Birmingham Retail Market Sees Strong Backfilling Activity, Infill Developments

Birmingham’s retail market continued to see positive growth in 2018, and it’s safe to argue this is largely due to a significant amount of retail space being backfilled with entertainment, discount, medical and first-to-market tenants that otherwise may not have been able to enter the market. Dave & Buster’s backfilling a Forever 21 space at the Riverchase Galleria, Urban Air leasing a former hhgregg box in Trussville, Ollie’s acquiring the former Toys ‘R’ Us box in Hoover and Floor & Décor backfilling the former Kmart in Homewood are just a few recent examples of this in Birmingham.

Two additional noteworthy deals that have been recently announced include REI opening its first Birmingham location in a portion of the former Toys ‘R’ Us box at The Summit and the Dick’s Sporting Goods/Golf Galaxy combo store moving into the soon-to-be former Academy Sports + Outdoors space at Lee Branch. The new combo store will be Golf Galaxy’s first location in Alabama.

These two deals alone all but confirm this backfilling trend is going to continue for some time. More often than not, you will find these new tenants are paying higher rents, driving larger traffic volumes and generating more sales tax income for the municipalities.

David Plummer
Vice President of Leasing & Brokerage,
Retail Specialists

Why is this trend continuing? Bankruptcy has been one of the leading causes of recent retail store closures in Birmingham, but one end leads to another beginning. The reality is Birmingham has seen its fair share of anchor boxes come available in the past 24 months, but growing interest in the market has driven many tenants to act swiftly and pay stronger rents in order to secure these spaces while the opportunity is there. New supply has created new opportunity that has proven to be a win-win for both tenants and landlords.

New developments

Many new developments have also come to life in 2018 in Birmingham. These include the new Stadium Trace Village located on Highway 150 and Interstate 459 in Hoover, Homestead Village on Highway 11 in Trussville and the roughly 400,000-square-foot District 31 retail development planned along Interstate 65 in Alabaster. What these developments all have in common is their infill locations within existing strong suburban markets.

Grocery wars

Like many other larger markets throughout the Southeast, Birmingham has also seen a steady supply of new grocery-anchored developments. Publix and Aldi have been leading the way as they both have added multiple new locations to the market within the last 12 months, and there is no sign of them slowing down anytime soon.

A number of these new locations have come in the form of backfilling existing retail spaces, including the former hhgregg that Aldi leased on Highway 280, and the two Western Supermarket locations Publix Super Markets recently acquired in Mountain Brook and Vestavia.

In addition to these, Publix is also anchoring three new developments that are currently under construction, one of which being Tattersall Park at Highways 280 and 119. The other two are Lakeshore Pavilion along Lakeshore Parkway at the main northern access point to Ross Bridge and The Bray at Liberty Park located just down the road from the new Encompass Health headquarters.

Non-traditional retail

Non-traditional retail tenants have also become a large player in the competition to secure traditional
retail space. Urgent care practices such as American Family Care and MedHelp, along with dental practices like Heartland Dental and Aspen, fitness concepts including Planet Fitness and even freestanding emergency rooms continue to pop up throughout the Birmingham metro area.

These medically oriented uses not only provide convenient services to the communities they lie within, but they also drive additional traffic to the surrounding retailers. For example, University of Alabama at Birmingham’s new freestanding emergency room on Highway 150 in Hoover affords someone the opportunity to get in and out of an emergency room within one hour.

The bottom line is Birmingham’s retail market is healthy and holding strong in 2019, and many professionals in the industry agree that the momentum will continue for the foreseeable future. We can all expect to see additional new retailers enter the market in the coming years as Birmingham’s retail market becomes increasingly of interest as a focus expansion market for retailers around the country.

— David Plummer, Vice President of Leasing & Brokerage at Retail Specialists. This article originally appeared in the April edition of Southeast Real Estate Business.

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