Huntsville Commercial Real Estate from the Experts Q1 2018
Markets: Huntsville-Madison County
Anusha Alapati: Crunkelton Commercial Real Estate
Huntsville’s metro is still growing at a fast pace and Huntsville’s healthy economy has set the stage for a strong retail market. The overall vacancy rate declined from 4.6% in 4Q17 to 4.3% in 1Q18. Retail demand is very strong with over 1 million square feet under construction. CoStar research reports that Huntsville boasts some of the highest rental rates in the state with rental rates reaching their pre-recession peak.
Recent Retail Updates:
- Dave & Busters will be opening at MidCity in July 2019.
- RCP companies is partnering with Southern Fried Hospitality and Chef Marc Taft on several concepts in MidCity and CityCentre. Taft plans to open Gemini Kitchen + Cocktails at CityCentre this fall.
- Stovehouse is currently under construction with the anticipated opening of its Food Garden in late 2018.
- Edgar’s Bakery will be opening a new location on the corner of Airport Road and the Parkway, at the old Copelands site.
- The Times Plaza development broke ground and is on schedule. Times Plaza is a 70,000 SF mixed-use retail/office development located at 2317 South Memorial Parkway that will have multiple exciting tenants including restaurants, boutiques, and more.
- Pet Supplies Plus is opening their first North Alabama location in Madison at Midtown Marketplace. The 7,200 SF store will open this summer.
Expert: James Lomax: Colliers International
The start of 2018 gives every indication that the office market continues to remain robust and tenants continue to show confidence in both the economy and the market. Politics aside, The Trump administration and Congress have continued to fund defense spending and the Huntsville market has reaped the benefits of those actions. All major metrics indicate that the Huntsville office market is steadily moving forward:
- Overall vacancy is at 7.6% with Class A at 1.5%
- Net absorption increased by 29ksf; Class A Q1 2018 absorption topped out at 78ksf
- Rental rates increased in both Class A and Class B product lines with Class A average at $22.52/sf and Class B at $14.75.
Downtown things are coming at a premium, even as new supply heads to the market. When we compare the downtown market to the suburban market, Class A rental rates are increasing rapidly with the average quoted rent at $25.33/sf while the suburban Class A product is at $20.87/sf. However, when you compare all classifications, the average rates are $20.75/sf (downtown) and $13.91/sf (suburban). Additionally, since Class C vacancy remains in “double-digits”, the overall vacancy for the Class C product increases rapidly as demand for it subsides.
A few major developments proposed or under construction are starting to take life.
- 127 Holmes, a mixed-use project downtown under construction features 8,000 square feet of office
- 225 Holmes downtown will contain +-45,000 square feet of dedicated office space
- Office Space at 4th largest development in the United States, MidCity, likely to be 200,000+ Square feet
- Redstone Gateway project delivering two new office buildings in fall of 2018
- Town Madison expected to deliver 200,000+ Square feet of office product
Recent previous years within our market were stagnant, but with active construction & development, rising rates, and active tenant base, the market is poised to keep chugging at a high level.
Expert: Andrew Agee: SVN Commercial Real Estate
In the first quarter of 2018, the Huntsville, Alabama, apartment market saw few transactions, but continued to enjoy very strong and improving fundamentals. The announcement of 4,000 new jobs locating to the area with the planned Toyota/Mazda plant near the I-565 and I-65 Exchange in West Huntsville, solidified Huntsville in the eyes of a growing number of equity investors and lenders as one of the most attractive growth markets in the Southeast with a median household income that is over 15% more than the average in the state. With sustained job and population growth on the horizon for as far as the eye can see, Huntsville is seeing opportunistic apartments investors knocking on almost every door looking for a willing Seller.
In 2018, this growing flood of new prospective buyers continued to put upward pressure on prices in Huntsville, and this,coupled with the acute lack of inventory available, promises to uplift the apartment market over the coming 12-24 months, and beyond. While the average rent increase/unit around the country slows to around 3%, rents have increased 5% year over year in the Huntsville area. This trend of rent increases should continue-and quite possibly accelerate-in North Alabama, as rental rates edge closer to those seen in the Birmingham and Mobile markets.
The sales volume in the first quarter has been slower, but below are notable sales:
- Malibu Apartments: a 241 unit, 1965 garden style apartment complex located at 8003 Benaroya Lane in Southwest Huntsville, sold in January for $13,700,000. pr $56,846/unit. The new owner is a family office from California.
- Chaney Place: an 80-unit, 2008 build complex, located at1060 Chaney Place Dr
- Southeast Huntsville, sold for $9.3 million or $116,250/unit, in January.
- Millstream Apartments: an 80-unit apartment complex in Southwest Huntsville sold for approximately $2 million to a local investor.
Expert: Bart Smith: Graham and Company
The Toyota/Mazda announcement in January is the largest project to hit North Alabama in many years - so big that even President Trump tweeted about the good news! The plant will be located on a TVA approved 2,500-acre tract in the Greenbrier area and is expected to create 4,000 new jobs. At full capacity, the plant will produce 300,000 automobiles annually. The site is located just 14 miles from the existing Toyota engine plant.
The Huntsville industrial market performed well in Q1 2018 with the actual number of available buildings shrinking. However, overall vacancy did increase to 8.90% from the EOY 2017 rate of 5.97%, primarily due to the closing of two large facilities: the former Qualitest and Navistar plants.
The 805,000 sf former Qualitest campus in Chase Industrial Park is currently on the market for sale.
Overall Vacancy Rates
Single tenant – 8.52%
Multi-tenant – 10.20%
Activity was strong across all the three industrial markets and is predicted to remain healthy in 2018. The overall vacancy rate per area is as follows:
Market Vacancy Rates
Jetplex – 8.81%
Central/North Huntsville – 1.78%
Chase – 11.81%
Supply of smaller industrial buildings is not keeping pace with demand from local supply-chain and distribution users, so speculative construction should increase in 2018. Asking rental rates for industrial spaces have begun to increase locally, especially for availabilities in the 10k to 25k sf range.
Translating it to Alabama