The Anchorage Rental Market
Welcome to the Real Estate Espresso podcast. Good morning, and let’s dive into what’s new in the world of real estate investing. I’m your host Victor Menasce. We’re coming to you live from Anchorage, Alaska. On today’s show, we’re going to take a look at some of the economic drivers and what’s happening in the market here in Anchorage, Alaska.
Over the past 20 years, the population of Anchorage has experienced a period of growth followed by a period of decline. According to the U.S. Census Bureau and the Federal Reserve, the population peaked in about 2015, and it’s been decreasing ever since. While the U.S. population as a whole, in fact the rest of Alaska have seen growth during the same time period, Anchorage has been the exception – its population has been shrinking by an average of 0.2% a year between 2010 and 2022.
The main economic drivers related to this phenomenon mainly revolve around the energy industry. The City of Anchorage is the economic hub of Alaska and the economy can be really thought of as having three main pillars. The first is the oil and gas industry which is the largest component of Alaska’s economy. The second is, of course, the federal government, including military bases and a whole bunch of non-defense activities, and then the third are all the various services including tourism, transportation, logistics and health care. There are a bunch of other resource industries including fishing, mining and timber. Although these are small components of the population, the economic health of families can be really linked to the volatile oil prices that started in 2015 and that literally decimated the oil industry across the U.S., but particularly in Alaska.
This, of course, affects the market for properties. Rental rates for properties in Anchorage have experienced a significant fluctuation over the past decade. Rental rates experienced steady growth followed by a recession, and fuel dip. Now, despite what’s happening in the energy industry, the market tightened significantly during the COVID-19 pandemic. During that period, high housing prices and a lack of available homes for sale pushed many would-be home buyers to continue renting. That increased demand for rental properties. This led to a sharp increase in rental rates with some reporting a 14% jump in 2022 and another 5% in 2023.
Now we dug into the Anchorage markets, simply because we happen to physically be there. We’re not actively contemplating investing in Anchorage ourselves. However, whenever I go into a city, I make it my business to learn about what drives the economy. It’s just something I do. So when you’re traveling, make it a point to understand the market that you’re visiting. As you think about that, have an awesome rest of your day. Go make some great things happen. I’ll talk to you again tomorrow.
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