Retail 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