What a time to write an article on the state of the retail real estate market in Birmingham. A few short weeks ago this would have been a much easier task.
The fundamentals of the Birmingham retail market are healthy and exciting despite the current health crisis and the fact that we have experienced very little population growth. I travel across the country regularly, and there is a national undercurrent about Birmingham that is exciting. Birmingham is spoken about nationally as a city with great food and quality of life, which are the types of things always said about a city prior to it hitting a tipping point.
We expect that consumer behavior is going to be different coming out of the pandemic, and that the way retail and restaurant businesses operate will continue to adapt to that consumer behavior.
Robert Jolly
CCIM,
Founder and CEO,
Retail Specialists
Traditional developments
Traditional shopping centers continue to be strong regional draws, with tenant mixes focusing on local and national brands. Lee Branch is one of the most successful in Birmingham. The Dick’s Sporting Goods and Golf Galaxy side-by-side concept opened in February at Lee Branch and is the first of its kind in the state.
Discount retail, although not new, will continue to fill a lot of the big box vacancies. Crazy Cazboys, a new Alabama-based closeout concept, is an excellent example of this. The company recently opened its first location and has several others in the pipeline.
Grocery-anchored development remains strong with Publix leading the charge with new stores on U.S. Highway 280 and Lakeshore Parkway, with an additional location set to open in Liberty Park. The grocer’s acquisition of Western Supermarkets has allowed the company to penetrate landlocked areas of the market.
There has been a pretty substantial decline in the organic grocer presence with Whole Foods Market closing its Hoover store and Sprouts Farmers Market closing its Vestavia location. Additionally, The Fresh Market in Trussville that was announced, but never opened, is now an Aldi.
To elaborate on the Whole Foods closing, I believe it was simply a poor location for a second store in the market. The intersection of Highways 150 and 31 in Hoover is more of a destination than a convenience play for the immediate rooftops. Hoover is a solid market with strong density, but the demographics don’t fit Whole Foods relative to its target income and age profile.
Restaurants to suffer, for now
The thriving restaurant scene in Birmingham is something we all enjoy. We’ve seen strong restaurant growth over the past five years, with consumer spending increasing 27 percent from 2015 to 2019 in the Birmingham metro area. However, we do anticipate this segment will be the hardest hit by the pandemic.
Fast casual restaurants will likely be the hardest hit with the economics of where those eateries tend to open. Additionally, many fast casual concepts are private equity-backed and they’ll be quick to shutter underperforming locations in the market.
I do, however, predict a huge bounce back in the restaurant and entertainment segments as consumers will most assuredly be ready to start going out again after weeks and months of self-quarantine. It will take a while to fill the vacancies created by the crisis and there will be new concepts, operators and chefs emerging, but the Birmingham restaurant scene will be back.
Fashion in jeopardy
There are several national fashion concepts that were known to be financially weak prior to the pandemic and shutdown. It is very likely that our industry will experience a rash of national fashion and soft good retailer bankruptcies and liquidations. This will certainly change the fashion segment of retail, and it remains to be seen what the future will look like, but there will be new brands and concepts emerging to fill the void.
Meanwhile, The Summit development, which features several fashion retailers, will continue to thrive as it almost serves as a tourist destination for the state and region.
Non-traditional retail
Physical therapy, urgent care and other medical providers like The Joint Chiropractic have been very active in the past six to nine months, and there are no signs of that slowing down. Heartland Dental and Aspen Dental continue to open new locations as well.
Wholesalers continue to thrive in Birmingham with Costco and Sam’s Club both opening new locations throughout the Southeast recently.
A car care startup called LA Wax Club is disrupting the car care industry. The firm is expanding in the Southeast region, having opened its first location in Birmingham.
The bottom line
We’ve been able to witness this city weather the September 11 attacks and the Great Recession, so we can lean on that for predictions in the retail real estate market. There will be ample opportunities for real estate investment coming out of this pause in the market.
In the coming years, Birmingham will recruit or seed major employers and then we better look out. Lastly, I believe that our rebound from this worldwide health crisis will be epic.
— By Robert Jolly, CCIM, Founder and CEO at Retail Specialists. This article originally appeared in the April 2020 issue of Southeast Real Estate Business.