Earlier this year, Vancouver outdoor retail icon 3 Vets closed its doors and sold its building at 2200 Yukon Street after annual municipal property taxes on the site rocketed to $90,000.
This week Dulux Paints said it is closing its store at 2091 West Broadway, which has been operating for nearly 40 years, also blaming high commercial property taxes for its decision to end its longtime run on Broadway. Dulux said in a news release that the property taxes at its West Broadway store increased 12 per cent to $209,000 from $187,000 between 2017 and 2018. The store was facing another 8 per cent ($16,000) increase in 2019 for a total bill of $225,000.
“This makes it impossible for our business to continue to afford the space and operate profitably,” said Dave Rimmer, Dulux Paints regional director.
Yet, according to an Altus Group national survey, Vancouver has the lowest commercial tax rate among major Canadian cities, and its mill rate decreased 9.7 per cent this year, to $10.85 per $1,000 of value.
The problem is soaring prices for Vancouver land, which skews taxes higher for retail owners and tenants. The BC Assessment Authority calculates property on its “best and highest use,” so potential development, not the actual use of the property, dictates the assessed value.
The 3 Vets site, for example, sold for $20.4 million and is now being converted into high-quality industrial space. In July 2017, the site was assessed at $14.9 million – up from $11.9 million a year earlier – but the building was valued at only $20,000. The Dulux Paints site is assessed at $23 million, compared with $20 million a year ago, according to BC Assessment, but the Dulux building is assessed at just $9,900.
Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouver and a regular media commentator on real estate investment.
Sign Up For Our Newsletter!
Western Investor emails a weekly newsletter with top commercial real estate headlines from across Western Canada, including forecasts, opinion, analysis and exclusive content.