One expense that I think industrial property owners should have a good understanding of is property taxes. Whether someone owns a building for their business or leases it to a tenant, property taxes are an ongoing cost that can impact the property’s overall financial performance.
Something that makes Nevada different from certain other states is how property values are assessed for tax purposes. I think understanding this system is especially useful for owners who are considering selling, making improvements, or evaluating the expenses associated with their property.
How Property Taxes Are Calculated in Nevada
In Nevada, property taxes are based on an assessed value determined by the county assessor rather than simply the price someone paid for the property.
According to the Nevada Department of Taxation, local assessors determine taxable values for commercial buildings and land using the state’s valuation requirements.
Generally, Nevada’s taxable value calculation considers the land’s value and the replacement cost of improvements, less applicable depreciation. The assessed value is then calculated as a percentage of taxable value.
This is important because the assessed value used for property taxes is not necessarily the same as the property’s current market value.
Does Selling a Property Increase the Taxes?
One question that comes up in commercial real estate is whether property taxes automatically increase when a building sells.
Unlike some states where a sale can trigger reassessment based on the purchase price, Nevada does not generally reset a property’s taxable value to its sales price simply because ownership changes.
However, that does not mean property taxes will remain the same forever.
Assessors still update taxable values, and changes to the property, improvements, and other factors can influence future tax bills.
Understanding Nevada’s Property Tax Abatement
Another important part of Nevada’s property tax system is the partial abatement on annual property tax increases.
Under Nevada Revised Statutes Chapter 361, many commercial properties are subject to an annual tax increase limit calculated under state law, with an upper limit of 8% for qualifying existing property.
The actual applicable limit can be lower, and there are exceptions involving certain improvements, changes in use, and other circumstances.
This is different from the commonly discussed 3% limit that applies to qualifying primary residences.
For commercial property owners, I think it is important to understand which rules apply to their property rather than assuming every property in Nevada receives the same treatment.
Why This Matters for Industrial Owners
Property taxes can influence a property’s operating expenses and, in turn, its net operating income.
For a property owner leasing their building under a triple net lease, taxes are typically passed through to the tenant according to the lease agreement. However, increases in those expenses can still affect the tenant’s total occupancy cost.
For an owner-user, property taxes are a direct expense of operating the building.
I also think owners should review their property tax information periodically to understand how their assessed value is changing and whether the county’s records accurately reflect the property.
Understanding Your Property’s Expenses
Whether you plan to sell your property, refinance, or continue holding it, understanding your operating expenses is an important part of evaluating your real estate.
Property taxes are only one piece of that, but they are something every owner should pay attention to.
If you own an industrial property in Reno, Sparks, Carson City, or the surrounding areas and want to better understand how your property’s expenses compare to similar buildings, feel free to reach out. I would be happy to review the available property information and put together a market analysis to help you understand where your building stands.
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