Smaller market protects city from boom and bust cycle.
What office are you based in?
What area is your expertise?
Birmingham Industrial Market
What trends do you see presently in industrial development in your area?
Presently, some geographic areas of our market are soft. Primarily some of the bulk distribution markets located on the perimeter of Birmingham are experiencing a softness that our market has not seen in recent history. This softness is associated with the construction of new buildings which the market has not yet absorbed.
What type of industrial product is doing well in your area?
Office warehouse product is currently 91.1 percent leased. It is a very tight market with all submarkets in Birmingham experiencing the same kind of high levels of occupancy.
Who are the active industrial developers in your area?
There are different partnerships developing industrial product in the Birmingham market with either EGS Commercial Real Estate or Graham and Company leading the partnerships.
Please name one or two significant industrial developments in your area. What impact will these projects have on the market?
The most recently completed developments in our area have occurred in the Southern submarket. Shelby West and Shelby Commerce Park, IV are each significant developments (approximately 250,000 square feet each) which added product to a relatively new submarket. This development activity is causing more users to focus on this market as an alternate location for their distribution facility.
Where is the majority of development taking place? Why is this area doing well?
The majority of the development is taking place around the southern perimeter of Birmingham. The Interstate 459 southern loop and the distribution of the population are a few reasons these locations are seeing development. Also, the availability of developable sites has been an important part of where the construction activity is taking place.
What area do you expect to be the next big industrial development market? Why?
The same perimeter areas are likely to continue to have development activity once the softness, which some of these markets are experiencing, disappears. The Alabaster/Calera area, the Moody area and the Bessemer/McCalla area are all well located and positioned for future growth.
Please describe the industrial leasing activity in your area.
Leasing activity for the Birmingham Industrial market in 2007 has been due almost entirely to organic growth chiefly generated through relocation within the region and the expansion of existing operations, reflecting a strong local economy. Outside interest in the Birmingham market remains high. Second- and third-tier automotive suppliers, data centers, and biomedical research companies continue to demonstrate interest in Birmingham as the area economy maintains its broad-based growth.
Please describe the industrial sales activity in your area.
Sales in the area are healthy. There is generally limited availability of quality warehouse and distribution buildings which are available in the marketplace to purchase. Sales prices seem to have risen as the limited availability of these buildings and the cost to construct a warehouse building has increased.
Please give a measure of industrial vacancy rates and a measure of available sublease space.
Central Market – 8.8 percent
Eastern Market – 16.4 percent
Oxmoor Valley Market – 7.0 percent
Southern Market – 11.3 percent
Southwestern Market – 36.9 percent
Overall vacancy rate for the Birmingham market is 13.8 percent.
What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year?
Rates have affected the investment market more than they have affected the sale of industrial buildings in Birmingham. Overall, the economists are predicting a significant slowdown in the market for 2008. If a recession occurs, certainly the momentum in industrial would slow. However, one of the advantages to a market like Birmingham is that our economy is relatively stable and doesn’t experience the boom and bust cycle which many larger markets experience.
What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected?
The automotive sector will continue to absorb space as Alabama and the Southeast continue to attract suppliers from the North. Otherwise, organic growth in multiple industry sectors will account for absorption in our market.
Submitted by Mark Byers, SIOR, senior vice president with EGS Commercial Real Estate in Birmingham, Ala. Posted 02/07/08.