Amazon distribution centers in Arizona face tax quandary
By Christine Harvey, with contributions from Phoenix Business Journal Staff May 13, 2011
Amazon.com Inc.'s recent announcement that it plans to expand its Phoenix distribution center by 400,000 square feet and create hundreds of new jobs comes in the midst of a national tax firestorm for the Seattle-based online retailer.
At issue across the country is whether Amazon’s distribution centers — warehouses where products are packaged and shipped to buyers — count as a physical presence in a state, and in turn whether sales taxes should be collected on merchandise shipped within that state.
In Arizona, retailers are required to collect and pay sales or use taxes when they maintain a place of business in the state; make sales of tangible personal property for storage, use or consumption; or regularly solicit sales by mail in the state, according to Hsin Pai, a tax analyst with the Arizona Department of Revenue.
Pai said Amazon has not been collecting sales taxes on orders filled at any of its three Arizona locations, and thus has not been in compliance with state tax laws.
That means the online retail giant, which has been shipping products from the Valley since opening its first fulfillment center here in 2007, could owe the state hundreds of millions of dollars in back taxes it failed to collect from consumers.
Amazon officials disagree.
“We’re only fulfilling orders from the Arizona locations, and so we don’t have a physical presence there and aren’t required to collect taxes,” said company spokesman Todd Fogarty.
Arizona officials have been reluctant to push the issue, as Amazon is creating jobs in a tough local economy.
Arizona Commerce Authority CEO Don Cardon was out of town and unavailable for comment. Emails and phone messages sent to Gov. Jan Brewer’s office requesting comment were not returned.
Amazon has run into trouble on this front in other states. Texas billed the online retailer for $269 million plus penalties and interest for uncollected sales taxes between 2005 and 2009, resulting in Amazon closing its distribution centers there.
Similar scenarios have played out in other states, including South Carolina.
Rebecca Madigan, founder and executive of Performance Marketing Association, said states requiring the collection of sales taxes in this type of situation risk losing the business provided by hundreds of companies such as Amazon.com, including Overstock.com and Drugstore.com.
More than 1,000 third-party online retailers, known as affiliates, operating in Arizona also would be hurt by such a requirement, she said.
“The effects could be devastating,” Madigan said.
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At issue across the country is whether Amazon’s distribution centers — warehouses where products are packaged and shipped to buyers — count as a physical presence in a state, and in turn whether sales taxes should be collected on merchandise shipped within that state.
In Arizona, retailers are required to collect and pay sales or use taxes when they maintain a place of business in the state; make sales of tangible personal property for storage, use or consumption; or regularly solicit sales by mail in the state, according to Hsin Pai, a tax analyst with the Arizona Department of Revenue.
Pai said Amazon has not been collecting sales taxes on orders filled at any of its three Arizona locations, and thus has not been in compliance with state tax laws.
That means the online retail giant, which has been shipping products from the Valley since opening its first fulfillment center here in 2007, could owe the state hundreds of millions of dollars in back taxes it failed to collect from consumers.
Amazon officials disagree.
“We’re only fulfilling orders from the Arizona locations, and so we don’t have a physical presence there and aren’t required to collect taxes,” said company spokesman Todd Fogarty.
Arizona officials have been reluctant to push the issue, as Amazon is creating jobs in a tough local economy.
Arizona Commerce Authority CEO Don Cardon was out of town and unavailable for comment. Emails and phone messages sent to Gov. Jan Brewer’s office requesting comment were not returned.
Amazon has run into trouble on this front in other states. Texas billed the online retailer for $269 million plus penalties and interest for uncollected sales taxes between 2005 and 2009, resulting in Amazon closing its distribution centers there.
Similar scenarios have played out in other states, including South Carolina.
Rebecca Madigan, founder and executive of Performance Marketing Association, said states requiring the collection of sales taxes in this type of situation risk losing the business provided by hundreds of companies such as Amazon.com, including Overstock.com and Drugstore.com.
More than 1,000 third-party online retailers, known as affiliates, operating in Arizona also would be hurt by such a requirement, she said.
“The effects could be devastating,” Madigan said.
Read More
Appraising the situation: Many agents blame low evaluations for continued sluggishness in market
By Christine Harvey April 29, 2011
Home sales in Arizona reached a five-year high in March, but local Realtors say low appraisals continue to slow the state’s real estate market.
Michele Tennyson, a Realtor with Re/Max Integrity, said she’s recently seen a number of appraisals come in low.
“The whole market is taking a beating in Arizona right now, and unfortunately there is no magic bullet to cure the problem,” she said.
A national survey conducted in January by the National Association of Realtors revealed that 10 percent of Realtors had sales fall through because homes were appraised for less than what buyers had agreed to pay.
In addition, 15 percent said contracts had to be renegotiated after appraisals came in too low. Either the sellers lowered their prices, or buyers dished out extra cash.
