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Weekly UpdatesThe Anchorage Bowl has long been a trailhead of trade reached via the narrow mountain passes or wide margins of water that enclose it. Now suitable undeveloped acreage is shrinking and Alaska businesses extend this Alaska-Pacific trade center across Cook Inlet into the Matanuska-Susitna Valley, further up the Chugach hillside, and up in the sky.
"We try to be as efficient as we can because the land is getting more expensive," says Leonard Hyde, the "L" partner in JL Properties Inc., which has pushed real estate skyward. JL Properties focuses on Anchorage but monitors the peripheries, having bought and sold a 20-acre parcel of the Matanuska-Susitna Valley between 2004 and 2005. "Land is increasingly scarce; however, there is still land to develop in Anchorage," Hyde says, adding that redevelopment is also an option.
REDEVELOPMENT
JL's hotel lower at 1 Street and Seventh Avenue replaced an old parking lot. Redevelopment is "a different beast. We've done well with some redevelopment projects." Hyde says. "Others we haven't done as well. As an example, sometimes redevelopment requires retaining an existing building and anytime you go in and start modifying all existing building there is more uncertainty generally than if you start from scratch and build something new. There can be some enhanced risks."
As Anchorage businesses relocate or remodel to serve the changing needs of a fluid client base, land use changes. "We have changed the use on several buildings," says Hyde. "We redeveloped the University Center: we are in the process of redeveloping Boniface Mall. Most of what we are doing remains new construction."
Anchorage has invested in office space as skilled and unskilled services have supplemented government growth. "Government is a big driver, but the private sector has been expanding here continuously for more than 10 years," Hyde says. "I think it's a combination of reasons it's growing. Medical is probably the fastest growing private-sector industry here, but tourism has driven a significant amount of hotel construction. Alaska Native corporations have been growing significantly."
VALLEY BOUND
While JL Properties builds Anchorage up, others follow the population building out in the Valley. In 1995, Scott Johannes took over Criterion General Inc., a commercial construction company. "Overall business climate is just positive and a lot of businesses are reinvesting in other businesses and that has shown up as construction growth," Johannes says. "It's driven the prices up in Anchorage to the point that it's driving business to the Valley and we definitely see an increase in work in the Valley. We needed our own equipment shop, which we elected to do in the Valley because of the availability of land.
"Right now, on the horizon, we don't have anything for next year in the Anchorage Bowl."
Johannes identifies Wasilla as Alaska's construction hub: "We're building a warehouse for a plumbing supply (shop) out of Anchorage that's expanding to the Valley partly because that's where the business is, but also they need additional space.
"Over the last three years, our volume has doubled," Johannes says. "It's an absolute mix; we do a little bit of everything; we are client-driven; and whatever they need, we build." Criterion's flexibility has allowed steady growth in Anchorage, maintaining a renovation/remodel division year-round. "Most contractors in the past have been seasonal contractors." Johannes says. The number of Criterion employees has doubled since 2002. "Basically, for the last three years, our work force has steadily grown; we haven't had any layoffs.
"We are just completing the new office building for Alaska USA, which is live-story and 100,000 square feet," Johannes says. "Most of what we do is vertical construction."
Real estate Broker Paul Palmer believes the residential Anchorage market also is looking up. "The Hillside is all going to be high-end single-family homes. Your high-rise is going to be in the core of Anchorage where there is infrastructure with the sewer, roads." Palmer, a former city planner, has been developing Anchorage-area land for 30 years.
"Other than the Sand Lake pits and the gravel pit on Lake Otis at O'Malley and Huffman, the majority of the land that's going to be developed over the next 10 years is going to be on the Anchorage Hillside south of Rabbit Creek Road," says Palmer. "That's the only place there's any large parcels left with decent soil. All of your smaller parcels in town are most likely going to be developed as high-density high-rise buildings.
"So much of it is being developed so quickly," Palmer adds, sitting near a color air photo of Anchorage on the wall of his office in Jack White Prudential Vista Real Estate's section of the Centerpoint high-rise that JL Properties opened just a year ago. Palmer is planning his new Goldenview subdivision after the last unplatted areas were snapped up in his other Hillside development, Prominence Point.
