2015 Birmingham Retail Market Review with David Ashford, CCIM

davidashford_bwRetail real estate in Birmingham continued to improve in 2015, with lowering vacancy rates and tenants looking for creative ways to expand their footprint in the market. A lack of available space has caused a serious demand for new developments. Although there was not much in the way of new development in 2015, we expect 2016 will bring more new construction.

In 2015, vacancy rates continued a slow but steady drop from 9.9% in the first quarter to 9.4% at the end of 3rd quarter this year, according to Xceligent. This steady drop is to be expected without new projects coming online. This should change in 2016 with the ground breaking of several new projects, such as 20 Midtown, Lane Park and Publix at Patchwork Farms among others.  Although these projects will increase the square footage in the market, this will not increase vacancy rates much since the demand for retail real estate remains high.

The 20 Midtown project marks a huge achievement for the city of Birmingham. The first downtown grocery store, Publix, should be a shot in the arm to the downtown/UAB market. The first tenants to be a part of the project, Starbucks and Chipotle, are doing very well and the additional phases to this project will also be successful. The addition of more than 1,000 apartments to the Downtown/UAB market will definitely help to attract more retail to the area.

High-end specialty grocers continued to expand throughout Birmingham in 2015, with Sprouts opening their store in Hoover and another under construction in Vestavia Hills. Whole Foods is under construction at their location in Hoover and should open middle-to-late 2016.  Blackwater Development is working on a site in Trussville anchored by Fresh Market. The Piggly Wiggly in Crestline, currently under construction, will also deliver in 2016. But the biggest news in retail for 2015 was the opening of Trader Joe’s at the Summit. The long awaited specialty grocer took the former Banana Republic space. Other new retailers to the Summit this year include, Alumni Hall, Sprout and Pour, The Art of Shaving, Tumi, Pieology and Oli-O.

The opening of the Grandview Hospital has sparked a string of new developments on Cahaba River Road, with two new apartment complexes and the addition of Publix to Patchwork Farms. Blackwater Development is developing the Publix and adding 39,000 square feet of shop space and four outparcels to the site.

New tenants to the market in 2015 mostly consisted of restaurant concepts—both national and local—like Bamboo, Five Point Public House Oyster Bar, Miss Dot’s and Oven Bird as well as Grille 29, Sky Castle, Brava, Twisted Root Burger and Habitat Feed & Social. This year has also been the year of the pizza craze. Pieology, Ironstone, Pyros, Pizza 120 and Your Pie all expanded into Birmingham, begging the question, “How much pizza can you eat?”

As we look ahead, the future looks bright for retail in Birmingham. The downtown retail market is growing and should continue this growth next year as several projects with retail space are completed. Talk of several new projects in suburban areas surrounding Birmingham has us excited for what 2016 has to bring.

David Ashford, CCIM is Director of the Retail Division and an Associate Broker at Southpace Properties

2015 Birmingham Industrial Market Review with Rich Vanchina, CCIM, SIOR

richvanchina_bw_smAs Alabama’s economy continues to grow, Birmingham’s industrial real estate market is sustaining slow and steady occupancy growth. The automotive industry, as well as Alabama’s business friendly economic climate, continues to drive the industrial sector of the market.

The overall occupancy rate of the approximately 116 million square feet of tracked industrial space increased to approximately 90%. Similarly to the last two or three years, we experienced very few individually significant transactions, but actually had a good year due to the large number of small-to-medium-sized deals that occurred.

More deals with corporate tenants are being completed in central Alabama, and our usual amount of local and regional companies are also still healthy. This trend is consistent with other similarly sized tertiary markets across the United States.

Occupancy by the numbers

For the second straight year, the occupancy levels in each of Birmingham’s five industrial submarkets experienced slight increases in 2015.

Occupancy in the Oxmoor Valley increased to 79% this year, while the Central and Western submarkets also increased to 83.5% and 90% respectively. Occupancy in the Eastern submarket was unchanged, but remained strong at 91%. After a big year in 2014, the Southern submarket remained stable at a strong 90% occupancy level.

In addition to the modest leasing gains, sales of free standing owner-occupied industrial buildings increased again in 2015, which has resulted in a dwindling supply of quality industrial buildings.  And similarly to the leasing market, relatively few of these transactions were large enough to be considered significant deals. This type of sales activity drives home the notion that the local and regional players in Birmingham continue to thrive. And with the supply tightening, we are definitely seeing a price increase, although prices are still well below replacement value.

