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Commercial real estate: Cowtown office buildings plunge in value

The assessed valued of Calgary's downtown office buildings took a recent pummelling. Building values in Alberta's largest city dropped by about $4 billion in the last year. That change in commercial real estate values translates into increased taxes for non-residential owners of property outside the downtown core. City council will likely need to come up with a plan for tax relief in the short term while figuring out a long-term fix.

The news is a blow for an area of the city that used to generate 40 per cent of non-residential tax revenue. But with recent bleak economic times, energy companies jumped ship and closed their doors, leaving behind vacant buildings. Things are beginning to rebound, but Cowtown's unemployment rate still hovers at a little more than 8 per cent and vacancy rates for downtown offices are at about 30 per cent.

To offset the fall in assessed values, for the last couple years, Calgary's city coffers have have coughed up $90 million from a fiscal reserve to keep the tax hike at 5 per cent for non-residential properties. Doing so again next year would be an additional $89 million. A Canadian Federation of Independent Business director said even temporary tax relief is welcome but urges council to think about long-term structural reform.

There are many circumstances that impact commercial real estate. An experienced Alberta lawyer would be able to point out to his or her client on how various issues may legally impact their business ventures. Real estate is enmeshed with the economy and, as such, may have a short and long-term impact on business ventures.

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