Cushman and Wakefield EGS
Although Birmingham’s multi-tenant office market recorded negative overall absorption of
387,710 square feet (sf) in first quarter of 2018, this statistic doesn’t paint the full picture of the
overall health of the market. This negative absorption was primarily due to two large corporate
relocations. Regions Bank completed its move out of 160,000 sf at Regions Harbert Plaza in
Birmingham’s Central Business District (CBD) to consolidate at its nearby downtown
headquarters. At the same time, Southern Company began its phased relocation out of 450,000 sf at Inverness Center 40, 42 and 44 in the U.S. Highway 280/southern submarket.
The company will occupy 677,478 sf in its new headquarters at Colonnade North and Colonnade South office buildings, increasing its total occupancy by 227,478 sf and putting these Colonnade properties back into use after several years of being vacant. In more positive news, FIS will backfill a portion of Southern Company’s space at Inverness Center 44 and move into 112,500 sf in fourth quarter 2018.
Other market indicators also point to a stable overall market. Overall weighted average asking
rents for the Birmingham market increased slightly to $19.35 per square foot (psf), up from
$19.31 psf this same time last year. Leasing activity continued at a steady pace with 194,047 sf of transactions signed in first quarter, with Class A transactions accounting for 93,864 sf of the total.
As the year progresses, and Alabama’s economic climate continues to strengthen, commercial leasing activity is expected to remain healthy throughout the year as businesses continue to lease new space. Additionally, there are several mixed-use, hotel and multi-family development projects currently underway in Birmingham’s CBD, increasing excitement and momentum in 2018.
Graham and Company
The industrial sector in Birmingham continued to tighten in the first quarter of 2018, current occupancy rates for Bulk Distribution space are at historic highs across all submarkets with little relief in the pipeline. The Oxmoor Logistics Center, the first speculative build in Birmingham since 2007, is set to be delivered in the third quarter of 2018 which will bring a much needed 112,500 sf of class A distribution space to the market with 34,500 sf of that project being preleased. Asking rental rates for all classes of bulk distribution space are increasing across the Metro area as Landlords take advantage of the current market conditions.
Freestanding industrial buildings, the favored product category for medium to large sized local companies, are also becoming scarce. Multiple offer scenarios for this product category are becoming more common as growing businesses compete for the rare listing that comes to market. Several of the first quarter sales transactions had competing offers, previously a rarity in the Birmingham marketplace.
Build to suit development has provided an answer for several Birmingham businesses including Canton Properties, a regional wholesale distribution company. After an exhaustive search of the local inventory, Canton decided in early 2018 to break ground on a new 80,000-square-foot facility. It is expected that the industrial development pipeline will remain active for the foreseeable future and certainly the remainder of 2018.
Recent industrial activity includes:
41 North Industrial Parkway, a 270,600-square-foot distribution center in Calera sold to an investor.
The 75,637-square-foot former “Old Car Heaven” building located at 3501 1st Ave. S. sold as an adaptive reuse project.
Interstate Industrial Park, a 940,452-square-foot manufacturing facility sold to the existing tenants.
Truck & Wheel took occupancy of its 127,000-square-foot build to suit manufacturing facility in Vance.
Cushman and Wakefield Advisory Group
Coming off a near-record year for overall economic development, Birmingham’s multifamily forecast looks healthy. We expect the 7,100 net jobs added year-over-year to foster demand for apartments and complete the absorption of newly built and newly renovated projects along the 280 Corridor as well as provide a tenant base for new construction downtown. Steady job creation and an increasing demographic of high income wage earners are drawing residents closer to Birmingham’s urban core. One notable trend is the adaptive re-use of vacant commercial space downtown. The rental and for-sale housing markets are tight downtown.
Birmingham apartment trends and data:
- Effective rents have grown by 19% over the past 5 years
- 2017 was a year in which 7,100 jobs were created according to the Alabama Labor Department
- 2017 market rents grew by 2.2% on average and first quarter 2018 annualizes to 3% growth. Costar projects an average 4% market rent growth per unit over the course of 2018.
- Average vacancy rates decreased by 1.3% in 2017.
Notable first quarter 2018 sales include:
- Riverchase Landing – 468 units in Hoover acquired by a Houston-based investment firm. Plans for upgrades across the board are underway.
- Cahaba Apartments – Traded for $110,000/unit in an off-market transaction.
- Chace Lake Villas – 264 units purchased by a Florida-based investment firm.
- Terrace 31 – 79 units acquired by a California-based firm.