PRINT THIS STORY:

CHANGE TEXT SIZE:

NEW PROJECTS RISING IN RETAIL-STARVED ALASKA

By Steve Bergsman

Alaska, the largest U.S. state in terms of landmass, has a paucity of paved roads. Even Anchorage, the biggest population center, with 265,000 people, counts just two main highways into the city. One goes south to the Kenai Peninsula and the other north through the Mat-Su Valley, the state’s hottest residential market. It is on this road that the city’s newest retail developments are cropping up.

New centers are in high demand here, because there is no big retail space left in the city, says Chris Stephens, a principal in Bond, Stephens & Johnson, an Anchorage commercial real estate service company. “The market is tight all over. The vacancy rate in neighborhood shopping centers is 3 percent or less,” Stephens said. “Maybe you can find 1,000 square feet of space here or there.”

One of biggest impediments to new development has been the high cost of construction in Alaska, which sources estimate to be about 20 percent higher than in the Seattle area. So developers need to see strong lease rates, which recently have climbed as high as $3.25 per square foot per month, adds Stephens. That’s up from about $1.85 to $2.25 five years ago.

Traditionally, retail clustered in South Anchorage in an area around Dimond Boulevard, but during the past decade the population has exploded in the northern suburbs, particularly in the Mat-Su (short for Matanuska-Susitna) towns of Houston, Wasilla and Palmer. So the newest major retail development to hit Anchorage has focused on the Glenn Highway going north.

Developer Cook Inlet Region is building a 95-acre, regional shopping-entertainment center along the Glenn Highway on the northern perimeter of Anchorage. CIRI, an Anchorage-based Native regional corporation, has teamed up with Browman Development Co., of Oakland, Calif., and in August began what will be Tikahtnu Commons, a $100 million, hybrid power and lifestyle center. Boasting 900,000 square feet, Tikahtnu Commons will be the largest shopping center in the state. “The road from the north is the one that connects Anchorage to the Alcan Highway and the Lower 48. This shopping center is being built where the highway comes into town,” said Jim Jager, communications director for CIRI. “The site is adjacent to Elmendorf Air Force Base and Fort Richardson Army Base. It is the road all commuters that live in Wasilla, Palmer, Eagle River and the rest of the Mat-Su Valley have to drive past to come to work. It’s a natural chokepoint.”

Target will anchor the CIRI development, the first of three the retailer will build in the Anchorage region; the others will be in Wasilla and South Anchorage. The Target at Tikahtnu Commons is slated to open October 2008. Just to the south of CIRI’s project, Dallas-based P.O’B Montgomery & Co. is in the process of constructing the first 240,000 square feet of a 280,000-square-foot power center to be called Glenn Square. “We are doing the project in a joint venture with Kimco Realty,” said David Irwin, a managing director at P.O’B Montgomery. “Most of the land was used for storage by Anchorage. We worked out a development agreement with the city and broke ground in June 2006.”

Glenn Square attracted a number of traditional power center tenants, including Michaels, Petco, Old Navy, Famous Footwear and Bed Bath & Beyond, all of which are expected to open before Thanksgiving. The second phase of the development will include a Cinemark Theatre (called Century Theatre in Alaska).

This is P.O’B Montgomery’s third retail project in Alaska. In July 2006 it bought an older 85,000-square-foot shopping center in South Anchorage across from the Dimond Center mall. CompUSA and a vacant Michaels store anchored the property, called Dimond Crossing, and P.O’B Montgomery brought in Alaska’s first Bed Bath & Beyond to take the Michaels space (the state’s second Bed Bath & Beyond will be at Glenn Square). Also, coming into Dimond Crossing will be Alaska’s first David’s Bridal, which is taking 7,400 square feet.

Alaskan consumers will welcome the new space warmly, Jager predicts. “Alaska ranks 49th of all the states in terms of square feet of shopping space per capita,” Jager said. “But we are number one by a fair margin in terms of revenue per square foot of shopping space. That tells me the area can afford a bit more shopping.”