Commercial property is real estate used for business or investment purposes rather than personal housing. This broad category includes office buildings, retail stores, restaurants, warehouses, industrial facilities, and multi-family apartment complexes (typically 5+ units).
For property tax purposes, commercial properties are usually valued using the income approach—analyzing the property's rental income and applying a capitalization rate. This differs from residential valuation, which relies primarily on comparable sales.
Commercial property owners face unique challenges: higher tax rates in some jurisdictions, mandatory rendition of business personal property, and more complex valuation methods.
Commercial property tax protests require different strategies than residential—but can yield substantial savings on higher-value properties.
Key differences from residential:
• Income approach is primary valuation method
• Actual income/expense data strengthens your case
• Cap rate selection significantly affects value
• Personal property (equipment) is taxed separately
• No homestead exemption available
Commercial protest strategies:
• Challenge the cap rate (higher = lower value)
• Provide actual income documentation
• Document vacancy and collection losses
• Show comparable sale cap rates
• Identify functional or economic obsolescence
Types of commercial property:
Office:
• Professional buildings, medical offices
• Valued by rental income per square foot
• Class A/B/C distinctions affect value
Retail:
• Shopping centers, standalone stores
• Location and traffic critical to value
• Anchor tenant presence affects value
Industrial:
• Warehouses, manufacturing, flex space
• Valued by functional utility and location
• Clear height and loading docks matter
Multi-family (5+ units):
• Apartment complexes
• Valued primarily by income approach
• Per-unit and per-square-foot analysis
Special purpose:
• Hotels, hospitals, self-storage
• May require specialized valuation
Primarily using the income approach: Net Operating Income ÷ Capitalization Rate = Value. The district estimates your rental income, subtracts operating expenses, and divides by an appropriate cap rate. Providing your actual income data can help ensure accuracy.
In Texas yes—you may be required to file a rendition reporting property information and income. Failure to comply can result in penalties. Many commercial owners voluntarily provide income data during protests to support lower valuations.
Absolutely. Commercial protests can be even more effective than residential because the income approach has more variables to challenge. Contest the income estimates, expense ratios, cap rate selection, or comparable sales used.