JUNEAU’S LEASE MARKET FOR OFFICE SPACE CONTINUES STRONG BUT TRENDS SUGGEST SOFTENING OF SOME TERMS. Leasing of office spaces in Juneau continues at stable base rates, but some softening in other terms reflect concerns about the future. Overall, in the valley and downtown, the baseline for well maintained office space in superior locations with access to parking continues to be in the range of $2 to $2.30 psf. These are considered gross leases, where it is customary in the market for the owner/ landlord to pay heat, lights, water and sewer. Juneau’s lease market consistently has smaller tenants (below 3,000 sf) paying or arranging for their own janitorial services. Trends in the market see annual accelerators moving down from longtime rates of 3% per year, which was dominated by state leases using CPI accelerators for decades. Since the lease market is far weaker in Anchorage and Fairbanks, we see less and less use of the CPI in local lease agreements. While the market is trending toward favoring tenants, low inventory creates competition for the available choices of prime locations in Juneau.
RESIDENTIAL SALES CONTINUE STRONG IN SPITE OF UNCERTAINTY WITH THE STATE BUDGET. In both Juneau and Anchorage, sales are strong for properties marketed up to $425,000 while single family properties in both markets are sluggish in higher price ranges. With continued low inventories in Juneau, however, competition for even the higher end homes is evident. While appraisers do not suggest a softening of the market yet, we anticipate that some of the impacts of the uncertainty in the State budget will show to a greater degree during 2018. As long as interest rates remain comparatively low and inventory is limited, the Juneau market will continue to surprise many who predicted that we’d see weakness this year—which has not yet materialized.
NEW BOAT CONDO PROJECT IN AUKE BAY WILL CONTINUE TO EXPAND JUNEAU’S WAREHOUSE INVENTORY. An Anchorage company recently commented that “Juneau seems to have absolutely no warehouse space available.” They are correct. However, due to the scarcity of land for development, builder/developers have incorporated warehouse spaces along with newer residential spaces that in total, make up the “warehouse market “ in Juneau. The latest project of this type to be announced is Auke Bay Station, which is located uphill from De Harts at Auke Bay. When complete, the project will bring boat condo units on line including residential units on the second floor. What is unique about this project is its location in the increasingly walkable and ever popular—Auke Bay.
ALASKA MENTAL HEALTH AUTHORITY MOVES TOWARD SELLING LOT ON THE WATERFRONT. The Alaska Mental Health Trust Authority land parcel which is adjacent to the Coast Guard on the Waterfront is moving toward closing. The sale, negotiated through the Trust Land office is expected to close within 30 days. A local corporation that plans on building a facility to provide “district” heat to the Willoughby area using a large heat pump will be the owner/ developer. Another adjacent parcel is under contract. However the prospective purchaser nor details of their intended use is not presently known.