Pickings are still slim in the Birmingham metro’s industrial real estate market, but experts say a national uptick in sales and leases could foreshadow a local boost.
The vacancy rate among Birmingham metro industrial properties fell to 24.2 percent at the end of 2011 from 29.8 percent at the end of 2010, according to a new quarterly market report from real estate research firm Xceligent.
“We’ve started seeing corporate America coming back on the leasing side,” said Sonny Culp, senior vice president of Graham & Co.’s industrial group. “The tide is rising in all categories.”
Although local industrial real estate deals slacked off in the second half of 2011 and absorption levels reached their lowest point in the fourth quarter, Cassidy Turley Chief Economist Kevin Thorpe said there was a “robust recovery” nationally in 2011.
“No one cheers about that too much because the (industrial sector) really got hit hard by the recession,” Thorpe said.
As the housing market improves in 2012, he said, demand should increase for construction materials warehouses, which are a large chunk of the industrial sector.
Nick Nesmith, industrial agent at Engel Realty Co. Engel Realty Co. Latest from The Business Journals Kinetic Communications renovating, moving to caboose on Morris AvenueReal estate roundup: Salon franchise grows in AlabamaBlue Canoe acquires Engel small apartment division, eyes more growth Follow this company Inc., said sales activity has lagged for smaller facilities, but that he’s seen more startup businesses signing leases.
“We’re seeing a lot of activity – not really deals, but a lot of leasing activity this quarter,” he said. “So, we’re optimistic.”
For Birmingham, the big bump in 2011 came in the second quarter, when net absorption was at a high 539,251 square feet, Xceligent said. But from there, net absorption fell to 163,321 square feet in the third quarter and 76,909 in the fourth.
Jack Brown, also a Graham & Co. industrial group senior vice president, said he expects absorption to climb back up in 2012 as the inventory of foreclosed properties dries up, prices continue to soften and lenders loosen regulations for owner-occupants.
“It’s a little bit of a thawing of the pipeline, so to speak,” Brown said.
The tornadoes also contributed to an increase in activity, he said. The destruction of several properties, including the 100,000-square-foot Marmon/Keystone warehouse on Alabama 79 North, is expected to lead to additional leases, construction and renovations in the Birmingham metro.
Although most of the activity is – and will continue to be, according to Thorpe – in the form of leases, other brokers said they’ve seen a jump in industrial sales.
Although there are sales in the works, most of the activity in the national market is from the “flight to quality” trend, where businesses take advantage of low rental rates to move into new spaces, Thorpe said.
Harbert Realty Services Inc. Harbert Realty Services Inc. Latest from The Business Journals Real estate roundup: New Taco Bell for Valleydale VillageKinetic Communications renovating, moving to caboose on Morris AvenueCRE Roundup: Office, industrial pros see flat market Follow this company industrial broker James Proctor said there’s a dearth of out-of-town companies or investors entering the Birmingham metro market.
“I’m seeing more people wanting to move locations,” he said. “I’m also seeing a lot of consolidation.”
The most recent local multimillion-dollar industrial real estate deal was Prime Properties of Alabama LLC’s recent purchase of the 45,000-square-foot, $2.45 million facility at 350 Industrial Drive in the Oxmoor area. SCP 350 Industrial LLC – which was formed by Graham & Co. and has Shelby Commerce Park LLC listed as a member, according to the Secretary of State’s Office – was the seller.
In the fourth quarter, the largest sale was also in the Oxmoor area, according to Xceligent and public records. Alton Court LLC sold the 184,723-square-foot bulk warehouse at 120 West Oxmoor Road to Arkansas-based Priority Wire & Cable Inc.’s Hamilton & Newman LLC for $2.7 million.