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Non-residential property assessments

Assessment deems any property not used as a residence to be valued as a non-residential property* for assessment purposes. 

Non-residential property types:

Office

Office properties are generally used to maintain or occupy professional or business offices and are typically assessed using the income approach to value. These properties are designed for general commercial occupancy, including administrative government and corporate uses, and are normally subdivided into relatively small units. The term office can refer to whole buildings, floors, parts of floors, and office parks.

Key factors, components and variables are used to assess office properties. 

Office - key factors, components & variables

1. Location

Three possible main location stratifications with six possible sub-stratifications.

  1. Downtown
  2. Beltline
  3. Suburban
    1. NE
    2. NW
    3. SE
    4. SW

2. Class

For the purpose of comparison, office spaces are generally grouped into different classes: AA, A+, A, B, and C. Sub-categories that reflect the differences within the class might exist within major classes.

Class/Quality is typically based on the following factors:

  • Year and type of construction
  • Building finish
  • Location/exposure
  • Physical condition
  • Building functionality
  • Building amenities
  • Parking availability and capacity

3. Space type with the building

Other space types might exist within the office property besides typical office space such as retail space, food court, storage, bank, ATM, etc.

4. Parking

An income approach is generally utilized to value enclosed parking stalls and surface parking within office properties. The significant characteristics that drive a parking assessment are:

  • Location
  • Type of parking

Retail

Retail properties offer a variety of goods and services for sale. This type of property ranges in size, type of merchandise, age, and construction materials. Retail properties vary from freestanding single tenant buildings to major regional shopping centres.

There are three approaches to value which are used to determine market value assessments. Retail properties can use all of the three approaches to value:

  1. Direct Comparison Approach: Most frequently used for properties which trade frequently on the open market. This approach compares the sale price to the physical data of sold properties. An analysis then determines what factors contribute to value. Retail properties valued on the sales approach are retail condominiums and improved properties assessed on land value.
  2. Income Approach: The income approach estimates the value of a property by converting the income stream into an indication of present value. The City of Calgary uses the direct capitalization method which is the process of converting a single year’s income expectation into an estimate of market value through a capitalization rate.
  3. Cost Approach: The cost approach establishes value by determining the estimated replacement cost of the asset. The components are the depreciated replacement cost of the improvement, less GST, and the land value. Properties which are typically valued using the cost approach are those which rarely transfer in the open market, have unique construction characteristics, and lack income information as they tend to be owner occupied.

Land Value

In some situations the underlying value of the land can exceed the value generated through the income approach on a property. As a result, the land value more accurately represents market value. Land values are derived through the use of the sales comparison approach. Typically, there are two instances where income generating properties tend to be valued in this manner:

Underutilized Land

This occurs when a property contains a small improvement relative to the overall building potential of the lot. Alternatively, the land use of the site may allow for greater development potential.

Highly Depreciated Improvement

This occurs when an improvement is nearing the end of its economic life. As an asset ages, it tends to generate less income and higher operating costs over time and thus contributes little to no value.

Retail - key factors, components and variables

Rental rate

The rental rates used in the income approach represent typical market rent, not actual rent.

Separate categories can arise for a variety of reasons including space type, improvement type, location, size, and quality. Typically, the smaller the space the higher the rent achieved per square foot.

  Quality is based on the following factors:

  • Year and Type of Construction
  • Building Finish
  • Location/Exposure
  • Physical Condition
  • Building Functionality
  • Building Amenities
  • Parking Availability and Capacity

Each category in a property is assigned a rental rate which reflects the typical market rent as of the valuation date. This process aligns with best practices undertaken by appraisers and assessors. In order to produce a market value assessment that is both fair and equitable, the collective market leasing activity for comparable spaces is analyzed.

Market leases with defined terms are the basis of rental rate studies. Net leases are the preferred lease type.
The assessed rate is representative of the most probable value a space would achieve if leased on the valuation date.

Types of retail properties

Retail Type Description
Beltline Retail Properties located within the Beltline Region that are predominantly designed for retail use. The Beltline Region is located directly south of the Downtown Region and is bordered by 10th Avenue S to the north, the Elbow River on the East, the community of Mission to the south, and the community of Sunalta to the west.
Downtown Retail Properties located within the Downtown Region that are predominantly designed for retail use. The Downtown Region includes the communities of Chinatown, Downtown Commercial Core, Downtown East Village, Downtown West End, and Eau Claire.

