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Partially leased retail strip center being appraised for a commercial refinance
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Commercial AppraisalsEstate Planning
What to Expect From a Commercial Refinance Appraisal

Thinking about refinancing a building you own? Before a lender sets the new loan amount, it needs a supported opinion of what the property is worth today. That is the job of the commercial refinance appraisal, and it shapes how much you can borrow, how much cash you can take out, and sometimes whether the deal works at all.

By the end of this article, you’ll know:

  • How the appraised value sets the size of a refinance loan
  • Who orders the appraisal, and when a new one may not be needed
  • What owners and lenders can do to keep the process moving

How a Commercial Refinance Appraisal Sets Your Loan Amount

Lenders look at two things in a refinance. First, can the property’s income cover the payment? Second, is the building worth enough to secure the loan? According to the Interagency Appraisal and Evaluation Guidelines, the ability to repay comes first. Still, a bank must also consider the value of the real estate behind the loan.

That value usually caps the loan through a loan-to-value limit in the lender’s policy. Consider a hypothetical. A lender caps the loan at 70 percent of value, and your building appraises at $3,000,000. The most it would lend is $2,100,000. If you still owe $2,300,000, you would need to bring $200,000 to closing or find another lender.

So a few percent in value can move real money. That’s why it helps to understand what goes into the number before the appraiser shows up.

Your Lender Orders the Appraisal, Not You

This part surprises a lot of owners. The bank picks and engages the appraiser, and federal guidance says it can’t use a report the borrower ordered. Our article on commercial appraisals for lending covers those independence rules in detail.

For a refinance, the practical point is simple. An appraisal you order yourself can help you decide whether refinancing makes sense before you talk to lenders. It just won’t stand in for the appraisal the bank orders for the loan.

When a Refinance May Not Need a New Appraisal

Some refinances skip the full appraisal. Under the OCC’s appraisal rule at 12 CFR 34.43, an existing loan at the same bank can be refinanced without one in either of two cases. In the first, no new money goes out beyond reasonable closing costs. In the second, nothing obvious and material has changed in the market or the property that threatens the bank’s collateral.

The same rule exempts commercial real estate deals of $500,000 or less. In both cases, though, the bank still needs an evaluation, which is a simpler written estimate of market value. A bank can also order a full appraisal anyway, and the guidelines point that way for higher risk loans.

Two more points matter here. Moving the loan to a new lender takes it outside the existing loan exemption, since that exemption only covers credit already at the lending bank. And a cash-out refinance adds new money, so it qualifies only if the market and the property haven’t materially changed. The FDIC and the Federal Reserve have parallel rules for the banks they supervise, and credit unions follow the NCUA’s version.

What Moves the Value of a Leased Building

For most income property, the appraiser leans hard on the income. Our guide to the income approach shows how rent turns into value. Our explainers on net operating income and cap rates cover the two numbers that drive it.

Leases count too. The federal guidelines require lending appraisals to analyze deductions and discounts for partially leased buildings and non-market lease terms. So a half-empty building, or a big tenant paying well under market rent, will show up in the number.

Time plays a part as well. The guidelines list factors that can make an older appraisal stale, including the passage of time, changes in financing terms, lack of maintenance, and shifts in cap rates and lease terms. In other words, what your building was worth at purchase may not be what a refinance lender sees today.

Who occupies the building matters too. If your own company fills the space, our piece on owner-occupied and investment property appraisals explains why the two get valued differently.

How Owners Can Prepare for the Appraisal

You can’t pick the appraiser, but you can make the work go smoother. Have a current rent roll, every lease with its amendments, recent operating statements, and a list of capital improvements ready before the inspection. Our lending article above has a fuller checklist.

A refinance adds one more step. Find your last appraisal and write down what has changed since. A new roof, a lease renewal at a higher rent, or a tenant who moved out are exactly the facts that decide whether the old value still holds. So hand them to your lender early, before anyone has to ask.

One thing to leave out is a target value. The guidelines tell lenders not to give an appraiser a predetermined value, a loan amount, or a target loan-to-value ratio. For what happens next, see what goes into a commercial appraisal report and how long a commercial appraisal takes.

For Lenders, Set Up the Refinance Assignment Right

Bankers already know the ordering rules, and our lending article covers them. A refinance adds two decisions of its own.

