Anchorage commercial real estate market going strong
Commercial real estate in Anchorage remains in high demand, according to Reliant Advisory Services founder Per Bjorn-Roli.
He addressed the Anchorage Building Owners and Managers Association, or BOMA, Aug. 8.
“The new construction market continues to be very attractive,” Bjorn-Roli said.
New commercial Class A vacancy declined from 7.4 percent to 4.8 percent over the year beginning in June 2013, he said. Over the same time, existing Class A vacancy grew slightly, from 4.4 percent to 4.6 percent in Anchorage.
Overall citywide, Class A vacancy fell 1.7 percent over the past year, from 5.3 percent to 4.6 percent, Bjorn-Roli told BOMA members.
In Downtown Anchorage, the market relaxed slightly but remains extremely tight, he reported. Class A vacancy there went from 2.7 percent to 3.6 percent over the past year. In Midtown, blended available Class A space diminished a little, from 6.3 percent vacancy down to an even 6 percent.
On the east side of Anchorage vacancy fell from 9.7 percent all the way to an extremely tight 1.7 percent. The 2013 vacancy spike was related to the Alaska Native Tribal Health Consortium office relocation, he said.
The Class B market bucked the larger trend in declining vacancies, going from 6.6 percent to 7.2 percent, Bjorn-Roli said. This was due mostly to the popularity of the new Class A space available in Anchorage, he said.
Recent deliveries to the Anchorage market are filling up, according to Bjorn-Roli. The 14-story JL Tower, developed by Anchorage-based JL Properties Inc., between Tudor Road and 36th Avenue in the city’s Midtown is at 94 percent occupancy, he said.
JL Properties’ nearby 200,000 square-foot Centerpoint West building, completed in 2010, is now fully occupied, Bjorn-Roli said, and the 120,000 square-foot 188 West Northern Lights building is 70 percent occupied.
Also in Midtown, the Three Cedars building near Northern Lights Boulevard and the Seward Highway is available for lease.
JL Properties’ 100,000 square-foot office building under construction at International Airport Road and C Street will be open in October, according to the developer. That building will help continue a two-year cycle for commercial deliveries, Bjorn-Roli said.
The city has seen an average of just more than 150,000 square feet of office space delivered annually over the past 10 years, he said. In 2011, less than 50,000 square feet of new space became available; a year later deliveries jumped to more than 250,000 square feet; and in 2013 there were no significant deliveries, according to Reliant Advisory’s figures. Actual deliveries this year are expected to be about 250,000 square feet again, Bjorn-Roli said.
An increase in the average asking price for office space of 15 cents per square foot over the past year has led to a “mixed story” for rental rates, he said.
The increase in advertised rates is according to the Multiple Listing Service, or MLS.
“When you look at the actual closed transactions, what you see is basically stable,” Bjorn-Roli said.
Newly constructed Class A space is averaging $3.14 per square foot, he said, with the highest rates at $3.65 and the lowest at $2.90 per square foot.
Existing Class A is renting for between $2.30 and $3.10 per square foot, with an average price of $2.64.
Class B office space in Anchorage is averaging just less than $2 per square foot, ranging from a low of $1.55 to a high of $2.25 per square foot, he said.
Elwood Brehmer can be reached at email@example.com.