10/10/2012 - Private Commercial Construction: Steady growth in Anchorage continues (News)

By Paula Cottrell

Alaska Business Monthly

Modest construction growth increases of 3 percent over the last few years may not be an indication of a strong, rebounding economy, but it does have Alaskan developers guardedly optimistic. “There are many projects in progress across the state that are getting completed,” says Mark Pfeffer, president of Pfeffer Development, a multidisciplinary commercial real estate development firm based in Alaska. “We may not be seeing a lot of new, large-scale commercial projects being built right now, but construction on the mid- to smaller-scale has been relatively steady.”

Alaska construction spending was estimated to come in around $7.7 billion dollars this year, an increase of 3 percent over last year, according to the annual construction forecast released in February compiled by Scott Goldsmith and Mary Killorin of the Institute of Social and Economic Research at the University of Alaska Anchorage. This report, prepared for the Construction Industry Progress Fund and the Associated General Contractors of Alaska illustrates small, steady growth in the construction industry since the national economy hit all-time lows in 2008.

Of the estimated 2012 $7.7 billion, $5.1 billion will go toward private commercial projects. Of that $5.1 billion, an estimated $3.5 billion will be spent in the mining and oil and gas industries. That leaves only $1.6 billion being spent on utilities, rural, basic industry and other commercial and residential projects across Alaska in 2012.

A sluggish national economy combined with uncertainty regarding the future of oil and gas development in the state has caused some developers to proceed with caution. While it’s true that Alaskans haven’t endured the worst of what the recession has to offer—high unemployment, extreme crashes in the housing market and credit woes—the national economy does influence investment in commercial and residential markets. Some of that investment is in retrofits and tenant improvements, some in new builds.

Over the last three years, Dave De­Roberts, president of Criterion General Inc., has noticed that his business has increased at a fairly steady rate. In fact, Criterion, a contractor that specializes in private construction, is on track to having its busiest year ever. “In my opinion, we’re in a good place,” DeRoberts says. “We have a proven track record with our clients and are seeing a lot of repeat business.”

Criterion General is currently working with Pfeffer Development and kpb architects on a complete retrofit of the Unocal/Chevron building located at 909 West Ninth Avenue in Anchorage. According to Pfeffer, the company that purchased the building from Chevron was in the middle of tackling the asbestos abatement issues that required a complete demolition of all of the building components down to the steel and concrete when a prospective tenant became interested in the structure.

“The new tenant closed on the lease transaction in January of this year and subsequently a Pfeffer managed ownership entity closed on acquisition of the property. Construction commenced in March,” Pfeffer says. “The project is scheduled for completion in October with the tenant moving in by mid-December.”

Conveniently located adjacent to the Delaney Park Strip, the six-story 55,000-square-foot building will feature high performance glass, new mechanical and electric systems and 360-degree panoramic views of the Alaska Range, Cook Inlet, midtown and downtown.

“kpb architects focused on efficiently designing the space. Interior walls are clear, allowing employees to have cross views of each floor and to enjoy the natural light, and nine-foot sliding glass doors are incorporated into the design to maximize space,” Pfeffer says.

While a retrofit of this size definitely presents its challenges, it is sometimes the best option for tenants to try and fit into an existing space. “There is not a lot of vacant space in Anchorage, and the economy keeps people cautious. Expansion and construction needs are being met through creative solutions,” Pfeffer says. “It was a viable option for the client to retrofit the Ninth Avenue location to fulfill the long-term lease for the client, but sometimes there just isn’t an appropriate location and you have to build new.”

The management at Stewart Title found themselves in that situation when their lease expired on the company’s current location on Denali Street. “They wanted to stay in midtown, on street level and with some road exposure,” Pfeffer says. “When they were unable to find something that would suit their needs, Stewart Title chose an option that would allow them to almost duplicate—but with significant improvements—their current location which was working very well for them.”

Stewart Title’s new location will be at 480 East 36th Avenue. The building, which broke ground in June and is expected to be completed by December, is owned by United Companies Inc., a subsidiary of Sea Lion Corp., which was established in 1972 under the terms of the Alaska Native Claims Settlement Act and is the village corporation of Hooper Bay. UCI and Pfeffer Development are strategic partners in developing nearly three acres of land on 36th Avenue and have already completed and fully leased the adjacent retail building located at 600 East 36th Avenue where Alaska Communications and Whole Family Chiropractic are located. Alaska’s first Pita Pit is scheduled to open at the building in October 2012.

The design/build team of Criterion General Inc. and kpb architects have come together again to construct a 7,000-square-foot wood frame building that brings together the spacious open design reception and waiting area that existed in Stewart Title’s previous location with updated features and modern amenities. Included in the design is a heated sidewalk and entry plaza, beautiful landscaping and a convenient parking plan specific to Stewart Title’s needs.

“It can be convenient working with the same development team on several projects, but in this case, the retrofit on Ninth Avenue and the Stewart Title building are such different projects. They really present their own set of challenges,” DeRoberts says.

Criterion has a reputation for tackling difficult projects and bringing them to completion on time. “When 85 percent of your business is private money work, it’s all about performing at a level that keeps business coming in the door,” DeRoberts says. “We have great employees who are professionals at what they do. Our crews have been with us for a long time and have the Criterion values down. They know how and will go the extra mile for their clients.”

