Calculations take into account all market data, as well as site potential
The increased value of commercial properties has sparked debate in the media about what is the true value of commercial properties in B.C. The truth is market demand for those properties is what really drives prices up or down, says Tina Ireland, BC Assessment Regional Assessor.
BC Assessment’s mandate is to provide fair, equitable, independent and trusted property assessments that echo market demands.
“BC Assessment reflects what is happening in the marketplace. Commercial assessments are all based on market value data. Across B.C., the assessed value is based on a commercial property's best potential use, as opposed to actual use,” Ireland explains. “Think, could a small shop be redeveloped into a high-rise commercial building?”
But how exactly are commercial property assessments calculated?
The first step is to determine the highest and best use of the property in order to make an accurate assessment. This is fundamental to a market value assessment system. The highest and best use of a property must be legal permissibility, physical possibility, financial feasibility and maximum profitability. Once the highest and best use is determined we measure how the market reflects this use.
“We analyze sales, we interview participants in that sale and we also look at rental/lease rates…there is a lot of data that goes into creating accurate assessments,” Ireland says. “We also work closely with national associations across the country and internationally to ensure our approach is accurate.”
“Our assessments to sales ratio received a 96 percent accuracy rate,” Ireland adds. “Some people think we simply predict, and that assessments are less factual than they are, but on the contrary, it is a very thoughtful process using the best market data we can find.
"In fact, our assessments meet IAAO (International Association of Assessing Officers) standards. The IAAO sets the standards that BC Assessment follows to ensure delivery of accurate assessments with current property values. The IAAO does that by using the median Assessment to Sales Ratio (ASR). The ASR measures how closely assessments represent a property’s actual selling price, tracking assessment accuracy in a market-based property assessment system.
“Across Canada and internationally, we are renowned for our system…one which works, one which is understandable and transparent,” notes Ireland. “We are very well ranked.”
There are several drivers that influence market values, most notably the demand for specific properties, physical characteristics, and changes in zoning and density. If a property is rezoned, it is typically undertaken to permit more land uses and/or increased density to be developed on the property.
Ireland credits its highly professional staff who ensure the accuracy of its assessments.
“Less than two percent of our property assessments are appealed, which means 98 per cent of people accept their assessments,” adds Ireland.
The website is full of great information that helps people understand the process.
“On bcassessment.ca, residents can compare their property assessments to those around them, as well as latest trends, sales and value changes in different municipalities and much more,” says Ireland. “We encourage property owners to contact us to learn more about their assessment.”
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