Case Study

Office Savings

A client that was reliant on commodity pricing was hit hard economically during construction of a brand new, Class A corporate headquarters. Negative economic factors affect the buildout of a property and economic obsolescence enters into the equation.

THE CHALLENGE

Economic obsolescence, a form of depreciation caused by various economic factors surrounding the property can be a challenging concession to negotiate on a brand new office building. The office is going to be built design-rated at 100,000 sf for example and the county has specific vacancy rates and other items under the income approach they utilize. In this case, a small section of the building wasn’t going to be built out until commodities rebounded, so we needed a plan.

THE APPROACH

This negotiation took place in a Texas county where we have quite a large footprint of properties that we represent. Maintaining a positive professional relationship with local assessors allows unique circumstances like this to be taken into account by the other side in the appraisal process. In this case, our strategy was to utilize our long existing relationship and goodwill earned over decades.

THE SOLUTION

Utilizing our long-standing relationship with the local assessor, we successfully argued for economic obsolescence to be applied in this case reducing the assessed value of the property by $20,000,000, generating a tax savings of over $500,000+.

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