Colorado Industrial Property Tax Appeals

Market rent and market occupancy: the questions that decide industrial assessments

An industrial building’s county value is supposed to be the value of the fee simple estate as the market would price it on June 30, 2026, at market rent, market expenses and market occupancy. That is the statute (§ 39-1-103(5)(a), C.R.S.) and the assessor’s manual, which tells every county that “market value of the fee simple estate should reflect market assumptions, including market rent, market expenses, and market occupancy” (Assessors’ Reference Library, Vol. 3, Ch. 2). The statute also requires the assessor to “consider and document all elements” of the cost, market and income approaches before setting a value, and to consider current use, multi-year leases, and “existing zoning and other governmental land use or environmental regulations and restrictions.”

For industrial, the county’s model is built on the new product: 32 feet clear, cross-dock loading, a full truck court, leased at the rents those buildings command, with the rest of the stock priced down from it by age. Most of Colorado’s industrial buildings are nothing like it. The typical Denver-area building built before 1980 clears 22 feet. The rolls do carry those buildings lower, roughly a third below new product per square foot, but by a depreciation schedule, not by what the building can store or who will lease it. Where the county holds a rent roll, from a prior appeal or an income questionnaire, the model tends to capitalize that rent whether or not the market would still pay it.

The five arguments below are the ones that move industrial values in Colorado. Each is backed by the statute, the Division of Property Taxation’s manual, or a 2026 decision of the Board of Assessment Appeals, cited where it applies.

Five places an industrial appeal finds value

• Lease-up: a vacant building is not stabilized income. The county’s pro forma assumes the building is leased. A new or emptied building on June 30, 2026 is not, and a buyer prices the rent it will not collect, the commissions and improvements it must fund, and the time it takes to get there. Counties have argued that the deduction values a lesser interest than the fee simple. The Board of Assessment Appeals rejected that argument in six Adams County decisions in August 2026: “a deduction for lease-up expenses is consistent with valuing the fee simple estate and is not the same as a leased fee interest,” because the cost to lease a building up “is an anticipated buyer expenditure” (Dockets 2024BAA2984 to 2988 and 2025BAA84). In the Thornton cases, five new distribution warehouses of 66,000 to 112,000 square feet, the Board wrote that “it was not appropriate to ignore the below market occupancy and lease-up costs, which are commonly required for new industrial spaces.” The same cases carry the lesson: the county’s values there largely stood, because the Board’s own stabilized value, built from the county’s sales and cost evidence, came out above the county’s number even after the deduction. The deduction and the base value have to be proved together, each from base-period evidence; the Board rejected a discounted cash flow because assessors are “statutorily bound to rely only on conditions existing in the base period” (Padre Resort, Inc. v. Jefferson County Board of Equalization, 30 P.3d 813 (Colo. App. 2001)).
• Above-market leases and the in-place income approach. Sale-leasebacks, build-to-suits with rent set to repay construction cost, and leases signed at the top of the 2021 and 2022 market can leave contract rent above what the space would lease for on June 30, 2026. The county values the fee simple estate, not the landlord’s leased fee position. The assessor’s manual calls the gap excess rent, “created by a lease favorable to the landlord,” and says it “may be calculated separately and capitalized at a higher rate,” not folded into stabilized income (ARL Vol. 3, Ch. 7). The manual’s general rule is market rent; a long-term non-market lease is an exception with its own procedure, which values the leased fee and the leasehold as separate estates and brings them back to one unit value under § 39-1-106. SVA’s reading of that procedure is that on an above-market lease the tenant’s leasehold is a burden, not an asset, so the unit value comes back to the market. The Colorado Supreme Court’s decision on non-market leases, City and County of Denver v. Board of Assessment Appeals (Regis Jesuit Holding), 848 P.2d 355 (Colo. 1993), allowed a below-market lease to be considered because a buyer would consider it, and said that actual rent is neither the only factor nor necessarily the main one. The statute directs the assessor to consider multi-year leases (§ 39-1-103(5)(a)(III)); considering a lease is not the same as capitalizing its rent. Size matters in the market evidence: rents fall as buildings grow, and in the Brighton case the Board took the owner’s rent comparables over the county’s because the county’s were “significantly smaller than the subject” and closer to Denver.
• Tenant improvements and concessions. Industrial improvement allowances run smaller than office, but free rent and commissions on a seven- or ten-year lease still separate face rent from effective rent, and a county survey rent is a face rent. The manual’s standard is market rent, not asking rent, so the rent in the pro forma is the effective rent of signed leases in the base period, net of free rent and amortized allowances. The improvements and commissions a buyer must fund to re-lease the building come off the value as a line below net operating income or as a reserve. The Board priced those costs from the market in 2026: a 6% leasing commission, a $10.00 per square foot improvement allowance and twelve months of rent loss on a mega-warehouse (Docket 2025BAA84). The evidence is the building’s executed leases and the comparable leases in its size class with their full economics.
• Clear height and the older building. Clear height sets what a building can store and who will lease it. Modern distribution wants 32 feet and up; a 1970s building clears 18 to 22 feet, with columns on tighter spacing, fewer docks per foot, and a truck court that will not take today’s trailers. The market prices all of that into rent and sale price. The county’s model prices age, and only age, through a depreciation schedule; it rarely prices clear height, column spacing, dock ratio, truck court depth or power. On the Denver-area rolls, buildings built before 1980 carry about a third less value per square foot than buildings built since 2015; whether that step is enough for a given 18-foot building is a question of the rents and sales of buildings in its own clear-height class, and that is where the case is made. The authorities are plain. Functional obsolescence, including “functional inadequacy or superadequacy due to size, style, age” and “technological innovation,” and economic obsolescence have to be measured and deducted (ARL Vol. 5, Ch. 3), and the Colorado Supreme Court held in 1962 that where economic obsolescence exists “it must be acknowledged and deducted,” as the Division’s manual summarizes Colorado & Utah Coal Co. v. Rorex. The Board expects the obsolescence to be demonstrated, not asserted: in September 2026 it rejected an obsolescence claim on a Boulder County flex campus because “a cost approach was not developed to demonstrate the obsolescence” (Docket 2025BAA1471). The evidence is a rent and sale set drawn from the building’s own clear-height class, the leasing history of which prospects passed and why, and, where the fix is physically possible, the cost to cure against the rent it would add.
• Complex industrial: compliance costs are not value. Manufacturing, processing, food, chemical and energy plants spend heavily to comply with air, water and waste rules: scrubbers and baghouses, thermal oxidizers, wastewater pretreatment, secondary containment, stormwater systems, monitoring. Three things keep that spending out of the real property value. First, the roll. Most of it is machinery and equipment, which Colorado defines out of the “fixtures” that belong to real property even when it is bolted to the building (§ 39-1-102(4)), so it belongs on the personal property schedule, if anywhere, and not in the building’s cost. A county cost approach that classes the plant as a high-cost special-purpose building while the same systems sit on the declaration counts them twice. Second, cost is not value. Equipment installed because a permit requires it earns no rent, and a buyer pays for the plant’s capacity to earn, not for what the permit cost. In the cost approach that is functional obsolescence, a superadequacy; the manual’s own list of economic obsolescence includes the “passage of restrictive legislation,” and the statute tells the assessor to consider “environmental regulations and restrictions” in establishing actual value (§ 39-1-103(5)(a)(II)). On the personal property roll, the declared cost sets the maximum value and obsolescence comes off it; “physical, functional, and economic obsolescence shall be considered” (§ 39-1-104(12.3)(a)(II)). Third, the income approach. Permit fees, monitoring, disposal and compliance staffing are operating expenses of the property’s use, and they belong in the pro forma. Where a site carries known contamination or a remediation obligation, the value is what a buyer pays with that obligation attached; the Division lists the IAAO standard on contaminated property among its references, and the cost to cure, with the stigma that outlasts it, is the measure. One more line on the notice matters: manufacturing and processing buildings are industrial-classed property assessed at 26% in 2026 and 25% from 2027, while warehouses are commercial-classed at 25% in both years. The wrong class is its own ground.

