Appraisal: Commercial & Industrial

Commercial Property (also called investment or income property) refers to buildings or land intended to generate a profit, either from capital gain or rental income. Commercial Property includes office buildings, malls, retail stores, farm land, multifamily housing buildings, warehouses, land (including investment properties on undeveloped, raw, rural land in the path of future development. Or, infill land with an urban area, pad sites, and more), garages, and miscellaneous properties (including any other nonresidential properties such as hotel, hospitality, medical centers, and self‐storage developments etc.).

The Assessor’s Office applies three approaches or three separate indications of value when determining commercial market value; cost approach, sales or market approach and income approach.  These values are reconciled to arrive at a final value conclusion.

Cost Approach – the value of the land is determined first, then replacement cost of the buildings or improvements are added.  Accrued depreciation is subtracted and the result is added to the land value.

Market Approach – sales of similar properties are analyzed to derive units of comparison such as price paid per square foot, or per rental unit, or per $1,000 of gross income.  These are applied to the subject property to arrive at an indicated value.

Income Approach – based on the concept that the value of income producing property is directly related to the level of income which can be expected over their economic life.  The economic rent for the property is estimated and expenses are deducted to derive an annual net income figure.  Net operating income is converted to a value estimate by dividing the net income by a capitalization rate.  This rate is derived by comparing net income by sales prices of comparable properties.  This rate is then applied to the net income of the subject property to yield a value estimate.

Seldom do three approaches generate the same value.  The final step is to reconcile the values developed under the three approaches.  The relative merit of each value indication is considered and the values correlated to arrive at a final value determination.

Industrial Property is appraised in the same manner as Commercial. It means a facility or property engaged in manufacturing or processing which includes, but is not limited to sawmills, plywood and veneer plants, paper and pulp mills, food processing facilities, bakeries, flour mills, chemical processing operations refineries, breweries, wineries bottling operations, machine shops, metal rolling mills, metal fabrication facilities, smelters, printing and publishing operations, seed processing operations, permanent sand and gravel operations, and electronic and high technology manufacturing operations.  (OAR 150-306-0100)

“State-appraised industrial property” means industrial property that had real market value for improvements of more than $1 million for the preceding year and whose appraisal responsibility has not been delegated by the department to the county.  We determine the value of a property through a physical appraisal and information provided by the taxpayer in the annual filing (ORS 308.411).

"Improvements" or "real property improvements", for determining responsibility for property of more than $1 million, means improvements erected upon, above or affixed to the land but not the land itself. Improvements include, but are not limited to: yard improvements, buildings, structures, and real property machinery and equipment.  Improvements do not include site development and personal property.

"Yard improvements" include but are not limited to on-site: paving, exterior lighting, log ponds, underground fire systems, fences, access roads and roadways and railroad sidings.

 “Unit of industrial property” means, for appraisal purposes, a single facility or an integrated complex currently engaged in manufacturing or processing operations and may include one or more accounts.

Filing requirements

State-appraised industrial taxpayers must file a completed Industrial Property Return (IPR) postmarked by March 15th of each year. Starting with the 2016 filing, extensions to the filing deadline are no longer allowed.

Oregon law requires that all costs of real and personal property be reported on the IPR. All information contained in the IPR is held confidential (OAR 150-192-0500).

Some state-appraised industrial property may be exempt from taxation, however, we are still responsible for the appraisal and valuation of the property and a completed IPR is still required.

After we (DOR) determine the value of a property, we advise the county assessor of its real market value (ORS 306.126).

Refer to the IPR instructions included every year with the forms for more details. Read our tips for industrial property tax assessments for additional information.