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Anchorage commercial real estate vacancies expected to go up in 2017

  • Author: Annie Zak
  • Updated: December 2, 2017
  • Published January 14, 2017

Amid a statewide economic downturn, Anchorage's commercial real estate industry is expecting to see more vacancies in 2017.

That was one of the main takeaways from a commercial real estate forecast luncheon Friday hosted by the Building Owners and Managers Association of Anchorage.

For Class A office space, which essentially means the best buildings in the Anchorage market, the vacancy rate is expected to rise from 9.3 percent now to 11 percent or 12 percent a year from now, according to forecast numbers from Anchorage real estate appraisal and consulting firm Reliant.

The vacancy rate for both Class A and Class B (more average) office space combined in the city increased from 7.5 percent about a year ago to 9.1 percent now.

"If you're thinking the sky is falling in the office market, the answer is not yet," Reliant partner Ted Jensen said at the luncheon. "I don't think it will."

The national rate of office space vacancy was about 13 percent in the third quarter of last year, according to Los Angeles-based real estate company CBRE.

"By national and historical standards, (Anchorage) is still pretty healthy," Jensen said.

Jack White Commercial Real Estate agent Andrew Ingram expects the vacancy rate for Anchorage retail space to go up about 2 percent this year — he called that an "educated guess." It was 6.7 percent in the last quarter of 2016, marking an increase of 2 percent from the year before, he said.

"It's really going to be a slow year for new retail developments," he said at the event.

Retail jobs are also expected to drop this year. After years of growth, the sector is forecast to lose about a thousand jobs statewide, the Alaska Department of Labor and Workforce Development said earlier this month. The department predicted Anchorage will lose 600 retail jobs this year.

But there might be some bright spots. Ingram expects retailer Marshalls to make a "grand entrance" in Anchorage this year, perhaps at the former Sports Authority building in Tikahtnu Commons, and said he thinks T.J. Maxx and HomeGoods stores will also likely follow in the next year or two.

Ingram also noted "an ongoing negotiation for a 7,000-square-foot steakhouse at the Dimond Center," though he wouldn't say the name.

That commercial real estate is readying for a rise in vacancy rates is just the latest indicator of a slowed economy in Anchorage and the rest of the state. Alaska's population just saw its fourth year of more people moving away than moving here and the state is expected to lose about 7,500 jobs in 2017. That's more than preliminary numbers from the state labor department show were lost last year.

Jensen said he doesn't expect Anchorage to get to the same place it was in 1986, when a deep recession gripped the state and huge portions of office space sat empty.

"I don't know where the bottom of it is but it's hard to imagine you'd get back to that brief period of time in the 1980s," he said later over the phone. "The best model we have is that '86 crash but it was so different than it is now. All the damage happened really suddenly. Which is not happening now."

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