In any case, the accuracy of appraisals in this market has come into question.
“(Rates) are all over the board and, depending on the rate, it can definitely be a deal breaker,” Tennyson said.
But low appraisals might not be the source of the problem, she said. Instead, they are a result of the changing real estate industry, which has a historic number of distressed properties on the market, tighter appraisal and lending standards, and a not-so-confident consumer attitude.
According to Zillow.com’s most recent report, median home prices in Maricopa County were just above $130,000 in March. At the same time last year, they were close to $150,000. A key factor in the declining values: foreclosures.
According to RealtyTrac’s recent market data, Arizona’s foreclosure rate was the second-highest in the nation during the first quarter: One in every 175 housing units received a foreclosure notice. While activity was down 17 percent from first-quarter 2010, filings still were up 15 percent from the fourth quarter.
Arizona has 15,705 foreclosure properties on the market, including more than 11,000 in the Valley. Phoenix has 3,855 of those listings, landing it at No. 4 on RealtyTrac’s list of top U.S. metro areas for foreclosures. Maricopa County’s average foreclosure price was $132,910, according to the report.
A broken system
Brian Jacenko, a certified mortgage consultant with Professional Mortgage Associates Ltd., said foreclosure properties have a negative effect on the market because those listings are used for comparisons when an appraiser evaluates a nearby home.
“The whole system right now is just kind of not working,” Jacenko said. “Between the comps the appraisers use and the foreclosures and short sales, there is really no accurate adjustment that can be made. Whether it’s right or wrong to use those properties, I don’t know. But they are definitely hurting the values.”
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Michele Tennyson, a Realtor with Re/Max Integrity, said she’s recently seen a number of appraisals come in low.
“The whole market is taking a beating in Arizona right now, and unfortunately there is no magic bullet to cure the problem,” she said.
A national survey conducted in January by the National Association of Realtors revealed that 10 percent of Realtors had sales fall through because homes were appraised for less than what buyers had agreed to pay.
In addition, 15 percent said contracts had to be renegotiated after appraisals came in too low. Either the sellers lowered their prices, or buyers dished out extra cash.
In any case, the accuracy of appraisals in this market has come into question.
“(Rates) are all over the board and, depending on the rate, it can definitely be a deal breaker,” Tennyson said.
But low appraisals might not be the source of the problem, she said. Instead, they are a result of the changing real estate industry, which has a historic number of distressed properties on the market, tighter appraisal and lending standards, and a not-so-confident consumer attitude.
According to Zillow.com’s most recent report, median home prices in Maricopa County were just above $130,000 in March. At the same time last year, they were close to $150,000. A key factor in the declining values: foreclosures.
According to RealtyTrac’s recent market data, Arizona’s foreclosure rate was the second-highest in the nation during the first quarter: One in every 175 housing units received a foreclosure notice. While activity was down 17 percent from first-quarter 2010, filings still were up 15 percent from the fourth quarter.
Arizona has 15,705 foreclosure properties on the market, including more than 11,000 in the Valley. Phoenix has 3,855 of those listings, landing it at No. 4 on RealtyTrac’s list of top U.S. metro areas for foreclosures. Maricopa County’s average foreclosure price was $132,910, according to the report.
A broken system
Brian Jacenko, a certified mortgage consultant with Professional Mortgage Associates Ltd., said foreclosure properties have a negative effect on the market because those listings are used for comparisons when an appraiser evaluates a nearby home.
“The whole system right now is just kind of not working,” Jacenko said. “Between the comps the appraisers use and the foreclosures and short sales, there is really no accurate adjustment that can be made. Whether it’s right or wrong to use those properties, I don’t know. But they are definitely hurting the values.”
Read More
Development remains at a standstill; North Phoenix could rebound first
By Christine Harvey April 1, 2011
Commercial real estate construction remains at a standstill in North Phoenix and the Camelback Corridor as the market slowly recovers and landlords look to fill an oversupply of space. And while central Phoenix could be among the first areas to pop, development there is likely to be slow for several years.
That follows a trend across the Phoenix metro area, with vacancy rates remaining high in office, retail and industrial markets. The latter seems the most stable.
Retail vacancies at year end ranged from 8.3 percent in the South Mountain area to 14.5 percent in North Phoenix, according to Colliers International’s latest report.
The Camelback Corridor had the highest rate of office vacancies, climbing from 24.6 percent in 2009 to 28.1 percent. However, the report noted that tenant demand for office space will accelerate as the market begins to recover.
Corey Hawley, a real estate broker with CB Richard Ellis, said the Deer Valley and Desert Ridge areas of North Phoenix will rebound more quickly than other areas of the city. But he said that optimism won’t translate into new construction anytime soon.
