The 2025 Tax Appeal Review

Continued pressures created by elevated levels of mortgage interest rates, vacancies, as well as stricter lending policies, point to higher capitalization rates, lower property values and tax appeal opportunities in 2025.

2025 presents yet another prospect for a wild ride in the commercial real estate market. Although the recent history of inflationary growth has subsided, the Federal Reserve’s signaling that more rate cuts are likely, and the all-time high price of gold, suggest that inflation and interest rates will again continue to dominate the financial dashboards of investors. Furthermore, although the Federal government and several large employers are directing workers to return to the workplace full time, the paradigm shift to at least a part work from home modality in the post-Covid period continues to dominate and is largely to blame for the record high vacancy rates being experienced in the office sector. The office market continues to stand at occupancy rates that are just 34% of pre-pandemic levels. At the same time, while retail occupancy rates are remarkably high, malls excluded, for the first time since 2020 retailers are projecting to close more stores than they plan to open in 2024. Additionally, due to the continued elevated cost of debt and lack of available credit (with loan to value ratios dropping and investors demanding even higher rates of return (higher capitalization rates) due to greater default risk factors), the value of commercial real estate in certain sectors will continue to be negatively impacted. Consequently, ensuring that your commercial property tax assessment is in line with the realities of the marketplace is critical.

Because the relevant valuation date for your 2025 taxes is October 1, of 2024, and commercial property values are inversely related to capitalization rates, the alarm suggesting lower property values has again been sounded this year.

In the upcoming weeks New Jersey property owners will be receiving their annual property tax assessment notices (postcards) from the municipal assessor’s office. Receipt of these assessment notices indicates that the time has arrived to determine whether a tax appeal is warranted for the 2025 tax year.

As commercial property taxes remain one of the largest single expense components affecting a property owner’s bottom line the need to carefully evaluate property tax relief opportunities continues. The New Jersey 2025 tax appeal filing deadline is April 1, 2025, unless a town-wide reassessment or revaluation is in place, in which case the deadline is May 1, 2025.

New Jersey commercial property owners are therefore encouraged to review their property tax assessments with experienced professionals to ensure that these assessments are representative of the property’s true value. Considering that New Jersey law “freezes” assessments for a period of two (2) years, at levels fixed by County Tax Board or State Tax Court judgments, the tax appeal vehicle can be an effective means of holding assessments in place, as assessments are furthermore not otherwise modified until a town-wide revaluation or reassessment program is implemented. As a result, a successful appeal can provide lasting and beneficial tax relief.

Having the value of your commercial properties examined and an evaluation made as to whether a tax appeal would be warranted in the current market is therefore a property management exercise that is essential at this time.

To read more about Tax Appeals, click here.