Retail Activity Leads the Way in Birmingham’s Revitalization
The Birmingham retail market had an explosive 2016. Several large projects were announced or completed, while traditional indicators of market health also showed promising signs of growth. TopGolf will soon be coming to the Uptown District, while Regions Field, home of the Birmingham Barons minor league baseball team, continues to attract surrounding development.
Breweries remain a mainstay in Birmingham’s social scene, and they have demonstrated a capability to revive entire neighborhoods. As the natural beauty of Alabama becomes more important to residents and newcomers, the Red Rock Trail System’s green space bicycle system, which encompasses over 200 miles of green space trails and over 600 miles of street-based paths connecting all corners of the Birmingham area, will continue to grow in importance and recognition.
By the fourth quarter of 2016, retail vacancy had decreased to 5.4 percent, down from 6.1 percent at the beginning of 2016, while market rents for major submarkets held steady around $12.37 per square foot.
Downtown Birmingham, which hasn’t been viewed as a major retail area for decades, is the site of resurgent interest and accompanying capital. Some of the revitalization is occurring due to a renewed interest in public greenspaces, such as the recently developed Rotary Club Trail and Railroad Park. Both of these new parks aim to give the downtown area new life, and already some commercial ventures are following. A new Publix with high-rise residential opened in February, and the ripple effect is already apparent. While Publix was still under construction, both Starbucks Coffee and Chipotle Mexican Grill opened across the street. Since Publix’s completion, other nearby buildings have traded with the stated goal of new multi-tenant retail construction.
The combination of ground-level retail and high-rise housing can also be seen at Bayer Properties’ recently renovated Pizitz Building. The ground floor houses both a food hall and traditional retail space leased to retailers like Warby Parker. The Pizitz Food Hall aims to act as an incubator for local chefs and restaurants by having a mix of traditional restaurant space and rotating tenants. By bringing specialty food vendors into a central, highly publicized location, the food hall is showcasing one of Birmingham’s strongest attributes: the quality of restaurants and local eateries. The culturally diverse and fast-casual nature of the vendors makes the food hall a destination.
Another major development in Birmingham is Lane Parke, a newly established lifestyle center in Mountain Brook. Lane Parke offers nearby residents a blend of services aimed at creating an unmatched experience. The design, which draws from local themes of villages and bucolic living, encourages walking and traditional greenspaces. Phase I retailers are largely service- and luxury-based tenants.
The Grand Bohemian Hotel, an upscale boutique hotel, is also located on the development.
Within the scope of more traditional retail, Bayer Properties purchased 125 acres on Highway 280 across from The Summit, Bayer’s 1 million-square-foot upscale lifestyle center. While Bayer has not yet confirmed plans for the acquisition, the belief is that The Summit will expand over Highway 280. This new space would add on to what is already Alabama’s premier shopping experience along one of the area’s major retail corridors.
In Vestavia, another Publix-anchored center is under construction. The $20 million Patchwork Farms Shopping Center, which is being developed by Blackwater Resources, will offer 80,000 square feet of retail space. The shopping center is part of the larger Patchwork Farms development, which will also feature multifamily and office space. Publix will occupy 45,600 square feet, with the remaining to be leased to additional tenants.
Two major transactions dominated the retail sales market in 2016. Cahaba Village, a Whole Foods Market-anchored center located on Highway 280, sold to L&B Realty Advisors for $59.9 million. The center, whose other tenants include Diamonds Direct, FedEx, Charles Schwab and others, enjoys a prominent location in close proximity to both Mountain Brook and Vestavia. The other major transaction was the Shops at the Colonnade, which was purchased by Shannon Waltchack for $29.9 million. The Shops is an 18-acre center with 127,000 square feet of retail space. Some of the center’s tenants include Cracker Barrel and Gold’s Gym.
Those of us working in the Birmingham retail market are thrilled with the momentum the sector carried into 2017. Much of this energy can be attributed to renewed interest from investors outside Birmingham that are willing to invest premier capital into a secondary market with attractive underlying economics. With the ongoing construction and near-constant announcements of new projects, as well as injections of institutional capital, the market should continue to exhibit strength and growth through 2017 and beyond. Critical to this continued success is Birmingham’s mix of national retailers and unique local shops. These diverse providers, which are spread out geographically across the entire metro area, have proven able to grow concurrently with each other and with the exciting development occurring all over Birmingham.
— By Josh Randolph, Senior Director and Thomas Hiltz, Financial Research Analyst, Colliers International. The article originally appeared in the April 2017 issue of Southeast Real Estate Business.