Despite positive news regarding Alabama’s economy, Birmingham’s office market recorded overall negative absorption of 209,841 square feet (sf) during second quarter, according to Cushman & Wakefield.
As a result, overall vacancy increased to 16.9 percent, up from 15.8 percent in the first quarter. The increase in vacancy and overall availability can be attributed in part to a large corporate relocation in the U.S. Highway 280 submarket along with a large block of space being added to the multi-tenant market as a result of The Frank redevelopment in Birmingham’s Central Business District (CBD).
Commercial leasing activity continued at a modest pace with 120,967 sf of transactions recorded during second quarter; Class A transactions accounted for 80,004 sf of the total. Rental rates remained steady across most submarkets with an overall weighted average rental rate of $19.86 per square foot (psf) for the Birmingham market and $20.89 psf for class A space.
According to the Alabama Department of Labor, Alabama’s unemployment rate fell to a new record low of 3.5 percent in June, down from 3.7 percent in May and 4.1 percent the year prior in June 2018. Also in June, the state reported new record highs in its job count, employment count and labor force count, and a new record low unemployment count. On a local level, the national spotlight continues to shine on Birmingham. In June 2019, Indeed.com ranked Birmingham No. 4 in its 2019 “Best Cities for Jobseekers” report, reinforcing Birmingham’s and Alabama’s positive business climate.
The overall state of the Birmingham office market remains stable. Alabama’s positive business climate has created an inviting and affordable environment for start-ups, spurring growth in Birmingham’s tech sector. DC Blox opened the first phase of its $785 million flagship multi-tenant data center in Birmingham, and McLeod Software opened its new headquarters in Hoover, increasing excitement and momentum for the office market as a whole. Continued job growth, combined with increased confidence in Alabama’s economic environment should contribute to steady growth in the second half of 2019. New construction is expected to continue to be generated by build-to-suit projects or with significant pre-leasing in place.
