Multifamily Investors, Developers Expose Montgomery as a Diamond in the Rough
Commonly referred to as the River Region, Montgomery is the second largest city in Alabama and the state capital. The Montgomery metropolitan area consists of Autauga, Elmore, Lowndes and Montgomery counties.
With a population approaching 374,000, the River Region’s diverse economy, skilled workforce, business-friendly climate and Southern charm continue to attract new residents and commercial development. Key industries in the Montgomery metro area include automotive, manufacturing, fabricated metals, plastics, warehousing/distribution and state/regional government.
As of June 30, total unit count in the Montgomery market is 6,588 with an average year built of 1997. According to the Axiometrics second-quarter 2016 report for Montgomery, annual effective rent growth has averaged 1.2 percent since the fourth quarter of 1996 with annual effective rent growth forecast to be 0.1 percent for 2016, 1.7 percent in 2017 and an average of 2.6 percent from 2018 to 2020.
The Axiometrics report also states the market’s occupancy rate has averaged 92.2 percent since the fourth quarter of 1995. Currently, occupancy in the Montgomery market is 89.6 percent as of second-quarter 2016, which is a slight decrease from 91.1 percent in the first quarter of 2016 and 90.7 percent in second-quarter 2015. Axiometrics projects the market’s occupancy rate to be 91 percent for 2016, 92.7 percent in 2017 and average 94 percent from 2018 to 2020. According to the Bureau of Labor Statistics, Montgomery’s seasonally adjusted unemployment rate was 5.8 percent in June 2016, down from 6 percent one year prior.
We continue to see strong transaction velocity and interest from local, regional and out-of-state equity throughout the Montgomery MSA, including Prattville and Wetumpka. Buyers are finding yield here and continue to express interest in growing scale and developing a market presence.
Downtown Montgomery is one of the state’s most successful downtown revitalization success stories and it’s a hotspot for entertainment, commerce and a fledgling “residential loft district.”
Situated in the heart of downtown Montgomery are historical landmarks such as the Court Square Historic District featuring the well-maintained Court Square Fountain, the Alabama Capitol Building and the Old Union Train Station. Located in downtown along the Alabama River, Montgomery’s Riverwalk Stadium, which seats 7,000 people, is the home of the Montgomery Biscuits Minor League Baseball team. The ballpark has become a key attraction and economic generator for the city, hosting additional events for residents throughout the year.
With this resurgence, new apartments are being added to the supply in downtown Montgomery:
o 79 Commerce is a newly constructed, 54-unit apartment community downtown that was delivered in 2015
o District 36 Lofts is a 100-unit apartment property downtown with completion anticipated by year-end 2016
o The Heights is a 164-unit apartment property downtown that was completed in the first quarter of 2016
While downtown continues to thrive, the suburban submarkets around Montgomery remain attractive to families throughout the River Region. Specifically, east of downtown Montgomery is a stable live-and-play area with The Shoppes at EastChase, Wynlakes Golf & Country Club and a new Whole Foods Market opening by the end of 2016. Development will likely continue further east especially around the community of Pike Road.
The Pike Road School System recently began its second school year with expanded services, including the addition of ninth-grade and academy learning opportunities. Alternatively, the suburb of Prattville, which is north of downtown Montgomery, continues to be an attractive suburban community in the Montgomery market. Located in Autauga County, Prattville offers a low cost of living and strong public school system, both of which make the city an appealing option. As evidence of this demand, there is currently a 150-unit apartment property planned in Prattville called Prattville Lofts.
The region offers a variety of public and private universities and colleges. Montgomery is home to Alabama State University (5,800 students), a widely respected, world-class institution of higher learning offering nearly 50 undergraduate and graduate degree programs. Auburn University at Montgomery (4,300 students) ranks among the South’s top universities by U.S. News and World Report, and The Princeton Review considers it one of the best colleges in the Southeast. Auburn Montgomery offers more than 90 fields of study at both the graduate and undergraduate levels. Other schools include Troy State University at Montgomery (4,300 students), Trenholm State Technical College (1,700 students), Huntingdon College (1,100 students) and Ingram State Technical College (550 students).
Maxwell-Gunter Air Force Base (AFB) is the area’s largest employer, with 12,500 personnel. The AFB is home to the 42nd Air Base Wing, which provides all base operating support, infrastructure and services support for 42,000 military personnel, contractor personnel, civilians and families. There are approximately 105 information-technology companies in Montgomery, many of which provide direct support to the AFB. Maxwell-Gunter Air Force Base generates an annual economic impact to the area of approximately $2.6 million.
Hyundai Motors Manufacturing opened its Montgomery plant in 2005. The company currently employs more than 3,000 full-time personnel in the Montgomery area. According to Made in Alabama, Hyundai has an estimated annual economic impact of nearly $5 billion.
— By David Oakley, Managing Director, Berkadia-Alabama. This article originally appeared in the September 2016 issue of Southeast Real Estate Business.