First, decide whether the existing appraisal still holds. The guidelines let a bank use an existing appraisal for a later transaction. However, the credit file should show the facts and analysis behind that call, weighed against the staleness factors listed above. So document the check, even on a renewal with no new money that is exempt from a new appraisal.

Second, match the value premise to the new loan. If cash-out proceeds fund a renovation or a lease-up, the guidelines say a bank would generally ask for the as-is value. As applicable, it would also ask for a prospective value upon completion or stabilization.

If the building sits outside Cook County, our Dallas, Philadelphia, Phoenix, and Naples teams take commercial assignments in those markets. In Cook County, our Chicago appraisal team handles the work.

Planning a Refinance on a Building You Own?

Your lender orders the appraisal behind the loan. If you want a supported value first, to plan or before you talk to lenders, PahRoo can prepare one. Bankers can engage us for refinance assignments too.

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Frequently Asked Questions

What is a commercial refinance appraisal?

It is an appraisal a lender uses to decide how much it will lend on a new loan secured by income-producing or business property. The appraised value usually caps the loan through the lender’s loan-to-value limit.

Can my bank reuse the appraisal from when I bought the building?

Sometimes. A bank can rely on an existing appraisal for a later loan if it documents why the value still holds. The passage of time, lease changes, or a shift in cap rates can make an older value stale.

Does every commercial refinance need a new appraisal?

No. For an existing loan at the same bank, federal rules may allow an evaluation instead when no new money goes out or when the market and property haven’t materially changed. The bank decides which it needs.

What should I have ready for a commercial refinance appraisal?

A current rent roll, every lease and amendment, recent operating statements, and a list of capital improvements. Plan for access to the whole building, including vacant space.

Does a cash-out refinance need a new appraisal?

Not always. At the same bank, a cash-out refinance can skip a new appraisal only if nothing obvious and material has changed in the market or the property. Otherwise it generally needs one, or an evaluation for smaller loans.

Refinance Appraisals That Hold Up in Credit Review

When a lender needs a value it can underwrite, PahRoo Appraisal & Consultancy prepares commercial appraisals for banks, investors, and owners in Chicago and Cook County, Dallas, Philadelphia, Phoenix, and Naples. Michael Hobbs, MAI, SRA, signs our Illinois reports. See our commercial appraisal services for the property types we cover.

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Partially vacant retail property where vacancy reduces net operating income
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Commercial Appraisals
Net Operating Income in Commercial Real Estate

Net operating income is the number a commercial appraisal is built on. Get it wrong by five percent and the value moves by five percent. Owners send us their profit and loss statement expecting it to be used as-is, and it almost never is.

By the end of this article, you’ll know:

  • How to calculate NOI step by step
  • Which expenses belong in NOI and which are excluded
  • Why an appraiser reconstructs the owner’s numbers before applying a cap rate

What Net Operating Income Actually Measures

Net operating income is the annual income a property produces after operating expenses, but before debt service, income taxes, depreciation, and capital expenditures. It measures the earning power of the real estate itself, separate from how any particular owner financed or structured it.

That separation is the point. Two buyers can pay the same price for the same building with completely different loans. The property still throws off the same income. NOI is what makes properties comparable to one another.

How to Calculate NOI, Step by Step

Start at the top of the rent roll and work down. Here is a simple example for a small multi-tenant building:

  • Potential gross income: $1,000,000, the rent if every space were leased at market
  • Less vacancy and collection loss at 7 percent: $70,000
  • Effective gross income: $930,000
  • Less operating expenses: $340,000
  • Less replacement reserves: $30,000
  • Net operating income: $560,000

Apply a 7 percent capitalization rate to that $560,000 and the indicated value is $8,000,000. Move NOI by $28,000, which is five percent, and the value moves by $400,000. Small errors in the income line become large errors in value.

What Belongs in NOI and What Does Not

Operating expenses are the recurring costs of running the property. Include property taxes, insurance, utilities not reimbursed by tenants, repairs and maintenance, management fees, janitorial and landscaping, and reserves for replacement of short-lived items such as roofs and parking lots.

