Tuesday
May 30, 2017

Reality Check for the Retail Market

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Reality Check for the Retail Market

Commercial real estate advocates offer a snapshot of the intersection between commerce and real estate.
Three panel members at Commercial Legislation and Regulatory Advisory Board in Washington, D.C
Left to right: Emily Naden, Jennifer Platt, Sharon Whitaker

Commercial real estate experts discussed ideas for making transactions flow more smoothly and disspelled negative narratives about the retail sector and e-commerce during the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., on Wednesday. At a meeting of the National Association of REALTORS®’ Commercial Legislation and Regulatory Advisory Board, Sharon Whitaker, vice president of commercial real estate for the American Bankers Association, praised the committee for inviting several organizations to share their priorities. “Without each spoke in the wheel, it doesn’t move forward,” she said.

Jennifer Platt, vice president of federal operations with the International Council of Shopping Centers, focused on the positive aspects of retail, particularly strip malls. “We’re actually seeing opportunities and really low vacancy rates,” she told meeting attendees. “We’re seeing new tenants; we’re seeing different types of tenants.” She added that many retail spaces are being filled by companies that concentrate on experiential offerings, such as health care and wellness offices, restaurants, and educational offerings.

Check out more coverage of this year's legislative meetings at realtorm.ag/midyear17.

One of the elements undergirding the less-than-positive narrative about brick-and-mortar retail is the rise of e-commerce. Many states do not charge sales tax for online transactions, putting local stores at a disadvantage. Commercial Legislation and Regulatory Advisory Board Chair Michael Schoonover noted that leveling the playing field between online commercial activity and Main Street should be among the issues addressed by REALTORS® on Capitol Hill. “Those are jobs issues,” said Schoonover, GREEN, SFR, manager with John L. Scott Real Estate in Federal Way, Wash. “Congress loves to talk about jobs.”

Platt agreed that an important talking point to share with Congress is the fact that for every four brick-and-mortar jobs, there is only one job in e-commerce. She encouraged NAR members to talk to their representatives about the Remote Transactions Parity Act of 2017 (H.R. 2193), which would give states the authority to charge sales tax in online transactions. “There are some opportunities for that legislation to move forward in the next year,” Platt told the committee. She noted that more than half of states are projected to have a budget shortfall this year and that many lawmakers are looking for legislation that offers “a solution to a problem rather than a problem they have to deal with.” Even if there’s no meaningful increase in internet sales over the next 10 years, Platt said empowering states to collect taxes from online transactions could generate $260 billion in local revenue.

The event that precipitated the imbalance between online and brick-and-mortar sales is the 1992 Quill Corp. v. North Dakota case, where the U.S. Supreme Court ruled in favor of the office-supply company after North Dakota attempted to impose a use tax on its online sales. Platt said an appeal of that case will likely be heard in August by the North Dakota Supreme Court, setting the plaintiffs up to file a petition to be heard by the U.S. Supreme Court in spring 2018. Platt said newly appointed Justice Neil Gorsuch appears to be ready to side with those who support states’ rights to tax online sales, along with fellow Justice Anthony Kennedy. “We’re very bullish on the court case,” Platt said.

With financial shortfalls, possible Medicare cuts, and the ramifications of future tax reform threatening many states, Platt warned that other revenue-generating opportunities will become more tantalizing: “If you don’t deal with this, the states are going to do something.” Emily Naden, director of federal affairs for the Building Owners and Managers Association, pointed to Florida’s recently renewed sales tax on rent as one localized result of this need. “That’s a direct response,” she told the committee.

Committee member Jared Booth, CCIM, with Coldwell Banker Commercial Advisors in Salt Lake City, said his local government is coming after the wages of real estate professionals in order to plug a shortfall. “They’re looking at a tax on services for our commissions because they are losing tax revenue from online sales,” he said. “We have to get behind this.”

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