Next time you're driving around town, take a moment to notice all the commercial buildings. Commercial real estate is a huge piece of the local economy.
By commercial real estate, I mean all the office, warehouse, retail and multifamily buildings, from five-plexes on up. According to the Municipality of Anchorage, there are more than 10,000 commercial properties in Anchorage, with a total assessed value of about $9.5 billion. These buildings generate about $148 million in property tax revenue to the city. That's about one-third of our total tax base; of that tax revenue, about half goes to the School District.
Each of these buildings is owned by someone who purchased the property, or built it as an investment or for his own use. If he bought it, the buyer had to search the market for a property that met his needs, conduct a "due diligence" investigation, negotiate with the seller and arrange financing.
This also meant working with a broker and an attorney, obtaining an appraisal, securing a title policy and providing financial information, which may have required the help of an accountant. He hired someone, perhaps engineering companies, to investigate the physical condition of the property, which required the work of mechanical, electrical and structural engineers. The buyer had to obtain a survey and purchase an insurance policy.
If any problems were discovered through this process, the buyer had to work through them. For example, there could have been environmental contamination or a title problem.
If the property was for investment, the investor also had to review existing leases and have them transferred at closing, along with the security deposits.
An owner who constructed his own building had an even larger task. The building had to be designed, and the owner had to know the cost and manage the construction, find a site, secure financing and make sure the project made financial sense.
Purchasing the site and ensuring it was suitable for the building may have required architects and engineers, traffic studies, a zoning review and a survey and appraisal. Add to this hiring a contractor, obtaining the construction loan and long-term loan, and all the necessary government approval.
If the property was built as a commercial investment property, such as Class A office space, in addition to the above, the owner had to have tenants. That meant finding tenants and negotiating leases before the building could be constructed. The owner had to know the lease rate, be able to show prospective tenants plans for the building and identify the tenant's spaces.
Every commercial property is managed by somebody. The property manager takes care of the building operation, including maintenance and looking after tenants' needs, collects rents, pays bills and provides regular reports to the owner.
For a small building, the owner probably self-manages. But for most other buildings, someone manages the property. For a larger property, the manager most likely works for a property management company.
Each commercial property spins off even more jobs. Someone prepares and files a tax return. Someone negotiates lease renewals and works with brokers to find tenants. Then there is arranging for tenant improvements, work that involves architects, contractors, permits and suppliers.
It's startling to realize all that work required to construct and manage every commercial property you see. Consider this partial list: brokers, attorneys, architects, engineers, contractors, government regulators, surveyors, appraisers, bankers, title officers, suppliers, insurance agents, accountants, property managers, janitors, window washers, landscape and grounds workers, locksmiths, building tradesmen like roofers, painters, electricians, heating and ventilation specialists, steel erectors, excavators, and everyone who supplies or works for one of them.
That's a lot of jobs owed to commercial real estate and a big part of the engine that drives the local economy.
Chris Stephens, CCIM, is a local associate broker specializing in commercial and investment real estate. His column appears every month in the Daily News.