Leave out mortgage principal and interest, income taxes, depreciation, capital improvements, leasing commissions and tenant improvement allowances, and any expense personal to the owner. A vehicle payment or a family salary that would disappear the day the property sold does not belong in a market-based analysis.

Owners often push back on the management fee. Even an owner who self-manages should show a market management expense, because a buyer would either pay a manager or value their own time. Leaving it out inflates NOI and produces a value the market will not support.

Why Appraisers Rebuild the Owner’s Numbers

An appraisal reflects what a typical buyer would expect, not what one owner happened to experience last year. So the appraiser reconstructs the statement using market rent, market vacancy, and market expense levels, then compares that reconstruction against the property’s actual history and against expense comparables.

Non-market conditions get adjusted too. Federal appraisal guidance addresses this directly. The Interagency Appraisal and Evaluation Guidelines require appraisers to analyze and report appropriate deductions and discounts for partially leased buildings and for leases with terms that do not reflect current market conditions. A building leased to the owner’s brother at half market rent will be analyzed on both the contract and the market basis, and the report will explain which one drives the value.

NOI Is Not Cash Flow, and It Is Not Taxable Income

Three numbers get confused constantly, and they are not interchangeable. NOI stops before debt service. Cash flow before taxes subtracts the mortgage payment from NOI. Taxable income follows a different set of rules again, with depreciation and interest treated the way the tax code says rather than the way an appraiser treats them.

Lenders care about the gap between NOI and debt service, because that gap is the debt service coverage ratio. Appraisers care about NOI because it feeds the income approach. Your CPA cares about the tax figures, and that is properly their work rather than ours. If your accountant and your appraiser show different numbers for the same building, both can be correct, because they are answering different questions.

So before you accept a value conclusion, look at the income reconstruction. If the vacancy assumption, the expense ratio, or the management fee looks off compared to your market, that is the conversation to have with the appraiser.

Your Value Starts With Your Income Line

PahRoo reconstructs income and expenses against real market evidence, then shows the reconstruction so you can see exactly where the value came from.

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Frequently Asked Questions

What expenses are included in NOI?

Recurring costs of operating the property, including property taxes, insurance, unreimbursed utilities, repairs and maintenance, management fees, janitorial and landscaping, and reserves for replacement of short-lived building components.

Does NOI include the mortgage?

No. Net operating income is calculated before debt service, so mortgage principal and interest are excluded. This lets properties be compared on the earning power of the real estate rather than on how a particular owner financed it.

How is NOI different from cash flow?

Cash flow before taxes equals NOI minus debt service. NOI stops before the mortgage payment. Taxable income differs again, because depreciation, interest, and capital costs are treated under tax rules rather than appraisal practice.

Why does an appraiser change my operating statement?

Because market value reflects what a typical buyer would expect, not one owner’s actual experience. The appraiser applies market rent, market vacancy, market expenses, and a market management fee, then compares that reconstruction to the property’s history.

Should replacement reserves be deducted from NOI?

In most commercial appraisal practice, yes. Reserves cover the periodic replacement of short-lived items such as roofs, HVAC units, and parking surfaces. The treatment should be consistent with how reserves were handled in the sales used to derive the cap rate.

Check the Income Reconstruction Before You Rely on the Value

PahRoo Appraisal & Consultancy analyzes rent rolls, leases, and operating statements for income-producing property across Chicago and Cook County, Dallas-Fort Worth, Philadelphia, Phoenix, and Naples. We show the reconstruction rather than hiding it in an appendix. Review our commercial appraisal services, request a preliminary consultation, or call 773-388-0003 to talk through a property.


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Commercial Appraisals
What Goes Into a Commercial Appraisal Report

The first time a borrower opens a commercial appraisal report, the reaction is usually the same. Why is this ninety pages long? The length is not padding, and most of those pages exist because a regulator, a court, or a credit committee needs them there.

