Commercial real estate vacancies: what's really happening behind the scenes in Anchorage.

• Author: Spoerhase, Brandon J.
• Position: Special section: Finance, Insurance & Real Estate

[ILLUSTRATION OMITTED]

Driving the streets of Anchorage it is somewhat understandable to see why murmurs of concern are heard about the commercial real estate market. For example, our city's latest revitalization project, Glenn Square, has remained only partly occupied since construction. Vacancies are not just limited to northeast Anchorage--the downtown area currently has 236,000 square feet of vacant office space. However, that does not take into account two of the larger transitions taking place. The 71,691 square feet that will come available to the market if the Alaska Department of Health and Human Services moves out of 826 L Street, and secondly, the 55,180-square-foot office building located at the northwest corner of I Street and West Ninth Avenue that is being refurbished to be fully leased out to a national corporation.

It is not difficult to spot apparent vacancies scattered in other areas of town. In midtown there are still 73,165 square feet of vacant space at the new office building at the southeast corner of Northern Lights and C Street--188 West Northern Lights.

The impact of the recession and the inflated vacancy rates in the Lower 48, combined with reports in larger cities of vacancies in the excess of 15 percent, this has led many Alaskans to ask brokers and other commercial real estate professionals what is happening in Anchorage. While a quick glance can distinguish a vacant building from one occupied, it can be a full-time job to recognize the trends and overall performance of commercial products in any given city. When analyzing the commercial real estate market, professionals focus primarily on three products: office, retail and industrial spaces.

Alaskans have heard about a number of large scale projects that would result in substantial growth for Anchorage and Southcentral Alaska for years. These construction rumors have created high hopes for many sourdoughs and have resulted in new construction developments being placed on hold in anticipation for future demand. In total, there are about 850,000 square feet of office space in the planning stages in all areas except East Anchorage.

Currently, overall office vacancy is at 5.48 percent, which we expect to rise due to new construction coming on line this year. Office space defined by the Building Owners & Manager Association (BOMA) is broken down into three classifications pertaining to the quality of buildings:

* Class A: These are the most prestigious buildings...