Chicago, property taxes are already among the highest recoverable expenses in the total cost stack. These operating expenses have increased 18.7 percent since 2012 and this latest increase is unlikely to be the last. We expect additional property tax increases over the next several years to cover shortfalls in City of Chicago and Chicago Public Schools worker pension systems.

Commercial properties bearing the burden

In Chicago, commercial properties shoulder a significant share of the property tax burden. In fact, commercial properties pay more than 36 percent of all property taxes collected in the City of Chicago, of which office buildings pay nearly half. Moreover, commercial buildings are assessed at a rate that is 250 percent of the rate of assessment for residential properties.

Rates and assessed values both rising

While the average tax rate is critical, it is just as important to understand the significance of assessed values. The total tax paid is a function of the tax rate and the assessed value of the property. With assessed values of commercial buildings increasing approximately 11 percent since 2012, building owners are now exposed to dual pressure on their tax bills – one from increasing values and another from increasing rates.

Download the full report here. For more information, contact:

Christian Beaudoin
Director, Research
Tel +1 312 228 2020

Hailey Harrington
Research Manager
Tel +1 312 228 3189