Sizable Transactions Set the Tone for Birmingham’s Office Market
Pick up any Birmingham newspaper and the headlines will likely reveal plans for a historic building renovation, a new mixed-use development or a prominent Birmingham company expanding into the Central Business District (CBD). Birmingham has enjoyed a surge of development over the last few years, with nationally recognized projects such as Railroad Park and Regions Field, the renovations of prominent downtown buildings and the emergence of new districts throughout the city.
With all the development going on, it’s no wonder that the Birmingham office market is thriving with investors taking an interest in many of the city’s best Class A properties. The years 2014 and 2015 marked a record number of Class A properties trading to prominent national investors, and the trend seems to be continuing into 2016.
Over the past year, Hertz Investment Group expanded its Birmingham footprint to include Inverness Center (four buildings), the Wells Fargo Tower and the BB&T Bank Building, a total of more than 1 million square feet. The Matrix Group purchased the four-building portfolio Meadow Brook North, totaling more than 500,000 square feet. 2016 is off to a promising start with the sale of one of the Southern submarket’s most prominent buildings, the 211,335-square-foot Chase Corporate Center, to Priam Capital.
Local investors have been just as eager to purchase office properties in Birmingham, proving the dedication of the business community to the current Birmingham revitalization. 2015 marked the sale of the former 120,493-square-foot Birmingham News Headquarters, located in the CBD, to Infinity Property & Casualty. In addition, Meadowbrook 2500, 2600 and 2700 sold in two separate transactions to two local investment groups.
Two of the biggest stories for the Birmingham area in 2015 were the announcements that HealthSouth plans to build a new 200,000-square-foot headquarters in Liberty Park and ServisFirst Bank is breaking ground on its new headquarters, a 100,000-square-foot facility that will be located in the Midtown submarket. These two developments are the first significant Class A office buildings to be constructed since the economic downturn.
Office users have also shown dedication to Birmingham through several large lease renewals and expansions. Viva Health announced plans to add an additional 400 jobs to its CBD headquarters, and the state’s largest law firm, Bradley Arant, announced plans to remain in its 209,291-square-foot location at One Federal Place. Prominent Birmingham technology companies are also expanding into the CBD, such as Atlas RFID Solutions at the Gray Construction Building, which is currently under renovations and is located in the midst of the thriving Theatre District.
Overall occupancy in the Birmingham office market is 90 percent and multi-tenant occupancy is 85 percent. These numbers dropped slightly in 2015, but remain stronger than the two previous years. The future of the office market is bright, and development isn’t just taking place in the CBD.
The suburban submarkets have multiple projects in the works such as the Patchwork Farms mixed-use development and activity surrounding the new Grandview Medical Center, which was completed and occupied in October 2015. Back downtown, the area surrounding the Regions Field Ballpark and Railroad Park, known as Parkside, has multiple office and multi-use developments in the works or recently completed.
With a vibrant redevelopment scene in the CBD and projects popping up throughout the suburbs, the Birmingham office market is poised for a successful 2016. Birmingham has received national accolades for its food scene, local attractions and latest projects, giving the city even more appeal to national investors to get in on the action. The office market will surely keep a competitive edge as more developments are announced and completed throughout the coming year.
— By Sam Carroll, SIOR, Vice President, Office Group, Graham & Co. This article originally appeared in the April 2016 issue of Southeast Real Estate Business.