Enclosed Neighbourhood Shopping Centre

While similar to neighbourhood shopping centres, in that they contain spaces capable of housing larger tenants, this property type has interior common areas and hallways connecting the stores.
Freestanding Retail Freestanding retail typically containing three or fewer units, these structures can vary greatly in size, construction, and layout. Freestanding buildings can be located near other retail properties but are not located within a larger planned shopping centre.
These assets can be typically found on major commercial corridors such as Centre Street N, 16 Avenue N, Kensington Road NW, 17 Avenue S, and Macleod Trail S.
Neighbourhood Shopping Centre Neighbourhood shopping centres are designed to provide convenience shopping for day-to-day needs for consumers in the immediate area.  Such properties contain spaces which can accommodate larger tenants unlike strip centres.  These properties do not have enclosed walkways or halls linking the stores.
Power Centre Power centres are characterized as a group of commercial, primarily retail, properties situated in large planned districts. Buildings may contain single, or multiple tenants and are connected by large parking lots and common roadways. Power centres also contain multiple anchor spaces.
Regional Mall Shopping Centre  As premiere shopping destinations, regional malls are designed with an inward facing orientation with the majority of the spaces connected by enclosed pedestrian promenades. Regional malls contain a variety of spaces to house different tenant types; from anchor spaces to food courts and kiosks.
Retail Condominium Retail condominiums are separately titled units held under a single condominium plan. These units resemble strip centres but can be sold independently.
Strip Centre Strip centres are typically an attached row of at least four retail tenants, managed as a coherent retail entity, often with on-site parking. Open canopies may connect the storefronts, but a strip centre does not have enclosed walkways or halls linking the stores.  Strip centres lack spaces to house large scale tenants.

 

Industrial

Industrial property includes land and improvements that are used for manufacturing, warehousing, distribution centres, storage yards, contractor shops, etc. The improvements typically have limited interior finish.

Industrial properties are typically valued using the sales comparison approach. The industrial sales provide the information required to develop market value assessments. The significant characteristics that affect value of industrial warehouses assessed on the sales approach are:

  • building type: single, multi-tenant or out building
  • assessable building area
  • actual year of construction
  • region/location
  • interior finish ratio
  • site coverage
  • multiple buildings
  • land use
  • average unit size

The significant characteristics that affect value of industrial condo properties assessed on the sales approach are:

  • assessable building area
  • actual year of construction
  • region/location/project ID
  • interior finish

Industrial - key factors, components & variables

1. Building type

  • Ranges:
    • IW S = Industrial warehouse with two or less bays/units
    • IW M = Industrial warehouse with three or more bays/units
    • IOBS = Outbuilding
  • Criteria for range: Number of demised bays/units within a building

2. Assessable building area

  • Assessable area is the total size of a structure, measured to the outside of the exterior walls, excluding mezzanine and basement storage.
  • Ranges: N/A
  • Criteria for range: Market data
  • There is a cap for diminished returns at 325,000SF

3. Actual year of construction (AYOC)

  • Ranges: The AYOC for the improvement is used. Adjustment for age is not capped.
  • Criteria for range: Market data

 4. Region/location

  • Ranges: 4 region groupings – Central, North East, North West, and South East. Location adjustment groupings South Foothills (FO1, FO2, FO3) and Residual ward (ES4)
  • Criteria for range: The physical location of the property within the city

 5. Interior finish ratio

  • Actual per cent of finish area within the building
  • Ranges: 0 to 100% finish
  • Criteria for range: Market data

6. Site coverage

  • Ranges: 10 to 70 per cent. Typical is 30 per cent which receives no adjustment
  • Criteria for range: Market data
  • Additional land: The difference between a property’s actual parcel size and the typical parcel size that would be expected in order to accommodate the existing improvements.

7. Multiple buildings

  • This is a yes or no variable
  • Ranges: N/A
  • Criteria for range: Market data
  • This is to identify properties that have more than one building on site. Outbuildings (IOBS) will not be used to determine a multi building site.

