Key Takeaways:
- Managing Cost and Risk is Key in Commercial Real Estate – High rental demand continues, but with new builds slowing, owners must optimize costs, especially property taxes.
- Office Recovery is Slow, But Opportunities Exist – Vacancy remains high, but urban renewal and office conversions offer potential for growth.
- Property Taxes Aren’t Always Straightforward – Owners must manage multi-parcel oversight, complex ownership and delinquencies to stay compliant and cut costs.
- Flood Risks Demand Proactive Action – Climate events are unpredictable; staying updated on flood zones and insurance can prevent financial uncertainties.
The commercial real estate market is evolving in 2025, showing signs of improvement in some sectors while continuing to pose challenges in others. While office vacancies remain high due to ongoing shifts in workplace dynamics, multifamily developments continue to thrive as many would-be homeowners are stuck on the sidelines, boosting the residential rental market. As commercial property owners and managers navigate these changes, managing risk and controlling costs remain critical to long-term success.
Multifamily Gains Strength Amid Housing Affordability Challenges
Homeownership remains out of reach for many due to persistently high interest rates and home prices that, although showing some signs of coming down, are still at record highs. As a result, demand for multifamily housing remains strong, making this sector a bright spot in commercial real estate. However, a slowdown in new multifamily construction—projected to decline by almost 50% in 2025 according to CoStar—could put additional pressure on existing property owners to optimize their operational costs. Property taxes are one of the highest fixed costs for commercial real estate owners, making it essential to accurately assess, manage and pay taxes efficiently.
Office Sector on Slow Path to Recovery
Office vacancy rates hit a record high of 20.1% in 2024, according to Moody’s, and while many industry experts predict this trend to persist in 2025, there are signs that vacancy may soon improve. According to a 2024 survey by accounting firm KPMG, more than three-fourths of CEOs expect employees to return to a traditional in-office schedule by 2027—a trend further being pushed by the current administration. Commercial developers are seeing additional opportunity with urban renewal efforts and revitalization investment in distressed metro areas, with conversions of office and other commercial properties into residential, retail and entertainment/mixed-use spaces. These trends bring new tax complexities that require expertise in zoning, parcel subdivisions and assessment modifications to ensure tax obligations are met without unnecessary penalties.
Regardless of how fast commercial real estate comes back or what the multifamily/office/retail mix may look like in a few years, the mandate for commercial lenders and property managers is clear: Control costs and manage risk for long-term viability. Ensuring accurate property tax data and timely payments can help reduce unnecessary expenses and avoid penalties that add to financial strain. Specifically, commercial lenders and property managers should be deliberate in paying attention to these potential pitfalls:
- Ensuring Comprehensive Parcel Oversight
Because commercial properties often span multiple parcels, missing or misidentified parcels can lead to incomplete tax payments, penalties and legal complications. Having a property tax partner with the ability to conduct thorough parcel audits and leverage technology to track changes in parcel configurations can help prevent costly errors.
- Managing Complex Ownership Structures
Ownership in commercial real estate often involves multiple stakeholders, including LLCs, holding companies and other legal entities, making property tax payment tracking complex. Centralizing property tax data and using advanced reporting tools can help property managers and lenders maintain visibility of property tax obligations in order to avoid missed or inaccurate
- Actively Monitoring Property Tax Delinquencies
Rather than waiting for property tax delinquencies to accumulate, property owners should implement structured monitoring systems. Automated alerts and severity-based reporting tools can help prioritize property tax payments, address delinquencies before they escalate and reduce financial exposure. Property tax service providers with expertise in commercial real estate can assist in developing strategies to manage property tax liabilities effectively and maintain compliance with local regulations.
Flood Certifications: A Critical Risk Management Tool
As we have seen this year in markets like Ashville, NC—which previously would not have been considered a flood-risk—more severe climate events are becoming increasingly unpredictable and more severe. While lenders are required to ensure that life-of-loan flood insurance is in place for financed properties, there can be lags in sharing this information with owners and property managers.
As a result, there is growing interest on the part of property managers in securing up-to-date flood information to mitigate liability and protect against financial losses. In states like Texas and California, where flood zone maps are frequently updated, property managers should be proactive in ensuring properties are properly insured. Failure to do so can lead to unexpected costs, potential rent suspensions in FEMA-designated disaster zones, and complications in refinancing or selling properties.
As commercial real estate continues to evolve, staying ahead of market trends and proactively managing property taxes and flood risks can make a significant difference in profitability and compliance. With multifamily properties continuing to thrive and office spaces facing ongoing challenges, commercial property owners must focus on efficiency, risk reduction and cost control. Ensuring accurate property tax payments and maintaining a clear understanding of flood risks, with the help of experienced professionals, can ensure owners have the tools to successfully navigate an increasingly complex commercial real estate landscape.