The market is still not experiencing any speculative development, however, build-to-suit activity is starting to increase. Interest rates for commercial real estate mortgages are still hovering close to record lows, so in many cases it makes more sense financially for these companies to own, as opposed to lease their buildings. Also, many of the commercial lenders in town are aggressively seeking owner-occupied commercial real estate loans, making it easier for qualified applicants to secure a great deal on a commercial mortgage. All of these factors have created a dwindling supply of available buildings, which has lead to inevitable price increases.

Significant deals
One of the more exciting developments this year was auto supplier Kamtek’s announcement of a major expansion to its operation in Pinson Valley. The total investment is expected to be $530 million and will create around 350 jobs.

Also, Publix announced that it will build a 625,000 square foot distribution facility in Jefferson Metropolitan Park in McCalla. This $34 million investment is expected to create approximately 200 new jobs. The company has not announced a timetable for construction.

Finally, generic drug manufacturer, Oxford Pharmaceuticals broke ground on its $29 million, 120,000 square foot manufacturing facility in the Lakeshore Jefferson County Metropolitan Park. This project is expected to eventually create 200 jobs.

Birmingham continues to benefit from the product shortage of industrial space created by the strong demand for industrial property in major U.S. markets, which has pushed some major tenants into secondary markets. As evidenced by the projects that were announced this year, corporate tenants realize that Birmingham has the geographic advantage of being an excellent strategic distribution location in the Southeast. This, in addition to a favorable business climate and quality standard of living, makes our region an excellent place for them to conduct business.

Rich Vanchina, CCIM, SIOR is Director of the Industrial Division and an Associate Broker at Southpace Properties

2015 Birmingham Office Market Review with Blake Crowe, CCIM

blake_bw_loOver the past two or three years, I have begun the office portion of the Southpace newsletter by saying something along the lines of, “Are we finally seeing the end of the tunnel?”

Unfortunately for the Birmingham office market, 2015 was not our year to break through with huge rebounds.

In fact, as of the end of the 3rd quarter of 2015, the market has posted a net absorption of -90,000 SF. In other words, we have lost approximately 90,000 SF in our multi-tenant inventory.

At the end of the 3rd quarter 2015, our vacancy rate is approximately 14.6%. If you include the sublease space that is on the market, our vacancy rate is approximately 16.8%.

The largest block of space vacated this year was Infinity Insurance, who left approximately 150,000 SF at the Colonnade to purchase and occupy a building downtown. Although it is a positive note that Infinity is staying in Birmingham, it does not take too many of those “punches to the nose” to do some real damage to the numbers.

These are obviously not great numbers to boast about. However, if you focus on just Class A product, our vacancy rate is approximately 9.3%. That is not too bad, especially if you compare Birmingham to the rest of the southeast. Compared to the top 11 office markets in the southeast, we are in sixth place behind Nashville, Jacksonville, Memphis, Raleigh and Louisville. At 19,700,000 SF, our market is much smaller than some of these others in the southeast.

The Birmingham office market is comprised of seven submarkets. The Midtown submarket is historically the strongest submarket in Birmingham, however, Southside has overtaken it this year. The vacancy rate is around 7.1%. The Highway 280 / I-459 submarket is hovering around an 11.6% vacancy rate. The Southside submarket is approximately 5.9% vacant. The Central Business District has a vacancy rate of around 16.4%. The Riverchase submarket is in the 11% vacancy range. The weakest submarket we have is the Oxmoor submarket. With a vacancy rate at approximately 37.5%, this submarket continues to struggle even though it has seen a positive absorption so far this year.

Class A rental rates average $21.50 per square foot. Class B rate average is $15.00 per square foot and Class C rates are approximately $11.25 per square foot. It is likely that these rates will increase in 2016. There were modest increases in the A rates in 2015, however, B and C rates dropped slightly this year. Landlords will likely continue to be aggressive in offering rental concessions to increase activity and occupancy. The method appears to be working.

