We hear this question a lot: “How is commercial real estate doing in Birmingham?”
Many people assume our market is experiencing the same volatility seen in national headlines over the past few years. The reality is a bit different. Birmingham is actually a stable market. While we certainly feel broader economic shifts, our office sector has avoided many of the dramatic swings seen in larger metro areas and is gradually positioning itself for future growth.
To set the stage, Birmingham’s office market consists of approximately 18.8 million square feet of multi-tenant inventory across five submarkets, four of which include Class A properties. Overall absorption for fourth-quarter 2025 totaled negative 35,336 square feet following a positive third quarter.
However, the market still finished the year with 56,786 square feet of positive net absorption. Occupancy remained largely stable throughout the year, with the overall vacancy rate holding at 19.8 percent. Direct vacancy improved slightly to 16.6 percent by year-end.
Leasing activity also remained steady across the market. In total, 640,255 square feet of office space was leased in 2025, representing an approximately 14 percent increase compared to the amount of office space leased in 2024. Class A transactions accounted for more than half of the total leasing volume, reflecting the continued flight to quality among tenants. The Midtown submarket led the market in leasing volume, followed by the U.S. 280/Southern corridor and the central business district (CBD).
Tenants rethink office space
Across the Birmingham region, tenants are approaching their office strategies more thoughtfully as compared to previous cycles. Many companies are using lease expirations and renewals as opportunities to right-size their footprints and reconfigure their space to better support collaboration and client interaction.
Some organizations are reducing square footage while maintaining offices that facilitate meetings, teamwork and culture building. Other companies are bringing more employees back into the workplace and investing in updated office environments designed to support hybrid work models.
These changing priorities are also influencing where companies choose to locate. Submarkets that offer convenient parking, strong transportation access and proximity to residential neighborhoods and retail amenities are becoming increasingly attractive. Businesses are placing greater value on locations that allow employees to move easily between work, home and everyday services.
Competitive cost advantage
Birmingham continues to offer a cost advantage compared to many larger metropolitan markets across the Southeast. Office rents remain relatively affordable, which can be a meaningful differentiator for companies evaluating expansion opportunities.
Asking rents across the market remained stable throughout 2025. The weighted average asking rate closed the year at $22.12 per square foot, while Class A properties averaged $23.91 per square foot. The Midtown submarket continues to command the highest rental rates in the region, averaging $27.84 per square foot due to strong demand and limited availability. The CBD submarket followed with an average asking rate of $23.45 per square foot.
The Birmingham region continues to be an attractive destination for growing businesses. Several established local companies, including Coca-Cola United, Medical Properties Trust and Brasfield & Gorrie, have continued expanding their office footprints in recent years, reflecting increased confidence in the region’s long-term business environment.
Investment trends
Although office sales activity has remained relatively flat the past few years, Birmingham saw several notable transactions during 2025 that signal renewed confidence in well-located institutional assets.
The most significant transaction involved the sale of the Colonnade Office Towers North and South in the 280/Southern submarket. The two-building complex totals nearly 744,000 square feet and was acquired by outside investors for $144 million. The seller, Peakstone Realty Trust, completed the transaction as part of a broader strategy to shift its portfolio toward industrial assets. The buyer, Net Lease Capital Advisors, acquired the towers with Southern Company fully occupying both buildings.
Downtown also recorded a notable sale when The Plaza, a 240,000-square-foot office tower that serves as the headquarters for Viva Health, was purchased by an Atlanta-based investor for $10.6 million. Another noteworthy transaction involved Regions Financial Corp. selling its former corporate campus, a 296,438-square-foot, Class A office building situated on more than 55 acres in the Vulcan/Oxmoor submarket, to a data center developer. The conversion to a data center removes a significant block of vacant office space from the market and signals a positive shift for the office sector’s long-term balance.
Looking ahead
Mirroring national trends, new office construction in Birmingham will remain limited in 2026. This lack of new supply positions existing Class A properties to benefit from tenant demand and could support gradual vacancy improvement in the coming year. Additionally, as more companies have encouraged employees to return to the office, demand for well-located and high-quality office space should remain steady.
Downtown Birmingham continues to see growing momentum. The recent opening of the Coca-Cola Amphitheatre in the Uptown Entertainment District has brought new activity and visibility to the area, and additional urban revitalization projects are expected to further enhance the district’s appeal. The University of Alabama at Birmingham (UAB) remains a major driver of regional growth, with approximately $872 million in campus projects currently in the pipeline.
The market also offers several large blocks of available space in both downtown and suburban submarkets, creating opportunities for corporate users seeking larger office footprints. Birmingham’s greatest opportunity will be retaining and developing local talent while continuing to support the success of existing businesses. Those efforts will play an important role in attracting new industries and sustaining long-term growth for the city’s office market.
— By Nick Vogel, Associate, Cushman & Wakefield | EGS Commercial Real Estate. This article was originally published in the March 2026 issue of Southeast Real Estate Business.