Commercial real estate in Anchorage last year was hard to come by as a strong economy and low interest rates prompted buyers and leasers to pounce on just about anything that opened up, industry experts told members of the Building Owners and Managers Jan. 14.
Space in 2005 is expected to get even tighter as lease prices are dropping slightly and new construction is slowing.
State economist Neal Fried predicts Anchorage will see an additional 1,200 jobs next year as the city continues nearly two decades of economic growth.
"Anchorage has just finished 16 years of uninterrupted growth, and over the long run, that has created tens of thousands of new jobs. Those new workers need a place to stay and work."
In the last four years, the health care industry alone has added about 5,100 jobs and dozens of new offices throughout the city, he said. That growth has helped bring 2,000 new construction jobs.
"Every time I drive by the new Alaska Native health center, it seems like there's a new building," Fried said.
Several new buildings that will offer commercial office space are under construction and should be completed this summer. Three of the larger projects include the Alaska USA Federal Credit Union, Residential Mortgage and the Bristol Bay Native Corp. headquarters.
Once these projects are complete, about 100,000 square feet of office space will become available throughout town, said Chris Stephens, of commercial real estate broker Bonds, Stephens and Johnson.
Stephens expects a vacancy rate of about 10 to 11 percent after those buildings open, an increase of a percent or so, he said.
In 2004, to major office buildings were completed - Centerpoint and Re/Max Properties - that also left about 100,000 square feet of space open.
Citywide, Stephens said about 114 properties totaling about 573,000 square feet are available. Most are smaller spaces ranging in price of $1.25 to $2 a square foot. The price per square foot for office space dropped slightly last year, but should level out in 2005.
Stephens said he doesn't expect much new construction in the coming year, despite continued faith in the economy and continuing low interest rates.
"The high cost of building supplies might slow new construction," he said. "But I tell you, it's hard for lenders to turn down a loan for a new building project that will offer office space."
The high cost of building supplies may also dampen the chances for industrial warehouse construction in the coming year. Prices for metal and concrete last year more than doubled in many cases. That, in addition to the high cost of buying land, may prove to be too much for some developers, said Mark Filipenko, of Bond, Stephens and Johnson.
New warehouse construction would run about $70 to $90 a square foot, not including the purchase of the land, he said. Land is also getting scarce and expensive.
Anchorage currently has a total of about 14 million square feet of warehouse space, about 6 percent of which is currently available, he said. Nationally, about 10 percent of such space is open.
"There are not a lot of opportunities available for people to move into," he said. "It's leaving the market flat this year."
Warehouse rental cost runs about 75 cents to 85 cents a square foot, Filipenko said. That's compared to about 40 cents a square foot in Seattle.
About 54 new leases were made last year. Warehouse space for rent spent an average of 170 days on the market.
"People were renewing their leases because there weren't any options for them," he said.
About 15 warehouse sales went through last year, averaging about 152 days on the market, he said. Average price ran about $80 a square foot. The year before, similar space sold for about $60 a square, he added.
Mark Rowley, with Pacific Tower Properties, said the retail market is also fairly tight, with few large spaces available.
The city's major shopping malls and strip malls all report nearly nonexistent vacancy rates.
Mayor Mark Begich discussed the possibilities of further growth in Anchorage with his plans for a new convention center and the museum expansion.
Brian Meissner, of architect and engineer firm ECI/Hyer Inc., discussed various new construction projects planned, including efforts with the Alaska Railroad Corp., the Port of Anchorage and several military projects.
