Sonny Culp of Birmingham-based Graham & Co. looks at the Birmingham industrial market through an optimist’s glasses. While the recession has slowed activity significantly — Culp estimates that the bulk distribution vacancy rate is somewhere around 20 percent — transactions are still taking place. And on the bright side, at least the current development standstill means Birmingham won’t have tons of warehouse space sitting empty for the next few months. “The economy has slowed construction, so that when the market rebounds, those projects that need to get filled first most likely will,” Culp says.
Birmingham, by location and size, is a secondary market. The city’s industrial market is closely tied to the health of corporate America; when corporations do well, space gets occupied, but in the current stagnant financial situation, it’s harder to find firms hungry for a transaction. “Historically, Birmingham has always been two or three deals shy of a shortage,” Culp says. “Today, you might say that two or three figure is eight or nine.”
Sales are now the territory of mom-and-pop companies, and the leasing arena mostly consists of renewals and small leases for short terms. This is the broker’s new reality. “Any transaction person is finding room on their plate to do some smaller deals, things that they might not have wanted to do previously,” he says. “Things are still going along as it relates to user transactions. There is still some inventory available, and companies that are in sectors that have not been killed by the economy are doing some things.”
Culp recently brokered a lease renewal of 80,500 square feet for Target Container Company in the Perimeter Industrial Park in Bessemer, a suburb of Birmingham. The space features 24-foot clear heights, rail availablity and a concrete tilt-wall construction. The lease renewal means the tenant will stay at Perimeter for another 15 years. According to Cushman & Wakefield, during the second quarter, Kaman Industrial Technologies leased 31,350 square feet in the Parkwest Corporate Center, and InMark leased 23,625 square feet in the Avondale Commerce Park. The Birmingham News leased 8,800 square feet of warehouse space, and Goodcents Solutions leased up 4,500 square feet in an industrial property.
All across the country, landlords are offering tenants concessions in order to fill vacant spaces or secure renewals. Culp says it’s hard to rate how landlords are sweetening the pot in Birmingham simply because there aren’t a lot of tenants looking for space. “On a new deal coming into town, I don’t know what the concessions are if any,” he says.
To get the industrial market back on track, consumers need to start shopping. As confidence increases, companies will ramp up production levels and hire back workers. While the market may look a little different when economic comfort returns, Culp is certain Birmingham will bounce back quickly. “There will be companies that will need less space, but there will also be new companies to occupy the vacant space,” he says. “It’s always going to be an evolving mix of growth and contraction.”
— Jon Ross