Real estate (Commercial).

• Author: Filipenko, Mark
• Position: 2006 Alaska Forecast

The 2006 commercial real estate market is going to be very interesting to real estate. But let's focus on only four sectors: class A office, warehouse and retail leasing and commercial building sales.

The 2005 office market was very stable, with class A office lease rates ranging in cost from $2.25 to $2.75 per square foot.

Even though we have seen a great deal of new construction, vacancy rates are still approximately 2.5 percent to 3 percent, which is well below the national average. Adding to the lack of inventory, construction costs are going to continue to stay high, increasing the costs of tenant improvements and new construction. When you combine both of these factors, we are going to see a slight increase in lease rates in 2006.

The warehouse market in Anchorage is extremely tight. There is approximately 3 percent to 4 percent vacancy, which is going to continue to elevate lease rates. Unfortunately, these rates do not justify the investor to build new warehouses, keeping the supply very limited. In 2006, we are going to see rates continue to rise quickly. On the low end rates will be approximately 85 cents per square foot and on the high end from 95 cents to $1 per square foot.

The retail market is going to get a shot in the arm with the largest and most progressive development Alaska has seen in over a decade. If all the pieces come together, we will see a development with six small box stores, containing 240,000 square feet and an additional 35,000 square feet...