"With the long and steady erosion of manufacturing, Chicago's real estate sector and the service companies it houses have become pillars of the city's economic tax base," reads the report. "As a result, both the successes and challenges facing these companies have significant ramifications for the city's overall economic well-being."
The report entitled: "Standing Tall: Keeping Chicago Vibrant Into the 21st Century," resulted from a BOMA/Chicago-commissioned study to measure the impact of BOMA buildings on the economy of Chicago and Cook County. Assistant professor Dr. Sofia Dermisi along with director Jon DeVries of the Marshall Bennett Institute of Real Estate at Roosevelt University authored the report.
"The Roosevelt University report points to an inescapable fact: Illinois' dependence on property taxes, especially to bear the primary burden of school funding, puts Chicago at a competitive disadvantage when compared to other cities and jeopardizes Chicago's long-term economic prospects," members of BOMA/Chicago caution in the report's introduction.
According to the study, Chicago had the highest property taxes during the past 10 years, with an average of $6.98 in taxes per sf. This compares to $5.31 per sf for New York, $2.78 per sf for Dallas, $2.40 per sf for Atlanta and $1.98 for Los Angeles.
Total taxes paid by BOMA/Chicago class A and class B buildings in 2004 were $652 million, from which $453 million was from class A and $198 million from class B. BOMA/Chicago class A and B total taxes represent 47% of the city wide commercial property tax base of $1.4 billion.
Average taxes of class A properties were $7.31 per sf, ranging from $4.31 per sf in River North to $8.66 per sf along North Michigan Avenue. Average taxes of class B properties were $4.11 per sf ranging from 34 cents per sf in Northwest City to $5.32 per sf on North Michigan Avenue.
The report also concludes that operating expenses per sf averaged $4 lower than in New York but $3 higher than in Los Angeles and nearly $6 more than in Dallas and Atlanta. And while a few high-profile transactions reached the $400-per-sf range, Chicago building sales averaged $196-per-sf during the past 10 years.
Crippling Chicago's advantage in a global market, the authors reason that part of the funds that could be used to improve the property are now used for taxes; Chicago's higher costs of occupancy impacts the attraction of relocation; and tenants, subject to higher cost structures, may be unable to invest in other aspects of their business.
Nearly 90% of rentable space in class A buildings Downtown, are members of BOMA. In the Central Loop, BOMA/Chicago member buildings represent 88% of the rentable building area; on LaSalle Street, 100%. They represent 81% of North Michigan Avenue and 74% of the West Loop.
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