Every one of these is argued from the building’s own documents and from the leases and sales that closed before June 30, 2026. Nothing signed after that date supports the county’s value, and nothing signed after it supports the owner’s either. Cold storage, which sits between warehouse and plant on the rolls, has its own write-up, and the personal property side of an industrial account is covered on the declaration review page.

What the county boards decided for industrial

Denver’s county board decided 768 industrial and warehouse petitions in 2025, and 25.3% won a reduction, with a median winning cut of 8.9%. In El Paso County, warehouse and industrial petitions ended below the protested value 45% of the time, with a median cut of 16.5%, the deepest winning reductions on the Front Range. Across the Front Range, the strongest predictor of winning was whether anyone argued the case. The 2025 results, county by county.

A distribution warehouse, $623,000 over the cycle

A distribution warehouse in Aurora was carried at $45.5 million for 2023. The appeal settled at the state board at $36.9 million, a 19% cut, and the tax saved came to $623,000 over the two years of the cycle, as billed by the county treasurer. That engagement was at a prior national firm; results from SVA engagements will be published with client consent.

The fee, per property, before you sign

The fee is a contingency share of the tax actually saved, set per property by its annual tax bill: 20% under $200,000 of tax, stepping down to 8% at $2 million and up, quoted in writing before anything is signed. There is no invoice unless the taxes go down.

A distribution building with a $1.2 million tax bill over-assessed by 10% recovers $120,000 a year. That bill sits in the 10% row, so the fee is $12,000 and the owner keeps $108,000, and the reduction usually holds for both years of the cycle. The full fee schedule.