Buying and selling commercial real estate in Alaska: a range of options for investors.

• Author: Evans-Dinneen, Laurie
• Position: REAL ESTATE

This June, the forecast calls for a hot time in Anchorage, a chilling effect in Fairbanks, and calm seas in the Southeast. The commercial real estate forecast, that is. While the recession has made its mark on the Lower 48, Alaska had a bit of a dip about a year ago, but that glanced off the seemingly untouchable commercial market, particularly in Southcentral.

For investors of any level, commercial properties can give diversity to a portfolio, especially in volatile market times because commercial property values respond to different market conditions than those that affect stocks and bonds, and like these asset classes, there is a range of options to consider--retail, warehouse, land, office buildings, or multi-family housing.

Anchorage

The Anchorage commercial market reflects the general economy of Anchorage, which has seen good, steady growth for the last twenty years, according to Jeff Thon, CPM, Senior Commercial Associate Broker, Jack White Commercial. There is good disposable income and steady economic growth in town. Investors in-state and out are looking at Anchorage.

BurgerFi and Krispy Kreme are coming to town. Anchorage Outlets is going up across from the new Cabela's in South Anchorage. Southcentral

Foundation and Alaska Native Tribal Health Consortium are adding another building to the Alaska Native Medical Center campus in the U-Med District. Construction on the Blood Bank of Alaska building off DeBarr should start this summer. Warehouse space is at a premium. Available visible corners are nearly non-existent.

Anchorage is so hot investors are beating down the doors. Chad Graham, Broker, Graham Commercial Real Estate Consultants, Inc., says that part of what makes Anchorage look so good is its cap rates--capitalization rates, used to determine the investor's potential return on his or her investment (divide the income the property will generate, after fixed costs and variable costs, by the total value of the property). Graham says that local cap rates are 7 to 9 percent, while Outside rates hover around 6 percent.

Graham began his career in the Anchorage market and says a major medical supplier just paid $1.15/square foot "triple net"--meaning they pay for everything, utilities, etc., which makes it really about $2/square foot. The warehouse market, in particular, is in an interesting place.

"The number one product is warehouse," according to Graham. "There is a steady increase because there is only a 2.3 percent vacancy...