8. Land use

  • Adjustments for improved industrial warehouses. Typical land use is Industrial General (I-G).
  • Ranges: I-H, I-E, C-CORR
  • Criteria for range: Market data

9. Average unit size

  • Adjustment for IWM improvements only. Total size of the building divided by the number of units in that building.
  • Ranges: three or more bays
  • Criteria for range: Market data

Non-residential vacant land 

Non-residential vacant land properties are characterized as those parcels which have no improvements and which have industrial or commercial land use as of Dec. 31 of the previous year.

Assessment uses the sales comparison approach to value non-residential properties. 

The following information is used to assess non-residential land properties:

  • Commercial properties are stratified by Land Use Designation (1P2007), location, and by size (square feet).
  • Industrial properties are stratified by Land Use Designation (1P2007), location and by size (acres).
  • Key factors, components & variables

Non-residential land - key factors, components & variables

1. Location

  • Ranges: 160 non residential zones (NRZ) within Calgary.

2. Parcel size

  • Ranges: 0.0001 acres to 2000 acres
  • Criteria for range: legal parcel size

3. Land use districts

  • Ranges:
    • Commercial districts:
      • C-N1
      • C-N2
      • C-C1
      • C-C2
      • C-COR1
      • C-COR2
      • C-COR3
      • C-0
      • C-R1
      • C-R2
      • C-R3
    • Industrial districts
      • I-G
      • I-B
      • I-E
      • I-C
      • I-R
      • I-O
      • I-H
    • Special purpose districts
      • S-UN
      • S-SPR
      • S-CS
      • S-R
      • S-CI
      • S-CRI
      • S-URP
      • S-FUD
      • S-TUC
    • PREIP2007DC:
      • Direct control districts established prior to IP2007DC
      • For more information please visit the land use bylaw page for more information

5. Influences*

  • 0.0001 acres to 500 acres
    • Corner lot
    • Shape
    • Land use restrictions
    • Topography
    • Environmental concerns
    • Transmission/ powerlines
    • Limited access/use
    • Residual parcel
    • No services
    • SFUD1 to SFUD4
    • Partial services
  • Criteria for range: site specific characteristics of the parcel

Other non-residential

These are the types of properties that are represented by other non-residential:

Recreational properties

The recreational property portfolio is diverse and includes the following properties:

  • parks, green spaces, playgrounds and reserves
  • cultural buildings - theatres, museums, libraries
  • nature exhibits - planetariums and zoos
  • indoor and outdoor sport facilities
  • the Stampede fairground.

Purpose built recreational properties are generally valued using the cost approach to value. The Marshall and Swift Cost Estimator is used to value the improvements and the sales comparison approach is used to develop the land rates. The main factors in recreational property valuations are:

  • land
  • physical improvements – buildings

Recreational facilities such as gyms that are in retail, office, or industrial spaces will be assessed based on the space and not the curent use.

Recreational - key factors, components & variables

1. Building type

  • Range: Yes
  • Ranges: Numerous possible building types.
  • Criteria for range: Any various improvement types within the city as recreational properties are typically unique properties.

2. Net rentable area (NRA)

  • Range? No, as the actual square foot NRA for each building is used.
  • Ranges: N/A
  • Criteria for range: N/A

3. Actual year of construction (AYOC)

  • Range? No, as the AYOC for the improvement is used. Adjustment for age is not capped and, adjustments to effective year may occur.
  • Ranges: N/A

4. Region

  • Range? Yes
  • Ranges: Five region groupings for recreational property – Central, North East, North West, South West, and South East.
  • Criteria for range: the physical location of the property within the city.

5. Influences

  • Range? Yes
  • Ranges: Yes, 0 – (+/-) 75 per cent. There is a 75 per cent adjustment cap on any combination of influences.
  • Criteria for range: Actual site characteristics.

6. Land valuation

  • Range? Yes
  • Ranges: Various, dependent on individual property characteristics.
  • Criteria for range: Actual site characteristics as determined by Land Use Bylaw 1P2007.

Accommodation properties

Accommodation properties are considered hotel/motel properties for assessment purposes and are assessed as non-residential property for taxation purposes.

