Whether you are an experienced commercial real estate investor or are new to the market, one of the first decisions you will make is which property type suits you best. You will consider location, costs, return on investment, and of course, the outlook of that particular property type. In this case, it’s office space that is proving to be one of the best options for commercial real estate investors.
Alaska recently saw an increase in Class A vacancy given the numerous new construction office spaces becoming available, only adding to the existing mix of Class A vacancies. At the same time, the market began to soften. On the Class B front, vacancy rose from 8 to 11 percent, however this is attributed to two large tenants moving up from Class B to Class A and given the overall square footage versus percentages, the difference is not entirely significant.
So given the Alaska office market‘s vacancy rate, why is office space still a smart move for investors? For one, investors can rest assured that this is not a repeat of the ’80s in Alaska. In fact, Alaska is still well below the national average when it comes to Class A and Class B vacancies and as of mid 2016, Alaska’s Class B tenants are 100% full.
It also comes down to tenants who, in many cases, have decided to stay put given the financial aspect of moving their businesses. A growing number of tenants have decided it is more practical to renew their current leases than to move and have to negotiate a new lease and tenant improvements (TI’s).
What’s more, many landlords in Alaska’s commercial real estate market may be able to maintain current tenants by looking into their vacancy rates and negotiating lower leases when the time comes to renew. Instead of having to pay commissions or risk sitting vacant on the market when a tenant leaves, landlords may consider working with current tenants and even allowing more TI’s to keep them in place.
It is always wise to consider the outlook of a given property type before investing and this year, office space is still a smart move, depending on the investor’s goals. If you are looking to invest in an office building in Anchorage or the surrounding area, you can count on Northern Edge Real Estate to provide the commercial market expertise you need to find the best possible property.