Despite being considerably smaller than our Southeast rivals, Birmingham has received a lot of attention from outside investors this year. The Hertz Investment Group purchased the Wells Fargo Tower. Privet Investments purchased Two North 20th, The Crescent Building and Urban Center at Liberty Park. The Matrix Group purchased Meadow Brook North, and Point One Holdings purchased Colonial at Blue Lake and International Park.

At the end of the 3rd quarter 2015, 89 buildings have been sold. In 2014, a total of 59 buildings were sold. In 2015, eight buildings sold that were over 100,000 SF!
I mention the information above to say even though we have significant negative absorption, outside investors see value in Birmingham….and they should! Birmingham is a slow and steady market. We generally hold rental rates along a steady plain with modest occasional increases.

During the “good times” people hate that we are slow and steady; however, when the inevitable downturn comes, they love our market!

Significant deals that happened in the office market this year:


Bradley Arant Boult Cummings, LLP renewed at One Federal Place  –  209,291 SF
Labcorp expanded in Midtown Center  –  25,048 SF
Education Corporation of America renewed at Grandview Plaza  –   57,371 SF
Newquest Management of Alabama renewed at Chase Corporate Center  –  71,923 SF


Meadow Brook North  (508,976 SF)  –  $35,962,500
The Birmingham News Building (120,493 SF)  –  $19,591,353
Wells Fargo Tower (514,893 SF)  –  $75,980,00
Inverness Center (455,853 SF)  –  $53,400,000
BB&T Building (122,228 SF)  –  $15,190,000

Blake Crowe, CCIM is Director of the Office Division and an Associate Broker at Southpace Properties

2013 Industrial Market Review with Rich Vanchina, CCIM, SIOR

Rich VanchinaAfter experiencing a relatively flat 2012, occupancy rates of industrial real estate increased slightly in Birmingham during the first three quarters of 2013. The overall occupancy rate of the 14.5 million SF of multi-tenant industrial space increased to approximately 84%. As expected, this modest increase in absorption has finally resulted in a slight increase in rental rates.

Continue reading “2013 Industrial Market Review with Rich Vanchina, CCIM, SIOR”

2013 Retail Market Review with David Ashford, CCIM

David Ashford“Are we there yet?” As a father of four boys I hear this a lot. And as I reflect on the Birmingham retail market in 2013, I have to ask myself the same question.

Things seem better; rents seem to be growing, concessions are waning, the phone seems to be ringing more often and vacancy rates are dropping. But really, “Are we there yet?” Have the economy and real estate market really improved in the last twelve months or is this simply a mirage? Let’s look through the activity of this last year and you can be the judge.

Continue reading “2013 Retail Market Review with David Ashford, CCIM”

2013 Office Market Review with Blake Crowe, CCIM

Blake CroweAre we finally seeing light at the end of the tunnel? Birmingham’s office market appears to be reaching acceptable vacancy levels.

The 3rd quarter vacancy rate in 2011 was 17.5%. In 2012, the vacancy rate in the same period was 19.6%. Currently, the vacancy rate for Birmingham is approximately 14.1%. To have a positive swing of this magnitude is great for our market. In the 3rd quarter, we’ve had a positive absorption of approximately 112,000 SF. Year-to-date, we’ve had a positive absorption of approximately 122,000 SF. For a market that has approximately 18,500,000 SF of office space, that’s another sign of improvement.

Continue reading “2013 Office Market Review with Blake Crowe, CCIM”

Positive Absorption and Lower Vacancy for Retail in Birmingham

By David Ashford, CCIM, Director of Southpace Retail Division

The overall retail market saw a 204,000-square-foot positive absorption in the second quarter of 2012.

The vacancy rate is 11.1%, which is down from 11.8% in the first quarter. This can largely be attributed to Crestwood Festival Center, which saw about 50,000-square-feet of positive absorption. Continue reading “Positive Absorption and Lower Vacancy for Retail in Birmingham”

Slight Improvement in the Second Quarter 2012 Industrial Market

By Rich Vanchina, CCIM, SIOR

While none of the deals that have happened this year are exciting by themselves, it’s a pretty fair amount of market activity when combined. Deals are getting done to take available space off the market.

During the second quarter of 2012, we continued to see slight improvement across the entire market bringing us to +/-240,000-square-feet of total absorption so far this year. Continue reading “Slight Improvement in the Second Quarter 2012 Industrial Market”