“There won’t be any new projects that break ground in that area this year, because there is still too much space,” he said. “But the good news is that we are going to see the big spots get leased. People are moving a little more north; there’s good activity and good chunks of available space.”
Still, North Phoenix has the potential to become a hub of office and retail activity because of its travel accessibility, proximity to residential areas and lower prices for space and amenities, he said.
Deer Valley, specifically, has seen an increase in attention from companies that are looking to move north. The area has 10 vacant buildings with at least 50,000 square feet available in each, said Ashley Brooks, a real estate broker with CB Richard Ellis.
Lifeprint, Kiewit Corp.and D.R. Horton are among the companies that have leased space recently in Deer Valley. Rental rates in the area range between $18 and $22 per square foot.
“There are two projects on the books right now in Deer Valley,” Brooks said. “But because lease rates in 2011 and 2012 won’t validate new construction, the focus is on finding core household tenants.”
In the Camelback Corridor, the story is much the same.
Phil Breidenbach, senior vice president of office properties for Colliers International, said the Camelback Corridor will see vacancy rates shrink as consumer spending starts to increase.
And with a number of leases set to expire in 2011, he expects to see some job creation as old tenants are replaced by new companies looking to hire. However, opportunities for development will be slim because space is limited in the area.
Daniel Ortega, associate vice president of retail properties for Colliers, said regardless of development, the Camelback Corridor will remain a premium spot for commercial real estate because of the reuse and repurposing of buildings in 2010.
“The biggest change we have seen here is the remodeling and reinvention of older buildings,” he said. “Instead of spending money on new projects, companies are transforming existing spaces as we speak.”
One example is the auto industry. Remodeling projects are under way at properties including Camelback Toyota, Infinity and Lincoln dealerships.
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That follows a trend across the Phoenix metro area, with vacancy rates remaining high in office, retail and industrial markets. The latter seems the most stable.
Retail vacancies at year end ranged from 8.3 percent in the South Mountain area to 14.5 percent in North Phoenix, according to Colliers International’s latest report.
The Camelback Corridor had the highest rate of office vacancies, climbing from 24.6 percent in 2009 to 28.1 percent. However, the report noted that tenant demand for office space will accelerate as the market begins to recover.
Corey Hawley, a real estate broker with CB Richard Ellis, said the Deer Valley and Desert Ridge areas of North Phoenix will rebound more quickly than other areas of the city. But he said that optimism won’t translate into new construction anytime soon.
“There won’t be any new projects that break ground in that area this year, because there is still too much space,” he said. “But the good news is that we are going to see the big spots get leased. People are moving a little more north; there’s good activity and good chunks of available space.”
Still, North Phoenix has the potential to become a hub of office and retail activity because of its travel accessibility, proximity to residential areas and lower prices for space and amenities, he said.
Deer Valley, specifically, has seen an increase in attention from companies that are looking to move north. The area has 10 vacant buildings with at least 50,000 square feet available in each, said Ashley Brooks, a real estate broker with CB Richard Ellis.
Lifeprint, Kiewit Corp.and D.R. Horton are among the companies that have leased space recently in Deer Valley. Rental rates in the area range between $18 and $22 per square foot.
“There are two projects on the books right now in Deer Valley,” Brooks said. “But because lease rates in 2011 and 2012 won’t validate new construction, the focus is on finding core household tenants.”
In the Camelback Corridor, the story is much the same.
Phil Breidenbach, senior vice president of office properties for Colliers International, said the Camelback Corridor will see vacancy rates shrink as consumer spending starts to increase.
And with a number of leases set to expire in 2011, he expects to see some job creation as old tenants are replaced by new companies looking to hire. However, opportunities for development will be slim because space is limited in the area.
Daniel Ortega, associate vice president of retail properties for Colliers, said regardless of development, the Camelback Corridor will remain a premium spot for commercial real estate because of the reuse and repurposing of buildings in 2010.
“The biggest change we have seen here is the remodeling and reinvention of older buildings,” he said. “Instead of spending money on new projects, companies are transforming existing spaces as we speak.”
One example is the auto industry. Remodeling projects are under way at properties including Camelback Toyota, Infinity and Lincoln dealerships.
Read More
Women gaining ground in the traditionally male-dominated real estate industry
By Christine Harvey April 1, 2011
The number of women working in commercial real estate in Arizona has increased in the past five years, signaling that the traditionally male-dominated field may be turning a corner.
Afton Trail, managing director of CB Richard Ellis’ Asset Services Group in Phoenix, began working in real estate more than 20 years ago, when there were few female brokers or property managers. Often referred to as a “good old boys network,” the commercial real estate profession essentially was dominated by men until the late 1990s, she said.
“The industry used to be a kind of all-boys school,” Trail said. “It’s still perceived to be that way, but we’re seeing more and more women come into the arena because there are enough women now to give a new person comfort that they can be successful.”