By the end of this article, you’ll know:

  • What each major section of a commercial appraisal report contains
  • What highest and best use means and why it comes before the value
  • Which pages to read first if you only have ten minutes

What a Commercial Appraisal Report Contains

A narrative commercial appraisal report normally includes these sections, roughly in this order:

  • Letter of transmittal and summary of salient facts. The conclusion, the effective date, and the key property details on one or two pages.
  • Scope of work. What the appraiser did, and what the appraiser did not do.
  • Property identification and legal description. Address, parcel numbers, ownership history, and current use.
  • Regional, market, and submarket analysis. Supply, demand, rents, vacancy, and new construction.
  • Site and improvement description. Zoning, utilities, access, construction, condition, and functional layout.
  • Highest and best use analysis. As vacant and as improved.
  • The approaches to value. Sales comparison, cost, and income, as applicable.
  • Reconciliation and final opinion of value.
  • Certification, assumptions, limiting conditions, and addenda. Including the appraiser’s credentials and the supporting exhibits.

Scope of Work Sets the Rules for Everything After It

The scope of work section is short, and it governs the rest of the document. It states what the appraiser inspected, what data was researched, which approaches were developed, and what was excluded.

Federal banking guidance treats this as a matter of substance rather than formality. The Interagency Appraisal and Evaluation Guidelines state that regardless of the report option used, the report should contain enough detail for the institution to understand the scope of work performed, including research that was typically warranted but omitted, along with the reason. So if you want to know how much weight a report can carry, start here.

Highest and Best Use Is the Question Behind the Number

This is the section that surprises people, and it does real work. Highest and best use asks what the reasonably probable and legally permissible use of the property is, given what is physically possible and financially feasible, that produces the highest value.

The appraiser answers it twice. First as though the site were vacant, then as the property is currently improved. Those answers can differ. An older single-story building on a corner zoned for four stories may be worth more as a redevelopment site than as the building standing on it today.

The answer shapes everything downstream. It determines which comparable sales are relevant, which income stream is analyzed, and whether demolition costs belong in the math. Change the highest and best use conclusion and the value changes with it.

The Approaches, the Reconciliation, and the Certification

The approaches to value take up the largest share of the page count, because each one shows its supporting data. The sales comparison approach includes a grid with adjustments explained. The income approach shows the rent roll analysis, expense reconstruction, vacancy assumption, and the derivation of the capitalization rate. The cost approach shows land value, cost figures, and depreciation.

Reconciliation follows. The appraiser weighs the indications and explains which approach carries the most weight for this property. Then comes the certification, where the appraiser states that the analysis complies with professional standards, that the compensation was not contingent on the value reached, and that no undisclosed interest exists in the property.

The assumptions and limiting conditions matter too. An extraordinary assumption, for example that a property is free of environmental contamination absent a report, can materially affect the conclusion. Read those before relying on the number.

Which Pages to Read First If You Only Have Ten Minutes

Start with the summary of salient facts, then jump to three places. Read the scope of work to see what was and was not done. Read the highest and best use conclusion to see what use the value assumes. Read the reconciliation to see which approach the appraiser trusted and why.

Then check the extraordinary assumptions and hypothetical conditions. Those four stops will tell you more about the reliability of a commercial appraisal report than reading the adjustment grids front to back. If something in those sections does not match the transaction you are underwriting, that is the moment to ask the appraiser a question, not after the loan closes.

A Report Your Credit Committee Can Actually Follow

PahRoo writes commercial appraisals that hold up under lender review, audit, and cross-examination, with the scope and reasoning stated plainly.

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Frequently Asked Questions

What is in a commercial appraisal report?

A transmittal letter and summary of facts, the scope of work, property identification, market and submarket analysis, site and improvement description, highest and best use analysis, the applicable approaches to value, reconciliation, and the certification with assumptions and addenda.

What is a narrative appraisal report?

A narrative report presents the analysis in written form rather than on a standardized form. Commercial assignments use narrative reports because each property is different and the reasoning behind the value has to be explained rather than checked off.

Why are commercial appraisal reports so long?

Because each approach to value shows its supporting data, and because lenders, regulators, and courts need enough detail to follow the reasoning. Market analysis, highest and best use, adjustment grids, income analysis, and exhibits all add pages.

What is highest and best use?

It is the reasonably probable use of a property that is legally permissible, physically possible, and financially feasible, and that produces the highest value. Appraisers analyze it both as though the site were vacant and as the property is currently improved.

What is an appraisal certification?

A signed statement in which the appraiser confirms compliance with professional standards, discloses any interest in the property, and confirms that the fee was not contingent on reaching a particular value. It also identifies who provided significant assistance.

