The commercial real estate market this year has been more active than 2007, but it's still spotty. Some major issues that slowed the market in 2007 are behind us but there are remaining questions and new concerns to be dealt with.

In 2008, the state Legislature approved the natural gas pipeline contract with TransCanada Corp., which at least sets a course that I hope will lead to gas line construction. The oil producers are also studying pipeline construction. Political corruption is hopefully behind us. And I sense a general optimism about Alaska's future.

But the national financial and economic crisis, combined with sharply lower oil prices, is casting uncertainty over our future, which is causing a reluctance to move ahead with projects.

During the last year, we have seen construction completed on two major new class A office buildings: JL Tower with about 300,000 square feet and 188 West Northern Lights building with 120,000 square feet of office space. A new class A office building with 200,000 square feet, Center Point West, is under construction just north of JL Tower, with completion in early 2010. A 36,000-square-foot office/retail building, Town Square Center, is proposed for downtown at Sixth Avenue and E Street, with completion scheduled for spring 2010. (In the interest of full disclosure, I am the leasing broker for that project.) Another discussed downtown development, Augustine Tower with 340,000 square feet, is still under study.

To those not that familiar with commercial real estate, these new buildings suggest that we have lots of available office space. But we don't. We are drastically short of office space.

JL Tower was fully leased before it was finished. The 188 West Northern Lights building has leased 72,000 square feet, six of 10 floors, and is negotiating other leases. The Center Point West building is 40 percent leased with additional leases being negotiated. With the exception of 188 West Northern Lights, very little class A space is available today, particularly in amounts over 4,000 square feet.

Leases in these new buildings are from $3 and up per square foot. Older class A buildings are in the $2.65 range. Class B space is also extremely tight, with lease rates ranging from about $1.50 to $2.25.

Warehouse, retail, land

Warehouse space is in short supply with a 3 percent vacancy rate. New construction of warehouse lease space is not possible, because the cost of construction is way over market lease rate. Warehouse rates for good quality space are $1 to $1.10 per square foot, with the tenant paying for utilities and minor maintenance. This is up from about 85 cents per square foot two years ago.

The retail market has had tremendous growth over the past 15 years, most recently by the development of the Glenn Square Center and the Tikahtnu Commons with Target in North Anchorage. Target is also building stores in South Anchorage and Wasilla.

But for now this expansion is going to be it for major retail development. The economic recession in the Lower 48 is hitting retail hard, causing drastic cut backs in expansion. Most of the national retailers in the state have expanded throughout Anchorage and onto Wasilla, Fairbanks, Kenai and Juneau. So they are done. However, we might see some niche development with national specialty stores coming into the market.

The retail market in strip malls is also very tight with few spaces available. Rates range from $1.35 to over $3 per square foot.

Commercial land had seen a steady, steep increase in price, but that has now leveled off. In general, land zoned for industrial use is about $12 per square foot, land zoned for business in Midtown is $15 to $30 per square foot, and land downtown is about $30 to $125. Prices for specific properties vary tremendously depending on their attributes.

Investors are more than plentiful. In spite of the uncertainty, buyers are out there looking for good investment properties. Local financing is generally available. But few properties are available. Sellers have had high price expectations and no alternative investments for sale proceeds.

Here is wishing you a prosperous and happy New Year.

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

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