Mecklenburg County tax appraisers will start revaluating local commercial real estate next week - a task that could produce unwelcome surprises for both property owners and local government.

Property owners have been paying taxes based on values set in 2003. State law requires revaluation every eight years - leaving officials wrestling with setting values in one of the worst markets in decades.

As with the residential revaluation, appraisers are tasked with pinpointing values at a time when there are relatively few sales to use as comparisons. Of the sales that have happened, a historically high proportion are distressed, meaning they were sold at a discount.

In setting commercial values, appraisers will also consider the income a property generates and look at rents and occupancy rates, which have fallen in recent years.

Falling tax values could create grim consequences for the cash-strapped city and county.

At $26.5 billion, commercial properties represent about one-third of the county's tax base. Higher values, on the other hand, could stress property owners further.

Local real estate appraisers say they are preparing for property owners to appeal the findings.

"We had some years of appreciation from the last revaluation. That's what people will forget," said veteran real estate appraiser Fitzhugh Stout, managing director with Integra Realty Resources. "But they've been devastated and their rents are so low now. There's no question this could push people to becoming delinquent."

County appraisers are finalizing residential values, but officials estimate that the median home sales price across the county is 6 percent to 8 percent above 2003 levels.

Stout thinks commercial property values in general could end up equal to, or slightly lower, than the 2003 values.

Some properties will see increases - such as land along the light rail line, which saw big jumps in appreciation when the land was rezoned for mixed use.

Other property types that could see increases include newer, top-notch office towers, grocery-anchored shopping centers in affluent neighborhoods and single-tenant buildings that house medical offices, bank branches and drug stores.

Broadly speaking, Charlotte commercial property didn't see values ramp up as they did in other parts of the country. Instead, real estate appreciated an average of roughly 3 percent a year between 2003 and 2008, Stout estimated.

Values then fell dramatically - between 30 percent and 50 percent - during the past two years.

Raw land suffered more and will be harder to assess because there are few buyers. Of land that has changed hands, Stout knows of deals where sellers received 20 cents on the dollar from what they paid two years earlier.

Calculating rental income could also prove tricky, said Andrew Jenkins, analyst and managing partner with Karnes, a real estate research firm. Actual lease rates are often lower than advertised asking rates because landlords are granting concessions to lure tenants during the downturn.

A fire-sale deal on IBM's former Charlotte home last year could offer a grim sign of what's to come for local government. Or it could bode favorably for property owners.

The University City property sold for $42 million - about one-third of the site's property tax value. An equivalent markdown of the property tax bill would cost the city and county $1.1million.

And consider Eastland Mall, the once-vibrant shopping center of Charlotte's eastside. The 2003 taxable value of the land is $24.5 million. Last year, an investor bought the main section of the mall, which was in foreclosure, for $2 million.

Mass appraisals are difficult to do, Stout said.

"It's just a real dilemma for any property that has anything unusual about it. I don't think anybody knows what to expect.

"There will be a lot of values with a good reason to be challenged."