Q2 2022 Industrial Real Estate Report: Birmingham, AL
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Industrial real estate in Birmingham, Alabama is presenting serious opportunities to investors in 2022.
Home to several of the nation’s larger corporations, including American Cast Iron Pipe Company and Encompass Health, the city of Birmingham is also welcoming emerging industries like life sciences and digital media.
During the second quarter of 2022, Alabama’s unemployment rate fell to 2.6%, almost 1% lower than national numbers.
In addition, several major economic developments are underway in Alabama, reinforcing the strength of the state’s automotive, aerospace, and manufacturing industries.
General Area Overview & Demographics
Alabama offers a business-friendly economic climate and a prime location near major cities such as Atlanta, Georgia and Nashville, Tennessee. These are both favorable factors driving prices and Birmingham industrial real estate sales.
Census stats recorded the Birmingham/Hoover Metro area’s 2019 population as 1.1 million, making it the state’s largest population and economic region.
Alabama has also been ranked among the ten best states for its cost of living by U.S. News & World Report.
Here are details of current trends in Birmingham’s industrial real estate markets.
Summary of Birmingham Industrial Real Estate Performance in Q2 2022
Birmingham’s multi-tenant industrial market experienced a downturn and negative absorption during Q2 2022 due to a large amount of space becoming available at Calera Commerce Park, 28 miles south of Birmingham.
However, new industrial leases continued to be negotiated, adding up to 324,750 sq. ft. of transactions from April to June. This helped increase the year-to-date total leasing activity to over 575,000 square feet.
Next, let’s take a closer look at how these transactions are affecting prices.
What’s the average cost per square foot to rent warehouse space in Birmingham?
As of mid-year 2022, the average asking rate for all commercial/industry property types in Birmingham came to about $5.70 per square foot.
This number is slightly below the Q1 rate of $6.05 per square foot and above the year-over-year rate of $4.96 per square foot.
Pricing for warehouse space for different submarkets told a different story:
- The Oxmoor Valley submarket, currently with a 2.0% vacancy rate, came in at $11.00 per square foot. These were the highest prices for Warehouse and Distribution.
- The Eastern and Southern submarkets both came with rental prices per square foot around $5.40, even though the Southern submarket had a much higher (9.1%) vacancy rate than the Eastern submarket’s 0.2% vacancy rate.
Warehouse and industrial purchases in and around Birmingham were a different story, with square footage pricing from $33 to over $100.
What’s the average cost per square foot to buy warehouse space in Birmingham?
Based on our recent data, over 18,000 acres of commercial property are currently available for sale in Alabama, with an average sale price of $809,283. This adds up to an overall market value of around $538 million.
Within the six largest industrial real estate sales during Q2 2022, pricing per square foot ranged from $33 to $116.
Purchase & Leasing Activity
Vacancy for Birmingham’s industrial real estate is currently at 4.8% and is predicted to make steady downward progress.
Leading grocery retailer Kroger announced that they would pick up a lease for space in Birmingham as part of their hub-and-spoke network, creating 160 new jobs.
They will lease 50,000 square feet of space designed to interface directly with their hub in Forest Park, GA, which is a 160-mile drive on I-20 West.
Notable Industrial Real Estate Deals in Birmingham in Q2 2022
A 67,000 sq. ft. warehouse property at 101 39th St North sold for $7.8 million to STAG Industrial Holdings, LLC.
This sale represented the highest square footage price for the quarter, coming in at $116 per square foot.
3501 Warehouse Depot, located at 3501 First Avenue North, was purchased by Stout Operating Firm LLC.
This sale was closed for $13.25 million, with 239,000 square feet going for $55 per square foot.
Recently renovated, the property is conveniently close to Interstate Highways 20 and 65.
Notable Industrial Real Estate Leases in Birmingham in Q2 2022
Coming in first place for square footage, 1840 Corporate Woods Drive in the Southern submarket, a Class A facility within the Shelby West Corporate Park, was home to a 116,563 square feet leasing agreement.
Oxmoor Valley’s 69,140 square foot lease at 230 West Valley Avenue was signed with new tenant The Parts House.
As more tenants recognize the advantages of Birmingham industrial real estate, the industry’s developers are preparing to welcome them with plenty of space.
New Industrial Real Estate Development Activity in Birmingham in Q2 2022
Developers continue to expand within Birmingham’s seven-county region as more new construction projects broke ground during the spring of 2022.
In addition, construction continued on approximately 1.1 million square feet of build-to-suit space that includes:
- Georgia Crown’s 600,000 square foot facility in the Southern submarket, and
- Lear Corporation’s 300,000 square foot space within the Jefferson County Metropolitan Park.
What does this activity forecast for the future? Certainly a continued momentum.
Market Forecast for Birmingham’s Industrial Real Estate Market
Currently, over 800,000 square feet of space are scheduled to be delivered to the market by the close of 2022. This is the most speculative space to hit the market since 2007.
In addition, new regional warehousing solutions are currently underway as more businesses seek solutions to the supply chain problems originally caused by the arrival of the 2020 pandemic.
Other industries, including manufacturing and automotive, continue to create an optimistic future for Birmingham’s commercial and industrial real estate investors.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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