Assessed values for accommodation properties are predicated on the income approach to value. Each year The City of Calgary requests income and expense data from all hotel and motel operations. The information requested includes a summary of all sources of revenue as well as all departmental expenses, undistributed expenses and fixed expenses. The income and expense data requested from owners of accommodation properties for the 2017 roll correspond to the following dates:

Year 1: July 1, 2013 - June 30, 2014
Year 2: July 1, 2014 - June 30, 2015
Year 3: July 1, 2015 - June 30, 2016

The data reported from each property is stabilized using a weighting of 20 per cent for first year data, 30 per cent for second year data and 50 per cent for third and most recent year data. A net income for each property is determined based on the stabilized income subject to normalization of typical expense. The net income is adjusted to remove the business interest of the hotel creating a net income to real estate. The net income to real estate is capitalized to determine a final assessed value.

Criteria that may affect value

1. Location

Location is stratified by properties that are located within the downtown core and beltline or properties that are located outside of the downtown core or beltline area.

2. Hotel performance

  • Occupancy rate: occupancy rates over the last three years are analyzed.
  • Revenue: revenues over the last three years are analyzed.
  • Expense ratios: expense ratios over the last three years are analyzed.

3. Type

The City uses the Government of Alberta - Municipal Affairs Hotel/Motel Valuation Guide to identify threecategory types for hotel properties. Values may differ between hotel types:

  1. Full service hotels - provide a variety of guest unit styles, meeting rooms, spacious public areas, and a wide variety of facilities including restaurants, lounges, fitness centres, pools, spas, business centres, shops and parking.
  2. Limited service hotels - are usually multi-storey establishments with interior entrances but contain fewer rooms than full service hotels. A variety of guest unit styles are offered, however, public areas including food and beverage facilities, pools and spas are usually limited.
  3. Motels - are usually one to three storey buildings with inside or outside entrances to the units which provide easy access to parking. The standard guest unit includes a sleeping room, bathroom and is similar in decor and design throughout. Public areas are limited in the size and the variety of facilities provided. It is common to have third party providers for food and beverage facilities that may be present.

 

Airport

The Calgary International Airport is a large, diverse and complex parcel located in Calgary's northeast quadrant. It has approximately 5,260 acres of land and operates as Canada's third busiest airport.

Three approaches to value are used for airport properties based on ownership, which is assessed under the airport property assessment process:

  • Calgary Airport Authority Property — sales, income and cost approaches*
  • Land tenants — sales, income and cost approaches*
  • Terminal tenants — income approach

*Property located within the secured perimeter is valued using the cost approach as these buildings are not accessible to the general public and are unable to trade on the open market.

Vacant land is valued using the sales comparison approach. Industrial, office and retail portions of the property are typically valued using the income approach. Factors affecting the income valuation of the tenants include location, size and type of space.

Airport - key factors, components & variables

1. Property type

  • Calgary Airport Authority Property
  • Land tenants
  • Terminal tenants

2. Tenants

  • Building types
    • Ranges:
      • Hang-M Aviation hangar multi tenant
      • Hang-S Aviation hangar single tenant
      • IWS Industrial warehouse single tenant
      • IWM-L Industrial warehouse multi tenant – large bay
      • IWM-S Industrial warehouse multi tenant – small bay
      • AWM Airside warehouse multi tenant – small bay
      • AWS Airside warehouse single tenant
      • OW-S Office warehouse single tenant
      • OW-M Office warehouse multi tenant
      • Office Suburban
      • Car rental facilties
      • Retail free standing
      • SPB Special purpose building (miscellaneous storage)
  • Acutal year of construction (AYOC)
    • The AYOC for the improvement is used. Adjustment for age is not capped
    • Ranges: N/A
    • Criteria for range: N/A
  • Net rentable area (NRA)
    • The actual square foot NRA for each building is used.
    • Ranges: N/A
    • Criteria for range: N/A
  • Clear wall height (CWH)
    • Actual CWH used
    • Ranges: N/A
    • Criteria for range: N/A
  • Finish per cent
    • Actual percent of finish area within the building.
    • Ranges: N/A
    • Criteria for range: N/A
  • Site coverage
    • Range? Yes
    • Ranges:
      1. Industrial range: <30% extra land adjustment
      2. Hangar range: <20% extra land adjustment
      3. Criteria for range: Market data

3. Class

Spaces in each building type are generally grouped into different classes: A, B, C. Within these major classes there are sub-classes that reflect the differences within the class. Depending on the building type, Class is determined using a function of the property's age, quality, condition, location, tenant mix, parking availability, and achievable rents.

