Birmingham’s Retail Market Bolstered by New Grocers, Mixed-Use Projects

Midtown 20 Publix Birmingham

20 Midtown in downtown Birmingham will span three buildings and feature a Publix supermarket, Starbucks Coffee and several upscale apartment residences. (Rendering courtesy of Cohen Carnaggio Reynolds)

Rodney Barstein, Retail Specialists LLC

Rodney Barstein, Retail Specialists LLC

Robert Jolly, Retail Specialists LLC

Robert Jolly, Retail Specialists LLC

Birmingham’s retail market remained steady in 2014, with approximately 10 percent of the total 24 million square feet available for lease. Birmingham is tracking above national averages relative to new ground-up and rehab projects that are announced or underway. Downward pressure on rents have challenged developers pro-formas, though the very friendly city and state incentives environment has allowed developers to creatively meet tenants conservative occupancy cost requirements.
While the Birmingham metro area is challenged by the threat of major closings by retailers like JC Penney, Sears and Kmart, there is a pipeline of first-to-market national retailers eyeing the growth submarkets, including Highway 280, Hoover/ Riverchase and Trussville.

New Grocers Enter Market
Trader Joe’s recently unveiled plans to open a 12,600-square-foot store at The Summit shopping center in the second half of 2015. Trader Joe’s provides a destination food option for the market. The Summit is leased and managed by Bayer Properties.

Arizona-based Sprouts Farmers Market recently announced it would be entering the Birmingham metro as well. Sprouts’ first local offering will be at Brook Highland Plaza on U.S. 280. The 22,457-square-foot store will serve an array of fresh produce and meats. Additionally, GBT Realty is developing a 25,000-square-foot Sprouts location at The Crossings of Hoover, a new development at the intersection of Interstate 459 and John Hawkins Parkway.

Whole Foods Market is building its second store in the market as well. The store will be situated on the site formally occupied by Bruno’s within Riverchase Village Shopping Center, located at the intersection of Highway 31 South and Lorna Road in Hoover.

Mixed-Use Developments
Anchoring the new $130 million mixed-use development in Mountain Brook Village will be Western Supermarkets. Construction of the 28,300-square-foot store will begin by summer, with an opening slated for early spring 2016. The grocery store will replace the current Western in Mountain Brook Village and will be torn down after the new store is complete.

Additional retailers that will join the 68,000-square-foot project to include 30,000 square feet of first-to-state upscale boutique retailers and restaurants. Along with the grocery store, new restaurants, and other shops, the development recently opened a 276-unit luxury apartment community. Later this fall, a 100-room Grand Bohemian Hotel will open with a rooftop bar during the summer of 2015.

Plans are coming together for the downtown development that will be anchored by a 34,000-square-foot Publix supermarket. The full-service grocer and pharmacy will anchor one of three buildings that will make up the development 20 Midtown. Publix announced in May that it had approved the location and would build and occupy space at the corner of 20th Street South and Third Avenue South.

Starbucks Coffee also committed around the same time to occupy space at 20 Midtown. The Seattle-based coffee store chain will anchor one of the buildings that will also feature 36 apartment units. The Publix building will have 86 apartments.

The mixed-use project will feature a potential combination of retail, restaurants, office and multifamily lofts.

The three buildings will sit on a total of 200,000 square feet of property, but vertical construction will put the total building square footage around 400,000 square feet, not counting the parking spaces that will be built into the development.

The developers’ limited liability company, Firestone Flowers, has been busy acquiring properties around the old Firestone building site over the past several months in preparation for the roll out of 20 Midtown.

In November, the city of Birmingham approved more than $6 million in incentives for the project. Plans for the third building, which will also have a mixed-use component, are still being finalized. The project is being developed by developers Dick Schmalz of RGS Properties and Scott Bryant of Scott Bryant & Co.
Near the new Publix downtown, Alabama Power has announced preliminary plans to redevelop the Powell Avenue Steam Plant.

Under these conceptual plans, Alabama Power would preserve the 117-year-old steam plant and redevelop the properties for a mixed-use facility that could include an urban park plaza for outdoor events, a museum and retail space.

Due to the new construction and strong fundamentals, Birmingham’s retail market is shifting back into a landlord’s market. Landlords are getting control back and are pushing rents higher. The new supply continues to be absorbed by the market, which gives landlords leverage to push rents and be more particular as to who they allow in their centers.

— By Rodney Barstein, Executive Vice President, and Robert Jolly, President and CEO, Retail Specialists LLC. This article originally appeared in April 2015 issue of Southeast Real Estate Business.

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