The Anchorage commercial real estate market is slow and level, but compared with the rest of the country, it is an oasis of prosperity.

Commercial real estate in the rest of the country has tremendous problems. The amount of vacant space can be better understood in square miles rather than square feet. Commercial debt in the trillions of dollars is in trouble and a turnaround in the market is years off.

These vacancy numbers for the rest of the nation are mind-boggling: They come from a variety of sources, but primarily from CoStar Group, a commercial real estate information company.

The national commercial property vacancy totals about 3.3 billion square feet, or about 118 square miles -- somewhat larger than the area of the Anchorage Bowl.

The national office vacancy rate for all types of office space is 12.7 percent, or about 1 billion square feet, about 38 square miles. This is 90 times more office space than Anchorage's total.

The national office vacancy rate is projected to rise to 20 percent by mid-2010 due both to space being vacated and new construction. In contrast, the Anchorage office vacancy rate is about 7 percent.

The national retail vacancy rate is 7.5 percent, an increase of 1 percentage point from last year. That might look low, but equals 661 million square feet, or 24 square miles. Included in that national retail vacancy is vacant big-box stores of 130 million square feet, or 5 square miles. Anchorage retail vacancy is about 4 percent.

For industrial vacancy, the national total is 9.6 percent. This is about 1.6 billion square feet, or 58 square miles. Anchorages industrial vacancy is only 3 percent.

The value of all commercial property nationally is down 30 percent from last year, with the bottom projected to be 40 percent below the market peak. Anchorage commercial real estate values have not declined.

The numbers are somewhat worse than I show here because they do not include sublet space.

DAY OF RECKONING

Commercial real estate nationally has massive debt problems. Commercial mortgage backed securities are a bomb about to go off. A total of $2.3 trillion in these loans are due by the end of 2012. These loans had relatively high debt-to-value and short call dates (a call date is the date on which the bond issuer can redeem the bond, even though the official redeem date is off in the future).

Now these loan call dates are coming due at a time when the properties are worth substantially less and replacement financing is scarce. Financing has a much lower loan-to-value ratio. This means a huge gap exists between the current loan balance and amount of replacement financing.

For example, a building worth $50 million five years ago when the loan was made might now be worth about $35 million. The existing loan might have a balance of $42 million, and the maximum new amount that can be borrowed on the building would be about $21 million, half the current loan balance. This leaves a $21 million gap -- a big problem for the building owner whose existing loan is called.

AWAITING A REBOUND

Another problem is that when the loans were made, they were grouped into securities, which were sold in pieces with different risks. These securities cannot be taken apart to work out problems with the individual loans that make up the security. The securities are like partnerships and changing one part affects the whole security. Plus, any change has tax consequences.

Lenders are coping with these loans by extending the call dates, hoping that the market and available lending will improve. The IRS has softened some rules on restructuring the securities, and the Federal Reserve Bank has made $100 billion available for refinancing these loans. At best, these are stop-gap measures.

The number of commercial transactions nationally is down about 70 percent from a year ago. Buyers believe the market has not hit bottom, and financing is generally not available. The commercial market will not begin to turn around until employment rebounds because employment is a major driver of the commercial real estate market.

During the last recession in 2001, employment rebounded about 18 months after the economy turned around. If that same pattern holds this time, employment may not improve until the end of 2010 or into 2011.

Being in Anchorage is like being in a boat offshore, watching disaster unfold on shore. We are extremely fortunate to not be caught up in the commercial real estate disaster in the rest of the nation.

Chris Stephens, CCIM, is a local associate broker specializing in commercial and investment real estate. His opinion column appears every month.

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