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Office space vacancies continue to decline while some types of warehouse and industrial space is also growing scarce, real estate representatives say.
The Anchorage office vacancy rate hit 2.4 percent for February, down from 3.2 percent in February 2000, according to a survey by Anchorage real estate appraisers and consultants Kincaid & Riely LLC. The survey included 211 buildings representing more than 7 million square feet of office space.
Most of the change in Anchorage office vacancy rates came in the Midtown area, the survey said. One reason can be traced to vacancies created when state offices moved out of the Frontier Building then being filled between 2000 and 2001, said Kincaid & Riely managing member Heather Fair.
"Midtown is becoming more attractive" to office tenants, she said.
Another example, Fair noted, is a new office building at 2610 Gambell St. The $7 million four-story building features 40,000 square feet plus one floor of covered parking.
Work on the building, which began last fall, is now being completed, said Chris Stephens, listing agent for the property at Bond, Stephens and Johnson Inc.
"This is the first new spec office building built since 1985 or 1986 when Resolution Plaza was built," he said.
Stephens and leasing agent Lottie Michael are in negotiations with possible tenants, he said.
Further, the survey found that the price difference per square foot for the two property classes is the largest in eight years.
Kincaid & Riely expects continued strength in the office market with rental rates climbing further in 2001. Build-to-suit projects, like ASRC's proposed new headquarters, should leave vacancies elsewhere in the market, the report shows.
However, those vacancies might not meet growing demand, according to Chad Frampton, partner at Schwamm & Frampton LLC.
"There are a couple speculative office buildings being considered and they will allow for some space, but they won't make a significant difference in the market," he said.
In January Frampton prepared a report on the Anchorage office market, but even since then statistics have changed, he said. Early 2001 showed a 2 percent vacancy rate in the city's 4 million square feet of Class A office space. Class B and C office space, totaling 5 million square feet, had a vacancy rate of 4 percent.
"Even since January the market has continued to accelerate," Frampton said. "The office market continues to tighten" due in part to businesses expanding, he said.
"Across the board economic indicators are up. Over the next couple months we expect the market will continue to tighten as businesses expand," Frampton said. "The only relief for creating more vacant space is through new construction or a downturn in the economy."
Frampton records a 3 percent to 4 percent vacancy rate in warehouse space. It is difficult to find large, contiguous warehouse space in excess of 20,000 square feet, he said.
Frampton expects to see an increase in new construction in industrial and warehouse space to accommodate demand for expanding and new businesses.
Tim Spernak, a broker at Bond, Stephens and Johnson, also believes demand will call for new industrial and warehouse construction. In the industrial sector he anticipates development at the Anchorage port area. For warehouse space, developments in the 20,000-square-foot to 50,000-square-foot range will probably come in 2002 through 2004, he said.
However, those future projects face a challenge.
"The Anchorage bowl is absolutely running out of land, and we will see land valuation rise incrementally," he said.
In retail space Spernak believes Anchorage will see other national retailers expanding here, which will have an impact on smaller, local retailers. Also, national retailers will begin to offer further services, such as gas stations.
The city's newly approved comprehensive plan will play a part in future development, either in rezoning or commercial development, Spernak said.
"I think we will start to see a greater emphasis on design standards," he said.
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