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Commercial and Industrial Property Valuation

The Cook County Assessor is required by law to assess one-third of the properties each year. In 2005, the west and south suburbs will be re-assessed.

The Classification of Properties

All properties in Cook County are classified for real estate tax purposes. The classification system was developed so that similar types of properties could be grouped together and valued using the same methods and units of measurement.

Classes of Income-Producing Properties

Commercial property is classified as Class 5A, industrial property is classified as Class 5B and apartment buildings over six units are Class 3 properties. Within these classifications, the properties are further defined by use (e.g. gas station, restaurant).

How Property is Valued

Valuation techniques have been developed for the different types of properties in Cook County. Physical features of buildings often indicate value. For example, apartments may be valued by number of units and unit mix while industrial properties are valued by amenities such as number of loading docks and the building size. For these reasons, the Cook County Assessor collects information on all of the properties we assess.

The Three Approaches to Value

Assessors throughout the country typically look at three approaches to estimate value to obtain a property’s value: the cost (replacement) approach, the income approach and the sales comparison (market) approach.

Cost Approach - is an estimate of value derived for the property by determining the cost to construct the building(s) less the estimated depreciation of the property. The Cost Approach is most effective when valuing unique manufacturing properties as income and sales data may not be available for these owner occupied properties. Marshall & Swift™ cost calibration software is used to apply cost estimates to this type of property.

Income Approach – is an estimate of value based on the rental income generated by the property. This approach is often a very important indicator of property value for income-producing properties. The Cook County Assessor’s Office uses market estimates for income, expenses, and a rate of return for an investor (the capitalization rate) to determine value.

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Sales Comparison Approach – is an estimate of value that compares the subject property to similar properties that have recently sold and have similar characteristics or indicators of value. Differences in location, physical characteristics, time of sale, physical condition, size, age and other market related conditions are adjustments that can be made to sale prices. This accounts for differences between comparable sold properties and the subject property. Extensive editing and adjustments are made before unsold similar properties are valued. Also, large commercial transactions are thoroughly analyzed because of the complexity of the sale.

The property values that are derived from the income approach are often lower than the recorded sales prices in Cook County. This is often because the sales prices reflect the expectation of higher income in the future and also have not been adjusted .for the non-realty .component of the sale. The Cook County Assessor is only allowed to value property on the current property value, not the anticipated value. Sales also need to be adjusted for non-real estate value included in the recorded sale price. Once appropriate adjustments are made to the recorded sale prices, they can be compared to the income market estimates. These two values are then reconciled to obtain an accurate estimate of property value.

Uniformity Between Properties

The Cook County Assessor uses a number of methods to ensure that similar properties are treated similarly:

GIS - Geographical Information System is the computer software that displays information regarding each parcel by neighborhood on the township maps. Using GIS, we can perform an analysis of sales prices and sales activity in a spatially displayed format. Economic trends are noted that allow for a more uniform assessment. Pictures are an invaluable tool in determining comparability of properties and to view the building’s condition and its surrounding neighborhood. While the images were captured in 2001, our analysts may need to match up property changes to existing pictures when viewing an area. Regardless, the images present area conditions that have not undergone extreme changes.

Visiting Re-Assessed Neighborhoods - Analysts also drive throughout the township that is being re-assessed, looking for improvement discrepancies and other resources of value (rental signs, “for sale” signs, local newspapers). Historical data is then typically confirmed or adjusted.

Historical Data - Market data is gathered from historical financial records and industry resources such as CoStar, BOMA, Globe Street and Black’s Guide. When sales data is scarce, income market data is the most reliable indicator of value for income-producing property. However, visually similar investment properties can be quite different in their income-producing potential. Therefore, existing rental agreements, leasing structures and financing terms must be examined. Cook County’s income property ranges vary widely, reflecting the differences in economic vitality throughout the county. These variances also are reflected in zones within a township that analysts use as a parameter to ensure a consistent and uniform assessment. The zones - average, above average and below average - are developed based upon field observation and market income data.

Current Market Data - Market occupancy and vacancy rates are always included in our determination of market value. Vacancy rates are determined by property class and location. In Cook County, the vacancy rates are higher for either depressed areas or with the poorer condition buildings. This reflects the problems that currently exist in the market.

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Cook County Assessor's Office (Main) County Building, Third Floor

118 North Clark Street, Chicago, IL 60602 (312) 443-7550