WHILE INTEREST RATES CLIMB NATIONWIDE, IN ALASKA, AIDEA REMAINS THE LENDER OF CHOICE FOR INVESTORS OF COMMERCIAL REAL ESTATE.  Across the nation, investors watch with trepidation as conventional lenders follow the Fed’s pattern of raising interest rates, with the last hike, topping 75 basis points—with more increases sure to come by years’ end.  But even though commercial rates remain historically low, Alaskan investors have the potential to pair their conventional lender with the state of Alaska’s AIDEA program, which effectively creates a blended rate which is much lower than a conventional bank can offer by itself.  AIDEA, which stands for the Alaska Industrial Development and Export Authority, can lend up to 90% of a conventional loan, and combine it with a local lender, which can assume as low as 10% of the loan, bringing to the investor a lower subsidized interest rate for up to 25 years in length.  This kind of loan is favored by Commercial real estate investors.

AIDEA displays its rates on its website weekly, and most local lenders (depending on their lending limits) can initiate one of these loans for their clients.  The process begins with the local lender initiating the underwriting on behalf of their client.  Once the conventional bank approves its clients’ package, they ship the loan package to AIDEA, which is located in Anchorage.  That approval process is most times much slower than the local underwriting process, and the communications can sometimes be limited.  The benefit to the investor is that they often secure a commercial loan that is substantially more competitive than seeking a loan directly with a commercial bank.  You can go to Aidea.org to see the current rates.  As of the last week of July, 2022, a 25 year fixed rate loan with Aidea is priced at 4.82%

THE OFFICE LEASING MARKET IN JUNEAU REMAINS IMPACTED BY COVID 19 BUT EXHIBITS STRENGTH DUE TO CONTINUED LOW OFFICE INVENTORY   Major employers in Juneau continue to ride out the COVID pandemic, still searching for the “all clear” signal that will mean their employees can freely return to the workplace in their own spaces.  Most larger native corporations and non-profits have their employees working remotely, and suggest until the CDC and other regulatory agencies can be confident of putting the pandemic behind us, they will continue to take the conservative approach with their employees working from home.  This fact has put a damper on any real “movement” of spaces being marketed for lease, but the good news is that office inventory is down—particularly in the valley.   This continues to hurt small business, as fewer and fewer locations present options for businesses to relocate or to grow.  The bright spot continues to be medical office, with a building on Front Street recently acquired by SEARHC, and their plans to build a significant medical facility on a 2.9 acre site at Vintage Park next to Safeway.   The Carlton Smith Company represented this purchaser in both transactions.

WAREHOUSE INVENTORY REACHES AN ALL TIME LOW AS OPTIONS FOR DEVELOPMENT OF INDUSTRIAL LAND ARE RARE  The availability of warehouse space in Juneau has hit an all-time low as many of the newly built boat condos in the industrial and light commercial zones continue to take up the slack with any small businesses relocating into those spaces.  But new projects for warehouse continue to be few and far between due to high costs of land and all other costs associated with putting up new buildings.    Developers are plagued with increasing costs of labor, shipping and supply chain issues, making new warehouse construction an ever more expensive proposition to contemplate.  With asking rates for commercial and industrial land as high as $23 per square foot, developers will need to secure strong regional tenants with an appetite for executing five to ten-year gross leases in the range of $2 per square foot in order to make these projects pencil.  This increasing trend in pricing for new warehouse space is now required compared to older leases which traditionally have been in the range of $1.50 to $1.75 per square foot with the bulk of that inventory located in the Industrial Boulevard and Lemon Creek areas of Juneau.