The Birmingham industrial real estate market has remained relatively resilient compared to many U.S. markets, but recent trends show a shift in demand patterns with recent softness in the distribution sector compared to growing activity from manufacturing users.
Overall market fundamentals remain stable. Birmingham continues to benefit from disciplined development and historically tight vacancies. Multi-tenant leased vacancy has generally remained well below national averages, hovering around the 5 percent range in the first half of 2025. Rent growth remains positive at about 3.5 percent annually.
Renewing or vacant second-generation rents strategically lag new construction rents by about 15 to 20 percent. The second-generation base rent range is $6 to $7.50 per square foot depending on size, location and quality.
Distribution and logistics demand has softened in recent months. Following the surge of warehouse construction and demand during the pandemic, leasing activity slowed by 2025. Approximately 1.3 million square feet of speculative space was delivered locally in 2022 and 2023, with asking rents at about $8 per square foot.
The early deliveries benefited while the last projects to deliver were slower to lease as the economy stalled in the post-pandemic Biden era. Presently, 109,000 square feet of first-generation space delivered in 2023 remains unleased.
While the speculative surge of 2021-2023 is over, the vacancies today are the result of corporate America pulling back for a multitude of reasons. This has resulted in about 800,000 square feet of quality space coming back to the market for direct lease or sublease ranging from 30,000 to 280,000 square feet. These vacancies, which represent about a year’s worth of absorption, are in addition to what was already available.
The current vacancy level, including sublease space, is 12 percent. Recent positives include the 311,900-square-foot, long-term lease by the U.S. Postal Service being true absorption of the mentioned supply of spec space. Mayer Electric was the most recent announced lease of former spec space, taking 55,600 square feet in the first quarter.
The largest second generation lease in the first quarter was 145,000 square feet taken by an expanding local company in the East submarket. 2026 will be a year in which the Birmingham market offers tenants quality second generation options. The expectation is that the market will move toward equilibrium by year’s end.
In contrast to distribution users, manufacturing, automotive and aerospace suppliers continue to generate steady demand across Alabama, benefiting from reshoring trends and the state’s strong industrial base. These industries are increasingly driving industrial activity and development across the Birmingham region with many new projects going to existing buildings or sites able to be tailored to specific manufacturing users rather than speculative warehouses.
The most notable local project is the completion of the new headquarters and distribution center for Coca Cola Bottling Company United. The 106-acre Brownfield site sits prominently along I-59/20 across the interstate from Birmingham International Airport and has an announced capital investment of $330 million.
Regionally, Minth Group Ltd., a Taiwan-based company, is redeveloping the former Republic Steel/Gulf States Steel site in Gadsden. This is a 400-acre brownfield site that Minth plans to convert to a $430 million automotive parts manufacturing campus.
In the Auburn/Opelika metro area, Graham & Co.’s industrial team listed and sold the former Joanne Stores Distribution Center (spanning approximately 702,000 square feet) to manufacturing-focused Faith Technologies, a Wisconsin-based leader in the energy and construction sectors.
Other notable development announcements have focused on the data center sector. Meta is expanding its Montgomery presence again, bringing the campus to 1.3 million square feet; “Project Marvel,” a multi-building, $14.5 billion investment, has been proposed in Birmingham suburb Bessemer; and Nebius is developing an AI factory in Birmingham’s Oxmoor Valley submarket. This shift toward data centers and alternative types of manufacturing is expected to help stabilize other vacancies and maintain balance between supply and demand.
Looking ahead, Birmingham’s industrial sector is expected to remain stable, supported by its strategic location in the Southeast logistics network, competitive occupancy costs and strong presence of regional manufacturers. Although the distribution sector may experience moderate softness in the near term, expanding manufacturing and supplier activity should provide a strong foundation for long-term industrial demand in the Birmingham market.
Lastly, it is worth noting the exciting announcement by The United States Coast Guard, which is set to acquire the vacant campus of Birmingham-Southern College with a goal of training beginning this year. After a national search, the Coast Guard selected the 192-acre campus for a new training center for 1,200 recruits on a sustained basis.
— By Sonny Culp and John Coleman, senior vice presidents with Graham & Co. This article was originally published in the March 2026 issue of Southeast Real Estate Business.