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While commercial real estate activity is holding firm, rising property tax assessments are creating unpredictability for owners.

That was the finding from NAIOP New Mexico鈥檚 April poll, conducted last week 鈥� the latest in a series of polls the commercial real estate organization is regularly releasing in partnership with the Journal through luncheons and newsletters.

NAIOP New Mexico is a chapter of NAIOP, or the Commercial Real Estate Development Association 鈥� a prominent organization for developers, property owners and related professionals in office, industrial and mixed-use real estate. The local chapter comprises over 250 members in New Mexico.

In response to the poll鈥檚 first question, which asked members to rate the current deal velocity in their segment of commercial real estate on a scale of 1 through 10, the majority of members selected a rating of 8. Ratings of 4 and 7 tied for the second most-selected options, bringing the average rating of all 28 responses to 6.

Last week鈥檚 poll marked NAIOP鈥檚 third time measuring deal velocity. NAIOP New Mexico President Prakash Sundaram said he thinks the findings thus far reflect current economic conditions.

鈥淚 heard a great analogy the other day: The economy is a sputtering rocket ship,鈥� Sundaram said. 鈥淚t鈥檚 getting ready to take off, and every time we think it鈥檚 going to take off, something happens on the national scale 鈥� the war in Iran or whatever 鈥� and everybody kind of pulls back and is like, 鈥榃hoa, what鈥檚 happening?鈥欌��

Through both periods of pullback and growth, Sundaram said it鈥檚 important to hear directly from the people who are putting 鈥渂oots on the ground鈥� and working with developers, site selectors and companies daily. That鈥檚 why he helped conceptualize and launch the idea of polling deal velocity, which he said has provided useful data for NAIOP to point to during discussions with policymakers.

Last week鈥檚 second question polled members on an issue at the center of several of NAIOP鈥檚 recent discussions with Bernalillo County officials. The question asked members how assessed values for their nonresidential properties changed this year compared to last year.

The topic of commercial property assessments, or valuations, has been a hot-button issue for many local owners because valuations, in part, determine how much owners have to pay in property taxes. Last year, NAIOP members said they saw an average increase of 54% from the previous year, and some saw increases as high as 704%. The county mailed out this year鈥檚 notices of value on April 1.

Of 45 participants in last week鈥檚 second poll question, 36% said their valuations increased by no more than 10%. But more than half of respondents 鈥� 51% 鈥� said their valuations increased in excess of 10%.

The latter finding is what stood out to Sundaram, who noted that increases larger than 10% far outpace the rate at which year over year.

For NAIOP Executive Director Rhiannon Samuel, the findings show that commercial property taxes 鈥渃ontinue to be an issue for the industry.鈥�

She added that the value fluctuations 鈥� which NAIOP expected due to assessors across the state launching concerted efforts to bring commercial properties to their current and correct values 鈥� are lasting longer than NAIOP was told they would.

Chadwick Parson 鈥� president of Alvarado Management Co., which owns several offices and retail properties throughout the Southwest 鈥� said he was among the 36% who saw increases of less than 10%. He said the average increase across the company鈥檚 Bernalillo County properties was 4 to 5%. The company鈥檚 retail properties saw the highest increases, with the valuation of one property rising by 70%.

Parson said this gap is an example of 鈥渦npredictable outcomes鈥� from the Bernalillo County Assessor鈥檚 Office that are creating challenges for the local commercial real estate industry.

鈥淯npredictability causes people in our industry to be gun-shy from a development standpoint, because you need to forecast and project to be able to have the confidence to build,鈥� Parson said.

A potential solution, Parson said, would be owners having a range of increases they can expect, bringing predictability into the mix. NAIOP tried pushing for a commercial property tax assessment cap during this year鈥檚 legislative session, but the legislation never saw the light of day at the Roundhouse.

NAIOP and the New Mexico Counties Assessors鈥� Affiliate could not reach consensus on the cap number and decided instead to form a working group to hash out details and concerns over the next several months with the intention of trying again next year.

In the meantime, Samuel said the trade organization will continue collecting more in-depth data about property tax valuations from its members in the coming weeks. She said the organization will share that data with the public and the Assessor鈥檚 Office to 鈥渋dentify mathematically supported solutions to this persistent challenge to economic growth and affordability.鈥�

Kylie Garcia covers retail and real estate for the Journal. You can reach her at kgarcia@abqjournal.com.