ARE PARKS NEXT?
There's a lot of good high-and-dry ground in the Fort Richardson reservation and Bicentennial Park. "Eleven thousand acres of the undeveloped Anchorage Bowl area is parks," Palmer says. Palmer expects all available Anchorage Bowl lots with good ground, wind protection, and access to utilities to be developed in four to seven years. "With the lack of land in Anchorage, a builder's not a builder if he doesn't have any lots. There are still enough lots left in Anchorage in the high-end range, $125,000 to $150,000-plus for the lot. But the entry-level and middle-income, there's virtually nothing left in town."
Another Prudential Real Estate agent. Pilar Eibeck, says interest rates and good loan programs are increasing demand for land. "The rents are going up and they say 'instead of paying so much rent maybe I should buy my home,' which makes sense." A 23-year Anchorage resident and Anchorage real estate agent for the last four years, Eibeck says, "Most of my clients are immigrants, most of them young couples, first-time homebuyers. The only thing they can afford is ... site condos."
"Site condos seem to have almost no future appeal," according to the Anchorage Homebuilders Association's housing survey taken last fall, which states three-quarters of Anchorage wanted a single-family home, while less than 1 percent desired to live in site condos. However, in the same survey, the ideal Anchorage home has three bedrooms, an oversized two-car garage, and two or more bathrooms. Site condos seem to have responded quickly to amenities and cost demands. Perhaps because the survey also shows future buyers gave lowest priority to home and neighborhood design and that Anchorage's home ownership rate was lower than average, site condo sales have picked up. Condominiums propagate outward and upward as developers create and regenerate permanent homes and offices near Anchorage.
A DENSER POPULATION
Palmer notes that building models are transformed by land prices that doubled since 2003, increasing demand for disappearing site condos. "Nobody can afford to buy land in Anchorage anymore and do site condos in the future with the new land prices." Palmer says, "You're talking about high-rise condos with elevators and that's exactly what is going on in town." The Municipality of Anchorage expects 100,000 or more dwelling units to be built in the next 20 years.
The Peterson Group is building three-story condos with shared underground parking. "On that land, where the zoning allows for a high structure, we are taking advantage of that opportunity and putting more units per acre," says Bob Peterson, president. Peterson expects to build more on less land, "You have to build higher-density condominium projects. That's what we need to do to stay in town."
Peterson expects he will have three Anchorage and three Eagle River condominium projects totaling 400 units under way next summer. "One of our developments, Discovery Park, is 245 units and we have only closed less than 30. So that will go on until the year 2007." Since Peterson founded The Peterson Group in 1983, the homebuilder has grown to $20 million to $25 million annual revenues and will build its own offices as it expands into light commercial construction.
"We're thinking redevelopment. We have to be," Peterson says. "We're actually involved in redevelopment projects with Cook Inlet Housing Authority right now out in Mountain View." These town-home rentals are constructed similarly to Peterson's condos but are owned by CIHA. "We're also involved in the Summerstone Townhome project on Pembroke. That used to be the Brookside Trailer Park. They had run their course, they were old. The owner needed to sell the project, which was impossible because the underground utilities were so dilapidated. It was time to move the trailers. We're putting 162 townhomes on that property. We're about half-way done."
The Peterson Group remains responsive to the Anchorage market, scouting up opportunities in the mortgage, title and redevelopment business. "Since we've been doing it so long we've developed enough relationships in town that we'll be able to do an assortment of things to make it work for us. High-rise condominium development, revitalization projects, it's a smorgasbord of work." The Peterson Group hopes to redevelop a high rise downtown alter finishing Southside and Eastside condo projects.
"I expect that most of the builders will find themselves out in the Valley," Peterson says. "However, I think that considering our paradigm shift, change in focus from single-family homes to condominium projects, we'll be able to stay busy at our current level, $20 million to $30 million, until I retire. We're having too much fun to quit now."
Palmer also believes Anchorage homebuilders will be working in rarified air. "Volume builders, to keep their machines going, have to move to the Valley because there's plenty of land out there."
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