Mobile Edition
Print
Get the Mag
Weekly UpdatesAlaska has enjoyed more than a decade of continuous and steady growth and good employment in almost every segment of its economy. That includes the commercial real estate and construction industries. Experts in the banking, construction and real estate industries say that the foreseeable future should remain stable and prosperous.
The state's total construction spending this year is expected to top $5.6 billion. A construction report recently released by the Associated General Contractors of Alaska lists this year's commercial construction spending at $250 million, which includes office space, retail and warehouse space.
CONTINUED GROWTH
"What we are seeing is continued significant growth in commercial property in the Anchorage, Mat-Su and Fairbanks areas," said Brian Nerland, KeyBank's president for the Alaska district. "It's not only with existing facilities, which are being purchased and changing hands, but there is also new construction.
"It's hard to drive around Anchorage, up in the Valley or in Fairbanks and not notice all the construction work going on. Of particular note is that some of these buildings going up are major office buildings for some of the regional and village corporations.
"I'd say overall it is a very active period for commercial properties. Unfortunately, there is a shortage of land here in Anchorage, but it's just the opposite up in the Mat-Su. So you are starting to see the shift, not only in residential, but also in commercial opportunities in that area."
AVAILABLE MONEY
Pita Benz, vice president at Wells Fargo's Commercial Real Estate Group in Alaska, agrees saying that there is plenty of money out there for commercial real estate. She said that Wells Fargo does not usually get too excited about loan requests for speculative construction projects and owner-build-to-use projects. Still there is some work going on.
"There are several office buildings here in Midtown that were built several years ago on 'spec' that are just now getting filled," she said. "We are seeing activity in the buying and selling of buildings, but there really isn't much out there; they sell almost as fast as they come on the market."
She also said that internal expansion of local businesses is generating a lot of the growth now. As companies expand and become more successful, they need more office space and look for amenities that are found in class A buildings. They are the newest construction with top-notch comforts and conveniences. That leaves some excess primarily in class B and C categories of offices, which consist of older buildings that lack some of the modern frills and sparkle of newer construction.
EXCESS OFFICE SPACE
Chris Stephens, associate broker with Bond, Stephens and Johnson commercial real estate services, says that when it comes to office space, there is a vacancy rate in Anchorage of between 9 percent and 10 percent. He said that some of the excess has been absorbed and if growth continues things should level out.
"Lease rates have come down a little bit over the last two years," Stephens said. "A couple of years ago I would have said class A office space would be renting today for $2.50 to $3 a square foot instead of the $2.25 that it is.
"But I really think this is only a temporary situation; if we continue to grow, we'll absorb the extra space."
On the other hand, Stephens says the warehouse and industrial markets are extremely tight, with only a 5 percent vacancy rate. All of the new construction is owner-occupied. To build a new building on spec, the owner would have to get rent at more than $1 a square foot, but in today's market it would rent for about only 80 cents a square foot. Stephens says that while the market is not there to justify the cost of construction, there are a few smaller buildings being built.
GIANT STORAGE SCARCE
As for very large structures, more than 30,000 square foot, there are very few available in today's market. One reason could be because when a company has specific needs, it may be more profitable for it to build its own structure. That way it gets exactly what it needs. While there are not a lot of giant storage facilities in Alaska, there also are not a lot of giant needs either.
Retail space is also very tight, according to Stephens. He says space in strip malls runs between $1.25 to $2.25 a square foot.
In terms of new retail construction, there is not a lot of activity. Anchorage can expect another Home Depot and Wal-Mart. Probably the largest project is taking place in Fairbanks at the exit of the Johansen Expressway. The center will include a Petco, Old Navy, Barnes & Noble, Sportsman's Warehouse and a couple of other businesses to be named later.
RIM KEEPS BUSY
Rolland Reid, senior vice president for RIM Architects in Anchorage, echoes the common opinion about the state of Alaska's commercial real estate market. He also says that the Anchorage projects tend to be primarily private-sector funded as opposed to public-funded projects in other areas.
"The number of projects we are involved in are up from last year," said Reid. "We are seeing a lot of activity in the health care market, but I think that's a national trend.
"Here in Anchorage we currently have a few projects. They include the new Credit Union 1 headquarters building on Abbott Road, the new school district space at the Boniface Mall and the new Cook Inlet Tribal nonprofit building off of Bragaw. We've also just completed the Residential Mortgage office building, plus a handful of others. So as you can see, we're doing well."
THE FUTURE
With a new convention center on the horizon for Anchorage, many people are saying that the convention center will have a spill-over effect throughout the downtown area. Rebecca Logan, president and CEO of Associated Builders and Contractors Inc., says there should be a lot of construction with private developers. This includes parking garages and high-rise condos; there also should be development in terms of refurbishing or replacing some of the older buildings in the downtown area.
If it is true that the economy, growth and development are linked together like box cars on a train, then Alaska is on track. And should the economy continue to grow at its current rate and oil prices remain high, the state has a bright future, especially if the stars fall into alignment for ANWR and the natural gas pipeline.
FEED