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.
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.
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+.