Anticipated Rise in Texas Property Tax Assessments for 2025: A Strategic Advisory for Commercial Property Owners

As we approach the 2025 property tax assessment period, Vantage One Tax Solutions has comprehensively analyzed current market trends and legislative developments. Our findings indicate a projected increase in property tax assessments for commercial property owners, particularly within the Dallas-Fort Worth (DFW) Metroplex.

Market Dynamics Driving Property Value Increases

The DFW Metroplex continues to experience robust economic growth characterized by significant business expansion, new developments, and corporate relocations. This surge has led to heightened demand for commercial real estate, resulting in increased property values. Notably, the market has observed a 4.5% year-over-year rent growth and maintains a low vacancy rate of 4.5% (mdregroup.com).

In the industrial sector, net absorption totaled a positive 3.3 million square feet in the fourth quarter of 2024, underscoring strong demand (cushmanwakefield.com).

This upward trajectory in property values directly influences higher tax assessments as appraisal districts adjust valuations to align with current market conditions.

Legislative Developments Impacting Property Taxes

The Texas Legislature is actively considering several proposals that, while primarily aimed at residential property owners, could indirectly affect commercial property owners:

• Senate Bill 4 (SB 4): Proposes increasing the homestead exemption for school property taxes to $140,000 for homeowners and $150,000 for seniors (texastribune.org).

This measure, if enacted, could alter the overall tax landscape, potentially shifting a greater tax burden onto commercial property owners to compensate for reduced residential tax revenues.

• Restrictions on Housing Finance Corporations (HFCs): Legislation is underway to limit HFCs from granting property tax exemptions to private developers outside their jurisdictions. This initiative aims to prevent out-of-state investors from exploiting tax breaks, which have previously shifted the tax burden onto local taxpayers, including commercial property owners.

Strategic Implications for Commercial Property Owners

Given these developments, it is imperative for commercial property owners to manage their property tax accruals and expectations proactively. Our analysis indicates that traditional valuation methods may not be as effective in securing reductions in the current market environment. In previous years, some industrial properties were assessed at $7-$8 per square foot, with market comps supporting $5-$6 per square foot, which provided leverage in appealing assessments. However, current CoStar data reflects a $1-$3 increase in market rates for comparable properties, leaving little room for traditional market-based appeal strategies. As a result, property owners should anticipate higher assessed values as we leverage alternative appeal methods to ensure fair assessments.

To navigate this evolving landscape, Vantage One Tax Solutions recommends the following actions:

1. Communicate Any Property Issues: Inform tax consultants of any property-related concerns that could impact valuation. These include deferred maintenance, needed repairs, environmental risks (such as flood zones), issues with collecting rent, or vacancies. Properly documenting these issues can support valuation appeals and potentially mitigate tax increases.
2. Stay Informed on Legislative Changes: Monitor ongoing legislative sessions to understand potential impacts on property tax obligations and adjust financial planning accordingly.
3. Increase Tax Accruals: Anticipate higher property tax assessments by adjusting budgets to accommodate potential increases, avoiding unexpected financial strain.

By adopting these strategies, commercial property owners can better position themselves to manage the anticipated rise in property tax assessments in 2025. Vantage One Tax Solutions remains committed to providing expert guidance to help our clients navigate these challenges effectively.

Sources

M&D Real Estate. Dallas-Fort Worth Commercial Real Estate Market 2024 in Review: Current Trends and 2025 Predictions. Retrieved from mdregroup.com.

Cushman & Wakefield. Dallas-Fort Worth MarketBeat Report. Retrieved from cushmanwakefield.com.

The Texas Tribune. Texas Senate Committee Approves Property Tax Cut Proposal. Retrieved from texastribune.org.

Vantage One Tax Solutions, Inc. Internal analysis using Costar. CoStar is a commercial real estate analytics company that provides market data and research to help users find market rents. CoStar's data includes information on commercial properties, transactions, and tenants.