Commercial real estate's mixed bag.

• Author: Tyson, Ray
• Position: Industry Overview

Booms, busts and slow growth give the state's commercial real estate industry a roller-coaster ride.

Alaska's commercial real estate market, aside from the retail craze sweeping urban centers, is playing to mixed reviews. Office and warehouse leasing appear healthy, but new construction and sales in these market sectors continue to lag well behind the boom years.

"It's nothing to write home about, but there's nothing to worry about either," explains Gregg Gunnarson, vice president of Management Services for Jack White Co. "I think it's a good, stable year and that it will continue through 1993 with moderate growth."

The Alaska Department of Labor agrees, projecting about a 2 percent annual growth rate in the state's economy through 1994. While other sectors of the economy, such as transportation and mining, are expected to contract, retail construction and employment are surging across the state.

Shark Feed

"It's typical that once a retailer moves, their competitor moves with them -- it's sort of like a shark feed. It's not that the pie is that much bigger up here, it's just that the pie is going to be cut into smaller pieces," observes Dale Jackson, president of Anchorage-based TRF Brayton Co.

As national retailers Kmart, Wal-Mart, Fred Meyer, Costco and Pace Warehouse enter or expand their base in Alaska, small retailers that cater to low- and middle-income wage earners could be squeezed out of Anchorage and other urban areas, dumping huge amounts of commercial space on the market.

"I think we are getting about twice the amount of retail space we need for our population," says Jackson. "Those that can adapt to the change will probably survive. But you're going to see a lot of them fall out, especially the marginal ones."

While it's no doubt a banner year for retail and government construction in Anchorage, however, it probably will be years before Anchorage lease rates increase enough to justify the cost of new office buildings, particularly high-rise or so-called Class A structures. On the other hand, "We're finding that the space is relatively well absorbed," notes Jack White's Gunnarson.

A recent Jack White survey of 3.5 million square feet of Class A and high-quality Class B office space in Anchorage found an overall 8 percent to 10 percent vacancy rate among the 40 properties surveyed.

"I don't think I would characterize it as a tight market -- but it's probably in balance right now," says Gunnarson. "There's a reasonable demand on...