Commercial construction fell 51 percent in 2010, city says

The Municipality of Anchorage says new construction of commercial real estate in the city is down from last year, while the industry says the drop may be due to the amount of empty office space available.

The city says new construction on both residential and commercial property has gone down, but commercial construction is down 51 percent.

Some say real estate is a business that moves in cycles: while one building may be fully occupied, others might stand empty.

After 30 years in the commercial real estate business, Jack White Commercial broker Jeff Thon has seen the ups and downs. He says the current vacancy rate for new commercial buildings in Anchorage is just under 7 percent -- good compared to the national rate, but up from about 2 percent vacancy before a boost in construction.

“We have always absorbed, in the last 15 years, over 150,000 square feet of commercial real estate in Anchorage,” Thon said. “In 2009 we had the first year we had negative absorption, and that was because of three new buildings coming online.”

The problem Thon sees in his line of work is a tie to the oil industry, from oil service companies to environmental groups that lease space. When the pipeline is slow, Thon says there are more holes to fill -- and when businesses move to new buildings with more amenities, there's also leftover space.

“It's probably a third of the market easily,” Thon said. “Demand right now, we're probably two years of product on the line, and until that's filled up no one is probably going to build a building that they're not going to occupy, or that they don't have a tenant for.”

The city says there's a decrease in new construction for commercial property, which may be affected by the national recession.

“The value has decreased a little bit on certain types of commercial property,” said municipal assessor Marty McGee.

While McGee says the value for certain types of commercial property decreased, the city says total property value for single-family homes has slightly increased this year.

Contact Christine Kim at ckim@ktuu.com