DESPITE THE FACT THAT THIS YEARS’ TOURISM SEASON MAY TOP 1.5 MILLION PASSENGERS, DOWNTOWN TOURISM RETAIL VACANCY REMAINS SIGNIFICANT. In our quarterly “walk” of South Franklin Street, we note that retail space vacancies in this area continue to reflect a slow recovery from both the COVID pandemic and prior year slumps in passenger volumes. Major spaces that remain vacant are the triangle building and the Elks building—both located in the 100 block of South Franklin. In the two hundred block, two larger tourism buildings remain on the market for sale, now into their second and third years on the market. The “window” for similar properties to sell is normally in the fall of the year prior to a new season. That timing allows a new owner the time that it takes to prepare for the next operating season. Missing that window means that tourism related locations will remain on the market another year. Larger properties over 1,500 square feet typically take longer to sell due to the fact that they require new ownership that can absorb the costs of acquisition and operation.
INTEREST RATE INCREASES HAVE AN IMPACT ON JUNEAU INVESTORS. As of today, the FED is poised to signal its intent in its next two meetings whether or not to increase rates once again to slow inflation. Here in Southeast, Commercial lenders confirm once more that the trend in rate increases over the past year is having a dampening effect on lending. However, this is not to say that activity is dropping off. Pressures to increase the number of housing units and the impact on tourism related businesses continues to drive demand. Assuming that rates will ease in the near future, we expect to witness more construction activity, and housing starts early next year.
HOTEL RATES SKYROCKET FROM LOWS LAST WINTER—REFLECTING A SHORTAGE OF ROOMS IN THE FUTURE. Because it has been several years since any new Hotel space has been added locally, Hotel rates are now in the range of $200 per night to a high of $500 per night for two downtown properties. As these rates continue to rise, new hotel construction may begin to pencil once again, but construction is only likely to take place in the Mendenhall Valley where some parcels have the potential for hotel development. Its our prediction that this October rates will drop once again, but likely not below the $200 per night level.
THE JUNEAU OFFICE MARKET STILL SLOW WITH OCCUPANCIES STILL PLAGUED BY THE IMPACT OF COVID. Like larger markets, Juneau’s office market is sluggish due to the fact that major employers still have large numbers of their employees working from home. This is a national trend, especially in 24/7 metro markets, putting more and more pressure on building owners to consider repurposing smaller buildings into housing as an alternative to continued vacancies. However, Juneau is fortunate to have very little historic vacancies of any significance in “B” or better buildings.
HONSINGER SUBDIVISION DEVELOPER TO APPLY FOR A REPLAT CREATING THE POTENTIAL FOR NEW COMMERCIAL LOTS TO BE ADDED IN 2023. The Honsinger subdivision adjacent to the Juneau International Airport will soon be applying for approval of a minor subdivision with the CBJ which when approved will create six new half acre commercial lots and three lots of nearly one acre in size each. In 2021, the CBJ approved a rezone of a majority of lots in the subdivision from Industrial to Commercial, opening up opportunities to locate businesses in the subdivision that the Industrial zone did not allow previous to the rezone. A Hotel site can also be accommodated on two or more of the large lots that face dedicated wetlands and offer unobstructed views of downtown Juneau and Douglas Island. The subdivision is located immediately adjacent to the Juneau Airport, and within walking distance to retail and service establishments. The Carlton Smith Company is the designated Broker for the sale of these lots.