Which property type is typically assessed at a higher value due to the income-generating potential?

Commercial property is typically assessed at a higher value due to its income-generating potential. This is because commercial properties, which include office buildings, retail spaces, and multifamily housing, are often leased out to tenants and can generate significant rental income. The value of a commercial property is frequently determined using the income approach to valuation, which takes into account the rent that can be generated and the overall return on investment. This income-producing capability makes commercial property attractive to investors, leading to higher assessments compared to other property types.

In contrast, residential properties, although they can also generate income through rentals, are generally assessed lower because they are primarily designed for occupancy by individuals or families rather than for generating significant commercial cash flow. Industrial properties, involved in manufacturing or distribution, can also have good income potential but do not typically reach the same value levels as commercial properties. Vacant land is not generating any income at all, and thus would be assessed based mainly on factors such as location and future development potential rather than its current income potential.