Golf Course properties

A golf course consists of a series of on average 18 holes with their own teeing ground, fairway, a green with a flagstick (pin), cup, rough and other hazards.

Golf courses are valued using the cost approach since sales and income information is limited.

The main factors in golf course valuations are:

  • land
  • course development — cost of greens, tee boxes, etc.
  • physical improvements — club house, maintenance shops, etc.

The Marshall and Swift Cost Estimator is used for the development of the value of the improvements which is added to the cost of the land. Golf course land rates are similar to the recreational land rates and were developed using the sales comparison approach.

Golf course location within The City is not a factor in the valuation; the Marshall Swift Cost Manual assigns a score using the following adjustments:

  • total yards of course
  • age
  • area
  • slope rating
  • maintenance budget
  • par
  • berms and undulations
  • number of elevated tees and greens
  • course conditions
  • number of bridges
  • number of sand traps

Golf course - key factors, components & variables

1. Building type

  • Range? Yes
  • Ranges: Numerous possible building types
  • Criteria for range: any various improvement types within the city as golf properties are typically unique properties. Typical buildings include storage buildings, clubhouses, and maintenance buildings.

2. Net rentable area (NRA)

  • Range? No, as the actual square foot NRA for each building is used.
  • Ranges: N/A
  • Criteria for range: N/A

3. Actual year of construction (AYOC)

  • Range? No, as the AYOC for the improvement is used. Adjustment for age is not capped and, adjustments to effective year may occur.
  • Ranges: N/A
  • Criteria for range: N/A

4. Region

  • Range? No.
  • Ranges: Citywide, there is no stratification by region
  • Criteria for range: the physical location of the property within the city

5. Course development

  • Range? Yes
  • Ranges: Courses are classified by individual characteristics of classes I-IV, pitch and putt, or par 3
  • Criteria for range: Developed by individual course attributes as determined by the Marshall Swift “manual” or “cost estimate” of golf course classification

6. Land values

  • Range? Yes
  • Ranges: Typical base rate with adjustments for specific course attributes
  • Criteria for range: Type of land on which the golf course resides and specific course attributes

Parking

A sales approach is used to value surface and titled parking properties. An income approach is generally used to value parkades. The significant characteristics that drive a parking assessment are:

  • location
  • property type
  • area

Institutional properties

 The institutional property portfolio is diverse and includes:

  • K-12 schools
  • Uiversities and Colleges
  • government services buildings — fire stations, libraries, public works
  • churches and religious structures
  • utility structures

Institutional properties are valued using the cost approach to value. The Marshall and Swift Cost Estimator is used to value the improvements and the sales comparison approach is used to develop the land rates.

The main factors in institutional property valuations are:

  • land
  • physical improvements — buildings

Institutions - key factors, components & variables

1. Building type

  • Range? Yes
  • Ranges: There are various possible building types based on method of construction and materials used.
  • Criteria for range: any various improvement types within the city coded as institutional properties are typically unique properties.

2. Net rentable area (NRA)

  • Range? No, as the actual square footage for each building is used.
  • Ranges: N/A
  • Criteria for range: N/A

3. Actual year of construction (AYOC)

  • Range? Yes, the AYOC is used unless subsequent physical changes have occurred to the building structure that requires an adjustment to the year built.
  • Ranges: N/A
  • Criteria for range: N/A

4. Region

  • Range? Yes
  • Ranges: Five region groupings for institutional property – Central, North East, North West, South West and South East.
  • Criteria for range: The physical location of the property within the city.

5. Influences

  • Range? Yes, there is a 75 per cent adjustment cap on any combination of influences.
  • Ranges: Yes, 0 – 75 per cent
  • Criteria for range: Actual site characteristics.

Non-residential property

*The Municipal Government Act defines non-residential property as linear property, components of manufacturing or processing facilities that are used for the cogeneration of power or other property on which industry, commerce or another use takes place or is permitted to take place under a land use bylaw passed by a council, but does not include farm land or land that is used or intended to be used for permanent living accommodation.