Commercial Real Estate Market Stays Steady in Southeast.

When it comes to describing the state of the commercial real estate market in Southeast Alaska, where most of the communities are accessible only by air or by sea, the word most tossed out by local experts is "stable." For the most part, communities in Alaska's Panhandle have experienced little change in this arena for the past five years. And at this time, resident real estate professionals forecast little change for the near future.

In Juneau, the region's hub, commercial property vacancy rates are about the lowest they have been since the late 1980s, according to John Williams, an associate broker with Re/Max of Juneau. "Commercial property vacancy rates are better than they have been," he said, "but it's been a slow progression."

Overall, there is about 1.7 million square feet of commercial space to be had in Alaska's capital city, and around 1.35 million of that can be found downtown. As of February, the citywide vacancy rate for commercial property was 4 percent One-third of that was located in the Mendenhall Valley, a highly residential populated area of Juneau that's about 10 miles from the downtown district.

In a place like Juneau, if you were to rely on a strict Class A, B or C commercial space distinction, you would find very few Class A sites that look like some of the sleek glass and steel high-rises located in Anchorage. In general, most Class A space in Alaska's capital. city is occupied by state and federal government, along with other organizations that might need to meet access re governments for the disabled. Downtown, premium Class A space is very tight, whereas it is slightly more available in the Mendenhall Valley.

Class A space in downtown Juneau can run a bit more than $2 per square foot, whereas premium office space in the Mendenhall Valley can be leased for around $1.65 per square foot However, space in Vintage Business Park, located in the Mendenhall Valley, is apt to cost somewhat more.

According to Williams, there is not enough activity to spur further development at this time. "With a one percent growth rate, Juneau's economy is pretty flat," he said. "Overall, the commercial real estate market remains stable."

Over the past five years, the commercial property market has remained stable in Haines as well, according to Broker Christine Turner of Haines Land. Situated at the northern end of Lynn Canal near the mouth of the Chilkat River, Haines is one of the few Panhandle ports where open road connects with the Marine Highway, marking the small city a significant transportation hub for travelers. The commercial real estate vacancy rate is minimal, so much so, in fact, that Turner said the only commercial property that is empty at the moment is one place that happens to be up for sale.

The tourism market is a growing segment of commercial property needs in Haines, albeit the business is seasonal Presently, Haines has just one cruise ship that docks during summer something the town has not had in the past. There is talk of the possibility of more cruise liners making daytime stops in the future. However, some residents protest what croachment, and according to Turner, this can create unease regarding investment in the community.

With the exception of Alaska's southernmost city, Ketchikan-which suffered repercussions from the closure of its pulp mill a few years ago-the rest of Southeast commercial property ha remained pretty stable over the last five years; according to Real Estate Appraiser James Corak, a partner of Horan Corak and Co. in Sitka. Presently the retail/commercial property vacancy rate in Ketchikan ranges between 7 percent and 15 percent, depending on location, quality, condition and type of occupancy. As a rule, the vacancy rate is lower in the town's professional field and higher in the retail realm.

However, the anticipated arrival of a Wal-Mart store might close some of the gap.

Second-floor space in Ketchikan might run between 90 cents to $1.25 per square foot, depending on what the lease includes, such as janitorial services, utilities and so on.

Commercial property cost in that city really depends on location." Corak said. "It's a tad higher by the cruise ship docks."

The commercial real estate market in Sitka, which is settled on Baranof Island and situated on the outer coast of Alaska's Inside Passage, has been fairly stable for the past five year, according to Corak. Office and retail vacancy rates in the one-time European culture center of the Pacific are less than 5 percent, while industrial vacancies sweep between 0 percent and 5 percent. Commercial space costs on the seaside city's Lincoln Street range between $1.25 and $1.75 per square foot.

According to Corak, the market can be fickle in the small city of Skagway, located 110 miles south from the Alaska Highway via the South Klondike Highway. Commercial property located on Broadway, a street that stretches from the city's ferry terminal to the opposite end of town, has vacancy rates as low as 2 percent, whereas commercial spots off Broadway are apt to hover around 5 percent. The historic town bustles in summer with cruise ship visitors and independent travelers, but the tourism season only last about 120 days. Off-season, sites tend to become boarded up. "It's then hard to tell what is actually occupied, but not being used," Corak said.

The coastal city of Petersburg, home-port to one of the most productive commercial fishing fleets in the state, lacks a shopping mall and franchise eateries, but has a variety of restaurants, retail establishments, specialty shops and a medical center. The commercial property vacancy rate in the city, whose Internet site boasts, "We may be small, but we probably have it," is less then 3 percent or 4 percent, according to Corak.

The commercial real estate vacancy rate in Wrangell is higher than Petersburg, swinging between 5 percent and 10 percent, Corak said. Businesses in the Gateway to the Stikine tend to stay open year-round, servicing the needs of residents. Currently the city is seeking to diversify its economy, citing opportunities for individual entrepreneurs and companies.

Like Wrangell, vacancy rates for commercial property located in most communities situated on Prince of Wales, such as Coffman Cove, Thorne Bay and Klawock, vary between 5 percent and 10 percent. However, Craig, the largest city on Prince of Wales, has a commercial property vacancy rate of around 5 percent.

Smaller Southeast communities, such as Angoon, Tenakee Springs, Elfin Cove, Gustavus, Hoonah, Kake and Yakutat are harder to gauge, according to Corak. In village such as these, commercial real estate vacancies can swing anywhere between 0 percent and 50 percent.

With stable rents and vacancies a tad bit higher, Corak, Turner and Williams do not expect to see a lot of new construction in the near future. "It's all about supply and demand," Corak said.