At the Cook County Assessor’s Office (CCAO), our role includes reviewing and valuing commercial properties. Commercial properties include:
Industrial properties such as warehouses and factories
Retail properties such as stores and restaurants
Residential properties with seven or more units
In Cook County, we review ⅓ of properties each year and determine their current value. We rotate between properties in the City of Chicago, north suburbs, and south and west suburbs.
To find the value of properties, we use the income approach to reassess commercial properties. We apply the income approach on a mass appraisal basis using market data for Potential Gross Income (PGI), Vacancy & Collections (V&C), Effective Gross Income (EGI), Operating Expenses, and Capitalization Rates. Here’s an overview of what goes into this process.
Researching the Property’s Value
First, we review some important information to help us calculate a property’s market value, or how much the property could sell for today.
- Potential Gross Income (PGI)
What is it: How much a property owner would earn annually if all units were occupied and leased at the current market rents.
Where we get this information: Market data from third-party sources and past appeal information for similar properties.- Vacancy and Collection Loss (V&C)
What is it: An estimate of typical unearned rent for similar properties.
Where we get this information: This information comes from market data, third-party sources and past appeal information for similar properties.- Effective Gross Income (EGI)
What is it: The estimated income a property would produce using market data.
How it is calculated: Subtracting the Vacancy and Collection Loss rate from the Potential Gross Income- Net Operating Income (NOI)
What is it: Income to run a business property after typical expenses such as:- Property taxes
- Insurance
- Repair and maintenance costs
- Property management fees
- Professional services fees (legal, marketing)
How it is calculated: Subtracting Operating Expenses from the Effective Gross Income.
Where we get this information: This information comes from market data, third-party sources and past appeal information for similar properties.
Note: Expenses not typically included in operating expenses
• Depreciation
• Debt costs
• Mortgage costs
• Capital expenses
• Owner’s equity / payments to owners
• Broker commissions (unless amortized over the life of the lease)• Tenant improvement allowances (unless amortized over the life of the lease)
- Capitalization Rate (Cap Rate)
What is it: A real estate metric (%) used to estimate the potential earnings on an investment property. The Assessor's Office only uses an unloaded cap rate. This means the real estate taxes are included in the operating costs.
How it is calculated: It's calculated by dividing the property's net operating income (NOI) by its market value or purchase price and is expressed as a percentage.
Where we get this information: This information comes from market data, third-party sources and past appeal information for similar properties.
Examples:
A property with $100,000 of net income divided by a 9.5% cap rate has an estimated market value of $1,052,631.
A property with $100,000 of net income divided by a 6.5% cap rate has an estimated market value of $1,538,461.