Predictions on interest rate trends abound with no clear pattern emerging.  The spread between the 10-year treasury and the 30-year fixed residential mortgage rates has been at historic highs for over a year as the uncertainty in lending and concerns about the future of the economy has impacted the way lenders look at new loans.  That spread, which is now in the range of 3% has caused residential mortgage rates to be much higher than they would be otherwise.  Nobody really knows if the Fed’s increases are over yet, and until the spread declines, they could remain at current levels.  For Commercial loans, as the spread decreases, they should begin to moderate.  Meanwhile, there is some consensus among the experts that we will see rates decrease sometime during 2024, but it is more difficult to see consensus as to exactly when that might begin, and establish itself as a predictable trend.

Hotel ownership continues to consolidate in Juneau, with rumors of new hotel construction on the horizon.  Ownership of Juneau’s hotel properties is consolidating rapidly as out of state owners secure title to more local properties.   One single out of state investor now owns the Baranof, the Sheraton Hotel and the Travelodge, which came under new ownership most recently.  Driftwood Inn was recently purchased by a non-profit entity.  What this trend foretells is a prediction of higher room rates, for both summer and winter guests.  What is challenging for business travelers and out of town Alaskan residents alike is that the higher rates make it more expensive for regular travel to and from the capital City, on top of higher rental car rates and the actual cost of getting here.  Out of state investors have signaled an interest in building new hotels in Juneau, but available sites are rare, and the cost of construction continues to increase every year.  In 2024 it is likely we’ll see evidence of plans to build new hotels.  Stay tuned. 

Warehouse Inventory at an all time low.  We recently were contacted by two national Commercial brokerages on the west coast who were seeking warehouse inventory for their clients in the 3,000 to 5,000 square foot range.  Unfortunately, we had to tell them what we’ve known for the past several years—there is no available inventory.  There are several reasons for this.  First, over the past decade, the boomlet of construction of boat condos has essentially become the warehouse market, in the Industrial Boulevard and Lemon Creek submarkets.  Second, the availability of new industrial parcels has fallen off dramatically, even though the City and Borough has identified industrial land—new supplies of industrial land as key to small business growth here.  Finally, the cost structure associated with new construction is making it more and more difficult for supply to keep up with the demand.

Office leasing slows to pre-pandemic levels. Since about 2015 when the last walk-up office and retail building was constructed in the valley, office leasing has slowed steadily until the pandemic, which is still impacting major employers in all office markets—Juneau being no exception.  And office rates have continued to reflect a “flat” outlook for both B and C rated buildings, which Juneau has in abundance.  Along with the softness in current rates, annual accelerators are “all over the place,” according to one leasing agent who has represented the state of Alaska for the past decade.  The shrinking size of state agency offices coupled with the challenge with the state budget outlook has most tenants staying where they are– and not expanding their footprints.