Easing the CRE Property Tax Burden with AI 

Key Takeaways

• Property taxes are the biggest single expense for commercial buildings.
• Despite this, they are often managed inefficiently.
• This leaves CRE investors exposed to mistakes and missed deadlines.
• It also makes forecasting costs nearly impossible.
• Proptech innovators have a lucrative opportunity to solve these problems with AI.

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Property taxes are one of the highest operational costs for owners of office buildings, shopping centers, and other commercial real estate (CRE).

And they’re complicated.

The United States has over 17,000 property tax districts, each with its own assessment authority, legislation, and tax policy.

It makes it challenging to understand how taxes are calculated, much less comparing costs for properties in multi-jurisdictional portfolios.

This challenge, however, is an opportunity for proptech innovators.

Because this isn’t just about taxes; it’s also a problem with data and technology.

The Industry’s Weak Spot

Although the real estate world utilizes digital solutions for tasks such as tenant and property management, managing property taxes remains largely a traditional, manual process.

Local assessment data is scattered across those 17,000 jurisdictions. Appeals are handled manually. Knowing a property’s tax exposure involves complicated, error-prone spreadsheets. For large owners, it takes weeks to simply identify which properties have been reassessed.

This slow, manual process causes significant problems: cash flow is unpredictable, owners frequently miss deadlines for appeals, and it’s challenging to compare taxes between different properties.

Where New Technology Is Needed

Proptech companies have a significant opportunity to address this issue with AI-enhanced tools. AI excels at crunching massive amounts of complex data to make it more easily accessible.

Let’s look at some of the solutions that would bridge the CRE property tax gap.

Smart Tax Platforms

Property owners need software that calculates parcel data, assessments, and levy rates into a single forecasting engine. Such a system would be particularly valuable if it could predict future tax liabilities in the event a building is sold or undergoes renovation. Bonus points if it integrates with asset management systems and underwriting tools.

Automated Appeals

The process of appealing a tax assessment is often complex and convoluted. AI-powered software could examine similar properties, identify errors in the tax value, and automatically generate the appeal paperwork. This could save owners millions.

Legislation Monitoring

Every year, local governments change tax laws. Voters approve or reject property tax measures. The federal government makes changes to national tax laws and deductions. A smart system that could track and understand these changes quickly would give investors an early warning before their taxes increase.

Capital Market Integrations

To maximize their accuracy, tax predictions should be connected directly to the financial software used by banks and investors. Integrating property tax AI with commonly used financial software and lending systems would give lenders, REITs, and investors real-time accuracy when testing debt coverage and valuation sensitivity. Credit investors would find this incredibly valuable when underwriting long-term exposure to property performance.

Easy Comparison

Owners can’t easily compare their property tax rates to others. A national tax database updated in real time would enable accurate asset comparisons and enhance price discovery for property transactions.

An Industry-Changing Opportunity

The market for these types of AI-enhanced solutions goes beyond CRE investors and property owners.

The U.S. CRE market contributes billions of dollars to the GDP, but one of its highest operating costs is still managed manually. It’s incredibly inefficient, and it gives proptech innovators a significant gap to bridge.

An opportunity exists for federal, state, and local governments to partner with proptech companies to create an interoperable system that digitizes assessment data, standardizes tax reporting, and creates transparency across jurisdictions.

Beyond Tax Applications

Any of these property tax applications could be a valuable product in their own right, or they could be features in a larger platform. AI’s impact extends far beyond tax collection.

For example, AI tools have the potential to significantly reduce proposal development time. Just by automating the paperwork necessary for property transactions—proposals, bids, contracts, etc.—AI can eliminate hours of manual work.

Ditto project planning: AI-powered automation can handle routine project tasks easily. This has proven to reduce planning and execution time by up to 50%.

Can you trust the accuracy of AI’s results? Signs point to yes. Integrated predictive tools have been shown to improve the accuracy of cost, resource, and risk forecasts by 25–45%.

Learn more: AI in Real Estate: 10 Applications Powering Business Growth

An Opportunity for Innovation

For proptech leaders, this is a category begging for innovation. CRE investors and owners are hungry for better ways to forecast, appeal, and manage the property tax burden.

They want tax-intelligent AI that integrates with standard underwriting systems. They want solutions for automating appeals. They want to eliminate error-prone, manual ledger keeping that consumes hours of their time.

They want solutions that connect data infrastructure, compliance, and financial performance.

Providers to plant their flag in this space stand to tap into a source of enormous, recurring revenue potential. A solution that standardizes property tax data across markets could alone become a boon to the industry.

If you’re a proptech innovator in need of the resources to build your bold new solution, contact Taazaa. We’re an end-to-end development partner with a deep bench of proptech expertise to augment your existing team or be your team.