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birmingham AL
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2011 OVERVIEW: Recovery Continues - Slowly Here in our Birmingham office, my brother, Mike Graham, called it in mid-April 2010: the recovery was beginning. It was in April 2010 that we started to turn the corner, but from this year end vantage point, the recovery has been more of a slow, upward curve as opposed to the more “v-shaped” recoveries we have experienced in the past. Since that spring announcement, our agents indeed saw a marked increase in activity, calls, and the transaction wheels began to turn, albeit slowly. We even had the recent rare occurrence of multiple tenant prospects vying for space at the same time. With any sort of demand pressure, rents should start to increase or at least there is an expectation of an increase. Inflation rates remain low, and interest rates are in step. A modest inflation in rent projections is considered a positive, though it will take some time to restore balance sheets from capital that was deployed in 2005 through 2008. The contractions that characterized 2008 and 2009 gave way to positive absorption, particularly in the free standing industrial sector and in the bulk sector. In 2010, credit remained very tight as lenders were still processing deals made before the recession. Absorption for the total market was positive, but the performance was mixed with the West submarket up over 200,000 sf for the year. Multi-tenant occupancy hovered around 80% and rents reflected nominal increases in Bulk and 2% increases in Office/Warehouse rates. The oversupply status of 2009 carried over to 2010, and weak tenants continued to struggle with business plans. There were no new projects brought to the market for 2010, and we would not expect new development until sometime in 2012. The market for freestanding buildings showed a dramatic turnaround in 2010, with almost 900,000 sf of positive absorption; current status is in a state of balance. We see 2010 as an improvement over the past two years, and we expect 2011 will be part of this cycle of slow recovery. With so many challenges over the past few years, we are optimistically looking forward, and we are grateful to our clients and tenants for the opportunities that lie ahead. Yours Truly, |
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