According to the Women in Commercial Real Estate: 2010 Survey, 43 percent of the people working in the industry are female; in 2005, women accounted for only 36 percent of the total. However, the report notes that it’s difficult to tell whether the upward trend will continue or be a short-term phenomenon.
The report was compiled by Commercial Real Estate Women, or CREW, a networking and trade group based in Washington.
The stability of women in the commercial brokerage business generally has been affected by family balance, the ability to find mentors, networking and maintaining the level of knowledge necessary for success, Trail said.
Career Dynamics
Commercial real estate is considered a high-risk, competitive industry with constant change. The pay-for-performance model may fluctuate with the unpredictable market and is based on each broker’s ability to rise above the competition.
To work under these conditions, brokers must be resilient, competitive and willing to take big risks, said Trail.
“The general characteristics associated with someone successful in commercial brokerage are not the characteristics owned by a large majority of the population,” she said, referring to women often being less willing to take risks and not being emotionally detached from their work. “It’s necessary that both men and women have them, but they are just less often found in women.”
Pete Bolton, executive vice president and managing director of Grubb & Ellis Co. in Phoenix, said women who possess the right characteristics — such as a competitive nature and go-getter personality — can be strong assets.
“The dynamic between the client and the team change when a woman is present,” he said. “Whatever the combo is, it just seems the client is more at ease when a woman is involved in the transaction.”
Bolton has a team of 36 brokers working in his Phoenix office. Six of them are women, which he said is the most he’s ever had on his team.
Finding mentor programs
Judi Butterworth, senior vice president of Velocity Real Estate, said it’s crucial for women in the brokerage business to get on-the-job training from mentors who will support and involve them in their work with clients.
“And, for whatever reason, there aren’t many men willing to train those women,” she said.
According to CEL & Associates Inc., a real estate industry consultancy, companies may be hesitant to offer training or mentoring programs because of the risks involved with investing in entry-level brokers.
And those risks are greater with women. The CREW survey reports that women are more likely than men to exit the profession in their early years.
Kurt Kalocin, senior associate at SRP Real Estate Partners, said more women have attempted to start careers in commercial brokerage in recent years, but many leave before gaining traction.
Read More
Afton Trail, managing director of CB Richard Ellis’ Asset Services Group in Phoenix, began working in real estate more than 20 years ago, when there were few female brokers or property managers. Often referred to as a “good old boys network,” the commercial real estate profession essentially was dominated by men until the late 1990s, she said.
“The industry used to be a kind of all-boys school,” Trail said. “It’s still perceived to be that way, but we’re seeing more and more women come into the arena because there are enough women now to give a new person comfort that they can be successful.”
According to the Women in Commercial Real Estate: 2010 Survey, 43 percent of the people working in the industry are female; in 2005, women accounted for only 36 percent of the total. However, the report notes that it’s difficult to tell whether the upward trend will continue or be a short-term phenomenon.
The report was compiled by Commercial Real Estate Women, or CREW, a networking and trade group based in Washington.
The stability of women in the commercial brokerage business generally has been affected by family balance, the ability to find mentors, networking and maintaining the level of knowledge necessary for success, Trail said.
Career Dynamics
Commercial real estate is considered a high-risk, competitive industry with constant change. The pay-for-performance model may fluctuate with the unpredictable market and is based on each broker’s ability to rise above the competition.
To work under these conditions, brokers must be resilient, competitive and willing to take big risks, said Trail.
“The general characteristics associated with someone successful in commercial brokerage are not the characteristics owned by a large majority of the population,” she said, referring to women often being less willing to take risks and not being emotionally detached from their work. “It’s necessary that both men and women have them, but they are just less often found in women.”
Pete Bolton, executive vice president and managing director of Grubb & Ellis Co. in Phoenix, said women who possess the right characteristics — such as a competitive nature and go-getter personality — can be strong assets.
“The dynamic between the client and the team change when a woman is present,” he said. “Whatever the combo is, it just seems the client is more at ease when a woman is involved in the transaction.”
Bolton has a team of 36 brokers working in his Phoenix office. Six of them are women, which he said is the most he’s ever had on his team.
Finding mentor programs
Judi Butterworth, senior vice president of Velocity Real Estate, said it’s crucial for women in the brokerage business to get on-the-job training from mentors who will support and involve them in their work with clients.
“And, for whatever reason, there aren’t many men willing to train those women,” she said.
According to CEL & Associates Inc., a real estate industry consultancy, companies may be hesitant to offer training or mentoring programs because of the risks involved with investing in entry-level brokers.
And those risks are greater with women. The CREW survey reports that women are more likely than men to exit the profession in their early years.
Kurt Kalocin, senior associate at SRP Real Estate Partners, said more women have attempted to start careers in commercial brokerage in recent years, but many leave before gaining traction.
Read More
