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Birmingham — Alabama's largest apartment market — is in the midst of a continued recovery from the economic downturn. The city posted a net-gain in jobs, occupancy and rental rates, which has helped spur new development, particularly at close-in urban locations.
Last year was a turnaround year for Birmingham. The city gained 700 jobs and the Birmingham-Hoover unemployment rate dropped to 5.8 percent by December, two percentage points below the national average, according to the Bureau of Labor Statistics. The gain in jobs was the first annual increase since 2007.
For the apartment market, 2012 results were strong: a 2 percent increase in occupancy pushed occupancy rates to 93.2 percent market-wide. Additionally, rent levels increased by 3.2 percent in 2011 and 1.9 percent in 2012, according to MPF Research.
The favorable market dynamics have drawn the attention of regional and national investors, which has led to healthy transaction and development volume. In 2012, 27 apartment complexes traded in the Birmingham MSA, totaling approximately $300 million in volume. Both local owners and several owners headquartered in New York and Florida, for example, made significant investments in Birmingham, including the CLK Properties acquisition of the five-property Park Lane portfolio in April.
On the development side, The Hill and 29 Seven are two examples of properties that had successful lease-up campaigns after opening in 2012. The Hill, a 122-unit property developed by Arlington Properties in downtown Homewood, has already reached above-market occupancy levels, with rental rates ranging between $1.50 to $1.75 per square foot. Apartments at 29 Seven, a mixed-use project at the corner of 29th Street South and 7th Avenue South in the Lakeview entertainment district, rent for between $1.25 to $1.42 per square foot. According to management, 29 Seven leased all 54 of its apartments in 60 days.
Current development activity is segregated to a few geographic areas. Downtown Birmingham is home to a majority of the new development pipeline. The downtown is benefitting from the newly constructed Regions Field baseball stadium, the new home of the Birmingham Barons (AA affiliate of the Chicago White Sox), as well as other entertainment options including bars, restaurants, and the new Westin.
The downtown market, which currently consists of mostly lofts and historic buildings, has enjoyed strong fundamentals during the last few years with occupancy in the mid-to-high 90s. There have been multiple development announcements in the last few months, including Parkside, a new $33 million apartment project near Railroad Park and Regions Field. Additionally, investors led by Birmingham developer Mark Elgin have finalized the purchase of the Booker T. Washington Insurance Co. headquarters, with plans to convert the property into apartment units.
Birmingham-based Daniel Corp. has two projects in the works, including Ashby at Ross Bridge, a 250-unit apartment project currently in lease-up, as part of its successful Ross Bridge development in Hoover. The National Association of Home Builders awarded Ross Bridge the “Best Community in America” in 2011, and the community includes a resort, golf course, single-family and retail buildings. Daniel Corp. is also on the project team for the redevelopment of Mountain Brook Village, where 276 new units are to be constructed.
The Birmingham rental market benefits from significant barriers to entry. The city’s mountainous topography and tough stance on new multifamily development from certain municipalities have led to, on average, 1,200 units delivered per year during the last decade. Birmingham’s low number of construction starts, along with the 1,400 units absorbed in 2012 (MPF Research), is a positive sign that occupancy and rent levels will remain strong throughout 2013.
— Jimmy Adams, managing director of MultiHousing Advisors LLC in Birmingham