BIRMINGHAM, Alabama – Downtown Birmingham is leading the recovery of the metro area’s commercial real estate, industry officials said at a symposium this morning.
Apartment, office and even retail and industrial real estate are feeling a positive impact from what is happening downtown, according to panelists at the 20th Annual CCIM/NAIOP Central Alabama Market Symposium at the Harbert Center.
The two most significant new construction apartment projects slated to be built are downtown – Harbert Realty’s $40 million, 15-story apartment tower on Highland Avenue and LIV Development’s $30 million LIV Parkside apartments across from the Birmingham Railroad Park.
Downtown is also almost exclusively home to the redevelopment of offices and other existing buildings into apartments, such as the $7.5 million renovation of the Booker T. Washington Insurance building, the $57 million Pizitz building renovation and the former Thomas Jefferson Hotel.
The new construction and renovation projects also have a retail or restaurant component to them.
Vacant warehouses – especially those around the Railroad Park and the Regions Field baseball park – are also being purchased and turned into everything from breweries to restaurants – taking them off the market and boosting overall occupancy of warehouse and industrial space.
Add to those developments the most robust office market in the metro area with a 95.4 percent occupancy rate and downtown is the brightest spot in the metro area’s commercial real estate market.
“There is no comparison between the perception of downtown versus five years ago,” Mark Elgin, chief executive of Stonegate Realty, said as part of a panel discussing downtown led by REV Birmingham’s David Fleming.
Robert Simon, chief executive of Corporate Realty, pushed the development of Regions Field and has been behind downtown redevelopment projects for several years. He said perceptions are changing as investors, businesses and visitors like the 600,000 baseball park visitors this year experience the reality of downtown.
“People are starting to see it for what it really is,” he said. “I think the awareness of downtown is already at the top. I hope it stays at the top.”
Developers like Stonegate or Shannon Waltchack commercial real estate once focused almost exclusively on suburban developments but are now not only developing downtown but are among its biggest advocates.
It is even attracting interest from investors from out of state.
Scott Reed of Portland’s Reed Realty Advisors, said his group of investors were attracted to the Thomas Jefferson Hotel because it was a great building in a growing area. He cited the state’s new historic tax credit program, the Railroad Park, Regions Field and Birmingham’s food scene as factors that tilted the scales in favor of tackling the 20-story project.
“We’re excited about the project and we’re excited about Birmingham,” Reed said.
He said Birmingham doesn’t have a national identity on the level of Charlotte or Nashville yet, but predicted it will if it can sustain a decade of downtown redevelopment like it has now.
Joe Holt of Rock Apartment Advisors said nearly all of the 1,153 apartments now under development are in downtown. The same is true of the 2,559 proposed apartment units.
Holt said it’s the largest new supply of apartments to the Birmingham market since 2007, but data shows the market can easily absorb it.
Holt said apartment occupancy for all of Birmingham is at 93 percent, higher than Atlanta or Nashville. Only Chattanooga was higher, at 95.1 percent, among the markets Rock monitors.
Dan Lovell, office broker with Graham & Co., said, like apartments, downtown is one of the areas trending upward for Birmingham’s office market. Downtown office leases helped boost occupancy a net positive gain in Birmingham this year for the first time since 2007, Lovell said.
To view Dan’s market overview please click attachment: Office Market Overview Dan Lovell
Is there concern that all of the new developments are creating a bubble ready to burst? The experts don’t think so.
“The depth of the market is unknowable, but you get a sense we’re in a synergistic mode,” Elgin said. “I think there is significant depth.”
“A downtown like this could easily support 5 percent of its workforce with residential development,” he said.
Between 65,000 and 85,000 people work downtown.