Ask for a Report That Explains Itself

PahRoo Appraisal & Consultancy prepares narrative commercial appraisal reports for lenders, attorneys, CPAs, and property owners in Chicago and Cook County, Dallas-Fort Worth, Philadelphia, Phoenix, and Naples. Every report states its scope, its highest and best use conclusion, and its reconciliation in language a reader can follow. Learn more about our commercial appraisal services, browse our appraisal FAQ page, or call 773-388-0003.


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Commercial real estate appraisal in Chicago after the 2025 north suburban reassessment
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Property Tax
Do These Chicago Commercial Values Hold Up?

The question in this post’s title now has an answer with data behind it. The 2025 north suburban reassessment has run its full course, appeals included. So the commercial real estate appraisal Chicago owners bring to the table matters more than it did a cycle ago. Here is the short version. Values went up, appeal reductions got smaller, and the Assessor’s office is actively defending its numbers. The owners who did best brought evidence. The ones who brought complaints paid retail.

By the end of this article, you’ll know:

  • The 2025 north suburban results, from the Assessor’s own releases.
  • Why commercial appeal reductions shrank from 20% to 14%, and what that signals.
  • What to do now, since the 2025 values are landing on 2026 bills.

What the 2025 North Suburban Numbers Show

Start with the scale. The Assessor’s April 2025 release on Evanston Township reported total assessed value growing 28%. That reflects three years of market change since the 2022 cycle. Then came the appeals, and the Assessor’s wrap-up on the 2025 cycle tells the rest. Take the 13 north and northwest suburban townships together. Homeowners’ share of the tax base moved from 66% before reassessment to 68% after appeals. In 2022, that shift ran from 63% to 67%, roughly twice as large.

The commercial side explains the difference. Board of Review appeals reduced commercial values 14% in the 2025 cycle, down from 20% in 2022. So the burden still shifted toward homeowners, but less, because commercial reductions got harder to win.

The Appeal Climate Tightened

Two details from the Assessor’s release show why. First, the office defended 14 large commercial properties through the appeal process, mostly data centers. Four received no reduction at all, and four more received reductions under 25%. Second, a December 2024 report found north suburban industrial properties typically assessed at two-thirds of market value after appeals. That is exactly the kind of finding that invites tougher defense of commercial values. Put plainly, the easy reduction era is fading. The data center defense also fits the wider 2026 picture, where high-growth niches attract both capital and assessor attention. A class the market prices confidently is a class the county values confidently, and defends the same way. Owners of ordinary buildings inherit that posture whether they like it or not. We tracked the same pattern countywide in our BOR data breakdown. In short: record appeal volume, rising scrutiny, and outcomes that follow the evidence.

The Commercial Real Estate Appraisal Chicago Owners Actually Need

In that climate, the appraisal stops being paperwork and becomes the case. A mass-model assessment can still mismatch a specific building. For example: real vacancy the model ignored, capital needs it never saw, income the market will not support. Still, nobody at the Board takes that argument on faith anymore. Instead, the winning file documents it: rent rolls, comparable sales, and a traceable income analysis. We detailed that discipline in NOI and cap rates under scrutiny. For portfolio owners, a preliminary review screens which parcels carry a real gap. Then the full workup goes only where it pays. The complete playbook lives in our commercial tax appeal guide.

Bills Arrive Now, and the Next Cycle Is Dated

The timing is not abstract. Properties certified in the 2025 reassessment affect second-installment bills issued in 2026. So north suburban owners are meeting these numbers in their mailboxes this year. Meanwhile, the calendar keeps moving. Appeal windows open township by township every year, even between reassessments. Chicago gets revalued in 2027, and the north suburbs come around again in 2028. For example, the evidence file built for a 2026 appeal meets the 2028 notice already standing. The work compounds in the owner’s favor for once.

Translate the tightening into dollars on one building. Say a north suburban property hoped for the old 20% reduction on a $2 million assessed value, a $400,000 trim. At the 2025 cycle’s 14% average, the same appeal yields $280,000 instead. That $120,000 difference stays in the assessed base. Then the equalizer and the local rate multiply it on every bill until something changes. The lesson is not that appeals stopped working. It is that average outcomes got thinner. So the above-average file, the one with documented income and defensible comps, is where the remaining money lives.

