Experts see tight commercial market

PHOTO/Rob Stapleton/AJOC
The Anchorage commercial real estate market should continue a trend this year of low vacancy in office and warehouse space, according to a panel of industry officials.

Also, several new commercial construction projects expected to begin this year or be completed in 2001 could affect the market.

Some of these projects and future development in Anchorage should be compatible with the city’s comprehensive plan, outlining strategies for area growth.

Industry leaders also cited a possible new Lowe’s store in South Anchorage.

Speakers addressed these topics Jan. 12 at the Building Owners and Managers Association of Anchorage commercial real estate forecast in the Hilton Anchorage Hotel.

In the office space sector, the market should see continued growth with fewer vacancies and higher rental rates, said Chad Frampton, partner at Schwamm & Frampton LLC.

"The office market is very tight and is getting tighter," he said.

Anchorage has 13 million square feet of office space, but 4 million square feet of that is government offices and not active in the market, he said. Of the remaining office space, 4 million square feet is class A or the highest quality office space, while the remaining 5 million square feet are class B and C office space, he noted.

Currently, Anchorage tallies a tight market for class A space at 2 percent vacancy rate, Frampton said. Class B and C office space registers a 4 percent vacancy rate, he added.

Smaller offices -- from 1,000 to 3,000 square feet -- are the most available size in Anchorage now, while 3,000- to 7,000- square-foot spaces are picked over, he said. Selection of 7,000 to 15,000 square foot offices are limited, and tenants looking for larger space might consider a design-build project since availability and demand are low, he said.

Class A rental rates are up 15 to 20 cents per square foot from last year, he said.

He cited new projects including physician’s offices at Alaska Regional Hospital, Providence Alaska Medical Center, the new Lake Otis Medical Plaza -- which will house HealthSouth among others -- and the Southcentral Foundation Primary Care Center expansion.

Other new projects to be leased include a 600,000-square-foot Midtown office building to be completed in spring that could affect the market, Frampton said.

Work has started on a two-story, 27,000-square-foot federal Drug Enforcement Agency office behind Tony Roma’s restaurant, he said. A new Division of Motor Vehicles building in Midtown, slated to be one-story and 20,000 square feet, could start this year and be completed by fall, Frampton said.

Arctic Slope Regional Corp. aims to consolidate its offices in a new 10-story, 200,000-square- foot building in Midown that could be finished by fall 2002, he said. Frampton believes ASRC’s former office space could be absorbed by the market by natural growth.

A proposed 23-story building, called the Fifth Avenue Tower, could begin work in spring. It would combine retail and office space with 60 residential condo units and 160 parking spaces, he said. The building may be built at Fifth Avenue and F Street.

Anchorage has other new commercial projects to anticipate, including possible office and hotel facilities at Ship Creek, a new Brother Francis shelter and expansion of the Anchorage Museum of History and Art, said Larry Cash, president and chief executive of RIM Architects.

Another possible project is a 100-room hotel near Dimond Center, he said.

Renovation of the University of Alaska Anchorage Consortium Library should begin in 2002 and add 100,000 square feet, he said.

Jeff Thon from Pacific Tower Properties Inc. presented notes on the retail sector from Hickel Investment’s Bill Gee. Retail space has the highest vacancy rate at 5 percent and availability ranges 1,000 to 60,000 square foot units, Thon said. Most space is available in East or Midtown Anchorage, he said.

The warehouse market records a vacancy rate of 2 percent, which may continue in 2001, and rental rates should stay low even though the market’s tight, Thon said. Possible new construction could be located near Ted Stevens Anchorage International Airport, he said.

The city comprehensive plan provides a new direction for future development, said Sue Fison, municipal planning director. The plan outlines more urbanization, quality of life issues, design standards and natural open space.

Anchorage has a shortage of vacant land and most of it is zoned for residential use, she said. However, changing a zoning from residential to commercial could prove increasingly difficult, she said.

Planning for the expected population growth by 2020, Fison noted that more multifamily units will be needed, unlike current housing development, which is largely single family units.

Next month the city will launch an online database to track zoning and platting cases so residents can track projects more easily, she said.

Updated: 
01/20/2001 - 8:00pm

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