HUNTSVILLE, Alabama – Huntsville’s office and retail divisions lost ground in 2013, but the city’s industrial market continued to perform well.

Commercial real estate firm Graham & Co. recently issued its annual market survey showing the Rocket City’s office, retail and industrial occupancy rates.

Here are some highlights from the Graham & Co. report:

HUNTSVILLE INDUSTRIAL MARKET OVERVIEW – The industrial vacancy rate fell to 10.03 percent in 2013, down from 11.62 a year earlier. The city’s vacancy remains below the 11.30 percent national average.

“The national industrial market has experienced steady, positive improvement since 2010,” the report said. “The national vacancy average declined in 2013, and has now dropped 14 consecutive quarters. The recovery has been felt nationwide as 48 of 61 markets reported declines in availability.”

Huntsville’s industrial market saw a net 618,000 square feet of industrial inventory leased in 2013. It was the second consecutive year the industrial sector experienced positive absorption.

While new construction was “almost nonexistent” last year, the report shows there is between 5,000 and 15,000 square feet of new construction underway in the Spacegate area and along Madison Boulevard.

The Jetplex Industrial Park at Huntsville International Airport saw its vacancies drop 13.02 percent last year, a decrease from 15.16 in 2012 and 16.15 in 2011.

Vacancies dropped 7.62 percent at the North Huntsville Industrial Market, while the vacancy rate jumped slightly from 1.40 percent in 2012 to 1.59 percent last year at Chase Industrial Park.

HUNTSVILLE OFFICE MARKET OVERVIEW – The city’s office market vacancy surpassed the national average last year, from 12.55 percent in 2012 to 15.47. The national office vacancy rate was 14.8 percent in 2013.

Graham & Co. said 2013 was the third straight year office vacancy has jumped and the second consecutive year it has experienced double-digit vacancy rates.

“Continued slowdown in defense spending and uncertainty surrounding the recent sequestration has negatively impacted the office market in Huntsville,” the report said. “The Cummings Research Park submarket has been greatly affected, with most defense firms downsizing to save costs.”

Cummings Research Park’s vacancy rate in 2013 spiked to 11.89 percent from 8.9 a year earlier. Multi-tenant vacancy in the nation’s second-largest research park also reached 22.78 percent, a jump from last year’s 17.96 rate.

Downtown Huntsville’s office submarket saw vacancy decline to 17.93 percent, down from 2012’s 21.98 percent. The report cited an increase in downtown projects, including construction of new buildings and redevelopment of existing structures.

Anchored by Intergraph and Boeing, the Jetplex/Madison office market experienced a dramatic uptick in vacancy, from 12.3 percent in 2012 to a striking 31.35 percent last year.

HUNTSVILLE RETAIL MARKET OVERVIEW – Although the national retail vacancy rate dropped to 10.4 percent last year, Huntsville’s retail vacancy jumped to 10.27 percent from 2012’s 9.05.

New retail construction in the Huntsville market declined slightly from 2012-13, but recently-announced projects are expected to increase that figure again. Graham & Co. expects the area’s negative retail absorption will be short-lived.

The U.S. 72/Madison and Jones Valley markets performed well in 2013, the report said. Both markets are below 6 percent vacancy and have added the largest amount of square footage. Vacancy on University Drive, which is Huntsville’s largest retail market, spiked to 16.57 percent.

“The vacancy rate for this submarket was Huntsville’s highest as several large blocks of space remain unfilled,” the report said. “Madison Square Mall, for example, has over 165,000 square feet available, with vacancy to greatly increase in 2014 as Belk exits the building for its new Bridge Street Town Centre location.”

Vacancy was only 2.8 percent in Jones Valley, which will add more than 200,000 square foot of inventory and welcome several new planned projects this year.

The vacancy rate grew in both North and South Huntsville, but not all is lost.

“The road construction projects on North and South Memorial Parkway have been completed and consumers now have easier access to these properties,” the report said. “A new Grissom High School is being constructed near South Memorial Parkway, which should revitalize that area’s retail needs.”

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