Of the five submarkets in Birmingham’s office market, the midtown market is likely to continue outperforming others in the coming years. Other office markets in the Birmingham area include Vulcan/Oxmoor, Highway 280/I-459, Southern/I-65, and the central business district.
“The midtown market will stay strong as it has been the strongest performing market for the last 10 years or so,” said Jerry Grant, CCIM, vice president of the office group with Graham & Co. Grant recently presented an office market report to the Central Alabama Commercial Market Symposium, an event hosted by the Alabama chapters of CCIM and NAIOP, giving a detailed comparison of the submarkets, highlighting notable lease transactions, new developments, and areas to watch.
Midtown, which includes parts of Five Points South, Homewood, and Mountain Brook, has approximately 5.2 million square feet (msf) of total office space, with 281,823 sf currently available and 40,070 sf recently absorbed. Midtown has the highest overall rental rate at $22.41 per square foot, and the highest overall occupancy rate at 95.6%.
Grant also identified the central business district as a diverse and dynamic market. He added, “Parking is the biggest challenge downtown. It is common to see properties asking high rents while offering little or no parking.”
Having over 7.9 million square feet of total office space, the central business district is the largest of all submarkets in terms of total square footage even though it has a relatively small footprint. Roughly 1 million square feet of space is currently available for lease with 65,900 sf recently absorbed. The overall occupancy rate of 87.2% is the second highest among submarkets, behind only midtown.
As a whole, the Birmingham office market has an occupancy rate of 87%, which is down slightly from prior years but has remained steady overall. Of the 27.2 msf, 18.2 msf is multi-tenant while 9 msf is single tenant. Roughly 3.5 msf is currently available across the Birmingham area.
Grant also presented a list of projects to watch in the greater Birmingham area including:
- Former Carraway Hospital: The mixed-use redevelopment plan includes residential, office, retail, entertainment, and hotel space.
- Southtown: The redevelopment plan includes 459 residential units, 850,000 sf of office space including medical research labs, medical office buildings, a grocery store, and additional retail.
- Alabama Power Steam Plant: The former steam plant will hopefully become a cultural hotspot by connecting Birmingham’s CBD to nearby amenities including Railroad Park and the Red Rock Trail System
- Trinity Montclair Campus: A New York developer plans to transform the former hospital campus into a mixed-use development including office, multi-family, and senior living.
- Protective Life Stadium: Birmingham plans to spend approximately $174 million on an open-air stadium to be completed by the 2021 World Games.
- Valley Hotel Homewood: Development is underway for 129 hotel rooms, a full service restaurant, and retail space.