Hold the Value Up Before Someone Tests It

The 2025 cycle delivered a clear message to commercial owners north of the city. Assessments rose with three years of market change, and reductions tightened. Also, the office that sets the values now defends them with data. So match the method. Get the building’s real numbers documented, test them against what the assessment implies, and file where the gap is real. A value that holds up is no longer a nice-to-have. It is the price of being taken seriously in the room.

The appeal discounts shrank. Did your evidence grow?

Get a commercial valuation documented for the climate the 2025 cycle just revealed.

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Frequently Asked Questions

What happened in the 2025 north suburban reassessment?

The 13 north and northwest suburban townships were revalued for the first time since 2022. Evanston Township’s total assessed value grew 28%. After Board of Review appeals, homeowners’ share of the tax base went from 66% to 68%. That is about half the shift seen in the 2022 cycle.

Why did commercial appeal reductions shrink?

Per the Assessor’s release, Board of Review appeals cut commercial values 14% in 2025 versus 20% in 2022. Also, the office actively defended large commercial values through the process. Whatever the mix of causes, the practical effect is the same. Winning a reduction takes stronger evidence than it used to.

When do the 2025 values show up on tax bills?

Properties certified in the 2025 reassessment affect second-installment bills issued in 2026. So the financial impact of the cycle lands this year, which is why owners comparing their bill to their building’s real performance are doing it now.

Can north suburban owners still appeal before 2028?

Yes. Appeal windows open township by township every year, even between reassessments. They run first at the Assessor and then at the Board of Review. An appeal corrects one year’s value, so owners with a persistent gap often file annually until the next cycle resets the number.

When is the next reassessment for the north suburbs?

2028, under the county’s three-year rotation. Chicago is revalued in 2027 and the south suburbs in 2026. Evidence gathered for a current appeal keeps working at the next notice. So the file is worth building once and maintaining.

Commercial Values Built for a Tougher Room

PahRoo Appraisal & Consultancy has valued Chicago-area commercial property for over two decades. An appraiser holding both MAI and SRA designations leads the firm. Maybe your 2026 bill needs testing against a commercial appraisal of what the building actually earns. Maybe a dispute calls for litigation-ready work with testimony behind it. Either way, the value arrives documented, because the 2025 cycle showed what happens to numbers that are not.


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Commercial Appraisals
Post-Pandemic Commercial Real Estate Six Years On

Post-pandemic commercial real estate did not return to normal. It repriced. Six years after the 2020 shock, the market has settled into a new equilibrium with different winners and different cap rates. It also left a pile of 2021 and 2022 transaction data that can badly mislead anyone who treats it as current evidence. This is a look at what the reset actually did to values, written from the appraisal side of the table.

By the end of this article, you’ll know:

  • How the reset split winners from losers across office, industrial, and multifamily
  • Why conversions are a highest and best use question, not just a construction project
  • Why 2021 and 2022 comps need special handling, and what owners should do about values now

The Post-Pandemic Commercial Real Estate Reset

Every major disruption resets which properties the market wants. The pandemic did it faster and harder than most. Demand for space did not disappear; it moved. It left commodity office space and flowed toward logistics, housing, and experience-driven retail.

Values followed the demand, but unevenly and with a lag. That lag is where owners get hurt. A building can carry a pre-reset number in its owner’s head, its loan file, or its tax assessment. It can stay there for years after the market has moved on. Six years in, closing that gap between remembered value and current value is the most common reason commercial clients call us.

Office: Bifurcation, Not Extinction

The office story is not one story. Top-tier buildings with strong amenities and locations have held demand as tenants shrink footprints but upgrade quality. Older commodity buildings have repriced hard, and some have repriced below their debt.

The appraisal implication is strict comp discipline. A Class A tower and an aging Class B building three blocks apart are no longer close substitutes. Blending their sales produces a number that describes neither. This is the same market-analysis rigor from our article on commercial appraisals in a shifting market. Here it applies to the sharpest divide the reset created.

Conversions Are a Highest and Best Use Question

The headline response to empty offices has been conversion: to residential, to healthcare, to storage, occasionally to something stranger. From a valuation standpoint, a conversion is not a construction question first. It is a highest and best use question, one of the core analyses in an MAI-level appraisal.

