Alaska's urban real estate markets: housing market brisk, commercial market brings in new names.

• Author: Barbour, Tracy

Alaska's urban real estate market is cooling, but still strong overall, experts say. Residential real estate remains brisk, despite land shortages, as well as steadily rising interest rates, construction costs and housing prices. On the commercial side, national retailers, restaurants and other businesses are expanding in some areas, while local companies are renovating and erecting new buildings to meet consumer demands.

This article summarizes what experts forecast for Alaska's residential and commercial real estate market in 2006. Then it delves into what real estate professionals are experiencing around the state in Anchorage, the Matanuska-Susitna Valley, Juneau, Fairbanks and the Kenai Peninsula.

FORECAST FOR RESIDENTIAL AND COMMERCIAL INDUSTRY

Experts have projected an increase in spending for residential and commercial construction for this year. Residential spending--at $715 million--will be slightly higher than last year, according to "Alaska's Construction Spending 2006 Forecast" released by University of Alaska Anchorage's Institute of Social and Economic Research. However, activity will be down "modestly" due to the increase in construction costs in this sector, according to ISER. "Growth will continue to be driven by population increase, but demand will be tempered by higher prices and interest rates," ISER reports. "These tighter conditions will continue to shift demand away from single-family and toward multifamily and rehab."

The annual forecast also indicates we'll continue to see a shift in new residential construction away from Anchorage and toward the Matanuska-Susitna Borough. Activity in Fairbanks will slow down, after a small boom associated with the buildup to accommodate the new Stryker Brigade at Fort Wainwright and the development and upgrading of mines in the surrounding area. Activity in the rest of the state will be mixed, depending on local economic conditions. Juneau and Kenai Peninsula, in particular, will see strong residential spending.

ISER's predictions for commercial spending also are positive. Private commercial spending-which consists of everything from retail and office buildings to hotels and warehouse space--is expected to reach $300 million in 2006. "This year, we expect spending to be up about 20 percent statewide, with a large share of that concentration in Anchorage, where a new convention center and museum expansion are planned," the ISER report stated. "Several large office buildings are also in various stages of planning and other projects, including new hotels, and both cargo terminals and rental car facilities at the airport are likely.

"The Mat-Su Borough will see additional retail space as an important component of its commercial construction. And as with residential, commercial construction spending in Fairbanks should become more moderate this year to correlate with the slowdown that the community will experience. Activities in other smaller areas around the state will be mixed, depending on local economic conditions."

ANCHORAGE REAL ESTATE SECTION

Anchorage's real estate market is marked by rising prices, high demand and the lack of "buildable" land. "We've got very little land and everybody wants to buy," says Keith Facer, the top resale agent at Prudential Jack White/Vista Real Estate and a member of the national Chairmen's Club. "Because of our boom that we've had over the last year, the lack of land has gotten real critical."

The scarcity of buildable land is suppressing the construction of new homes. Through February this year, there were 57 applications for residential building permits for single-family homes, according to figures from the city's Building Safety Division Development Services Department. The same time last year, there were 64 such applications.

In fact, the Anchorage Home Builders Association expects 550 new single-family homes to be built in Anchorage in 2006, a drop of about 19 percent from last year when 675 new homes were built. "As Anchorage residents grapple with increasing prices to buy a home, builders are finding it harder and harder to secure land on which to build, and at the same time face rising building materials costs and increasing rates for labor, insurance and workers' compensation insurance," AHBA President Ray Hickel stated in a March 21 press release.

Homebuilders and Realtors expect the demand for homes in Anchorage to remain strong. However, the market is cooling. And higher sales prices will make it tougher for some buyers to find a home. The average sales price of a new single-family home in Anchorage is $394,144, according to the AHBA. The average sales price for homes (new and existing) was $315,751 as of the end of February. Average condo prices have risen from $155,000 in 2001...