Dan McCue, senior vice president of corporate administration at Alaska USA Federal Credit Union couldn’t agree more. Criterion General recently completed construction on two locations for Alaska’s largest credit union—a new branch office on Abbott Road near Home Depot and an office building located on B Street just off of Tudor Road, which will house administrative offices and facilitate future growth for the company.

“As Alaska USA has grown, it has required a careful review of our administrative offices to ensure better utilization and efficiency of operations. The new office building on B Street is a result of trying to forecast what our growth would be relative to the needs we have for our operations,” McCue says.

Alaska USA relies on statistical data and member feedback to drive that decision when deciding where and when to open a new location. “Our expansion is based on finding efficient ways to serve our members and to provide convenient locations. As traffic and transaction volume in our Abbott Fred Meyer retail location increased, we found that we could best serve our members by opening a full service branch in the area,” McCue says.

Retail Market Expansion

The completion of the Alaska USA FCU branch on Abbott Road in March adds to an already increasing retail presence in Southeast Anchorage area that has seen a new Home Depot, Carrs Quality Center and several other small business and restaurants sprout up in the last 10 years. The next addition to the area is expected to be a Walgreens, but a final determination has not been made on whether the company will proceed with a location at 88th Avenue and Abbott Road.

While there is definitely room in the business development for a new food establishment to take over the recently closed Chili’s location—it has been speculated that a new restaurant will be moving in, but no official announcements have been made—additional growth in the area is expected to level out.

Another retail center that has seen its growth peak and is now tapering off is Tikahtnu Commons. This regional retail and entertainment hub is located on 95 acres of land on the corner of North Muldoon Road and the Glenn Highway. CIRI Land Development Co., and its partner Browman Development put the Tikahtnu Commons on the map when it brought to Anchorage its first Target store which opened in October 2008. Since then, Kohl’s, Lowes, PetSmart, the Regal Tikahtnu Stadium 16 Theater, Sports Authority and Best Buy are some of the retail giants that have moved into this Northeast Anchorage location. Sam’s Club is the final anchor store that will be built at the Tikahtnu Commons. Construction on the 145,000-square-foot retail store began in August and is expected to be completed by fall 2013.

The International House of Pancakes was the first dining establishment to open at Tikahtnu, but was quickly joined by Red Robin, Qdoba Mexican Grill, McDonald’s, Firetap Alehouse and most recently, Alaska’s first Olive Garden Italian Restaurant which opened in January.

Once completed, the Tikahtnu Commons is expected to have 12 to 15 major retail stores and 60 to 75 businesses that will include small shops, restaurants and various service and entertainment businesses. While occupancy is estimated to be at about 80 percent and construction has clearly slowed down on Anchorage’s largest retail shopping center, Denali Alaskan FCU responded to the increased foot traffic by opening its 18th branch at Takahtnu Commons in March.

A few short miles to the east is the Creekside Town Center. Located near the corner of Muldoon Road and Debarr Road, the commercial side of this decade-long project looks to finally be gaining traction. Pfeffer and Jerry Neeser of Neeser Construction are the principals responsible for this development effort. More than a retail center, this 160-acre project is already home to Begich Middle School and Cook Inlet Housing Authority’s Grass Creek Village and Clearwater Village, beautifully designed and landscaped mixed-income housing development built by Neeser Construction Inc. and The Peterson Group.

The pedestrian friendly community has a few pieces of vacant commercial land that Pfeffer Development says is starting to get some serious interest. “I can’t say anything specific, but we have a lot of interest in the Creekside Town Center right now,” Pfeffer says.

The competitive commercial real estate market combined with large scale retail customers carefully gauging their potential profitability in the Anchorage retail markets keep many developers close-lipped about projects sitting on the drawing board.

With the recent opening of the Walgreens on DeBarr Road and with Ken Brady Construction beginning work on the new 176,000-square-foot WalMart, which will be located near the same intersection, new businesses for the north end of town continue to be built.

Big Hopes for a Dimond Center Expansion

When the folks at Olive Garden Restaurant were looking to open a second location in Alaska, instead of building a new structure as they did at the Tikahtnu Commons location, they opted to take over the O’Brady’s Burgers and Brew location at the northwest corner of the Dimond Center mall. By adding an additional 2,000 square feet of space, the popular restaurant chain is expected to drive business to what is considered to be the most trafficked mall in Alaska.

In addition to Olive Garden, the Dimond Center may revamp 150,000 square feet of its existing 750,000 square feet of retail space to accommodate The Outlets of Alaska as another venture at Dimond Center.

This development project aims to bring more than 40 name brand outlet stores to existing space in the Dimond Center near the ice rink. Leasing Manager Hugh Ashlock says he can’t be specific on any of the potential leaseholders, although he is hopeful that the Dimond Center can begin construction by the spring 2013 so the new outlet stores can be open by fall next year—just in time for the Permanent Fund Dividend spending frenzy.

After so many major restaurant and retail players have entered Anchorage’s market in the last decade, it doesn’t come as a surprise that outlet stores would be next. But with a modest economy and the potential for market saturation, outlet store bargain hunters should remain cautious about getting prematurely excited. Development can be slow and it did—after all—take 30 years for Olive Garden to finally find its way to the Last Frontier.

Paula Cottrell is an Alaskan author.

Click here to view original article