Highest and best use asks what use of the property is legally permissible, physically possible, financially feasible, and maximally productive. When the answer changes from “office” to “apartments,” the entire valuation framework changes with it. Different buyers, different income analysis, different comparables. Owners weighing a conversion, and lenders financing one, need the value analyzed under both uses before committing. Guessing at feasibility is how conversion projects end up in workout.

Industrial and Multifamily Held the Line

Not every sector needed reinventing. Industrial demand, driven by e-commerce and supply chain reshoring, stayed strong through the whole cycle. Multifamily demand held as housing shortages persisted. Still, higher rates and construction costs squeezed development and put pressure on values bought at peak pricing.

Held value does not mean static value. Both sectors repriced as interest rates rose, because cap rates follow financing costs even when tenant demand is healthy. An industrial building can be full, performing, and still worth less than its 2021 number. The rent roll and the value are related, but they are not the same fact.

Handle 2021 and 2022 Comps With Gloves

Here is the technical problem the reset left behind. The 2021 and 2022 transaction wave closed at historically low rates, in a frenzy that no longer exists. Those sales are real data, but they describe a financing environment that vanished. Use them as direct comparables today and the value comes in wrong, usually high.

A competent appraisal treats that era the way it treats any anomaly. Verify the deal terms, adjust for market conditions between the sale date and the effective date, and lean on current income evidence where the sales record is distorted. This is the date-of-value discipline our guide to real estate market cycles walks through. Value has a date on it, and 2021 is not that date.

What Owners Should Do With the New Numbers

The reset cuts both ways, and both directions reward a current appraisal. If your property’s market value has fallen below its assessed value, you may have grounds for a property tax appeal. The appraisal is the evidence that carries it. If a loan maturity or refinance is coming, get the value before the bank does. Lenders follow the Interagency Appraisal and Evaluation Guidelines on when collateral needs a fresh look, and a stale number rarely survives that review. And if you are weighing a sale or a conversion, start with what the property is worth under today’s conditions, not the ones you bought in.

Our commercial appraisal team works these assignments across all five PahRoo markets. That runs from single-tenant industrial to conversion feasibility on obsolete office stock.

Price the Market You Are In, Not the One You Remember

Six years on, the post-pandemic commercial market is no longer in transition. It is the market. The owners doing well in it share one habit: they retired their pre-reset numbers and re-anchored on current evidence. Get the property valued as it stands today, then make the hold, sell, appeal, or convert decision from that number. The market stopped waiting in 2020. The paperwork should catch up.

Find Out What Your Property Is Worth Now

PahRoo’s MAI designated appraisers value commercial property against today’s market, for refinancing, tax appeals, sales, and conversion decisions across Chicago, Dallas, Philadelphia, Phoenix, and Naples.

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Frequently Asked Questions

Have commercial real estate values recovered since the pandemic?

They have repriced rather than recovered. Industrial and multifamily held demand but adjusted to higher rates. Top-tier office held better than commodity office, and older office stock repriced sharply downward. Recovery is the wrong frame; the market found a new level.

Can appraisers still use 2021 and 2022 sales as comparables?

Only with documented market-conditions adjustments. Those sales closed under financing conditions that no longer exist. Treating them as direct evidence of current value usually overstates it. Verified terms and adjusted analysis are required.

What does highest and best use mean for an office conversion?

It is the appraisal analysis that tests whether converting is legally permissible, physically possible, financially feasible, and maximally productive. If the answer changes the use, the entire valuation changes with it, so the analysis belongs before the construction budget.

My building is fully leased. Can its value still have dropped?

Yes. Value reflects both income and the return investors require. When interest rates push cap rates up, the same income supports a lower price. Occupancy protects the income side, not the pricing side.

If my commercial property is worth less now, can I lower my property taxes?

Possibly. If current market value has fallen below assessed value, an appeal supported by an independent appraisal can make that case. The appraisal must value the property as of the assessment date the appeal covers. That is exactly what a retrospective assignment does.

Appraisers Who Priced the Boom and the Reset

PahRoo Appraisal & Consultancy provides commercial and residential appraisals across Chicago, Dallas, Philadelphia, Phoenix, and Naples. Led by Michael Hobbs, our MAI and SRA designated team has valued property through the boom, the reset, and what followed.


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