Low vacancy squeezes commercial real estate market: new construction 'significant player' in Alaska's economy, helps stabilize rent.

• Author: Sergeant, Deborah Jeanne
• Position: REAL ESTATE

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Numerous factors influence the commercial office space market differently in Anchorage when compared with the Lower 48. According to "Market Watch," a recent survey prepared for the Building Owners and Managers Association (BOMA) International (www.boma.org), vacancy rates in the city are at 2.1 percent (down from 5 percent a year ago), compared with the current 10 percent to 14 percent nationally. The survey, conducted by Reliant LLC, a real estate valuation and consulting firm in Anchorage, also breaks down vacancy rates by areas within Anchorage.

Availability of Class A office space has tightened considerably in recent months, in part as a response to the economy. Although higher gas prices cause as much pain at the pump in Alaska as in other states, "I think that the overall impact is that it has a favorable impact on Alaska real estate because of the high oil prices," said Per Bjorn-Roli, managing director and founder of Reliant. "Our market behaves differently from the national market. Times of high commodity prices are good for our market in general."

Bjorn-Roli holds the Appraisal Institute's MM Designation and is a state-certified General Appraiser. Since founding Reliant in 2003, he has appraised more than 2 million square feet of Class A and B office space.

REASONABLE RATES

Reliant estimates that the average Class A office space rents for $2.40 per square foot. Bjorn-Roli compares the Class A market to a game of musical chairs. "If you have five people in five chairs and two get up to trade places, it's frictional vacancy," he said.

To fill the need for space, some companies break out the hard hats.

"As the former properties (of companies that are building) go on the market, there will be a little shuffle," said John Opinsky, associate broker with Framptom & Opinksy LLC in Anchorage. "The market is very tight right now."

Bjorn-Roli calls new construction "a significant player in our economy," and said that it has helped stabilize Class A rent. However, the building boom in this class has helped nudge the bar a little higher as to what tenants expect from a Class A building.

CONSTRUCTION COSTS HIGH

Since construction costs in Anchorage are inordinately higher than in West Coast cities in the Lower 48, new construction doesn't automatically decrease rental rates, as it tends to do in other cities.

For some businesses, the cost of moving, which Opinsky estimates is about $5 to $9 per square foot (including the...