By Philip Currie
As we approach the New Year, our team analyzed trends and stories that shaped Birmingham’s commercial real estate industry in 2016 and identified what we can expect in 2017.
Commercial Real Estate 2016 Recap
An early wave of momentum kicked off 2016 for the commercial real estate industry, which maintained steady growth throughout the year. In the first quarter, we saw several major transactions by some of Birmingham’s largest corporations, several of which were in the 280/459 submarket. Each quarter saw at least one large office building transaction. In Q1, Southern Company Services signed a 670,000-square-foot office lease in the Colonnade South and Colonnade North buildings. In Q2, Charter Communications signed a lease for 17,000 square feet at the BB&T Bank building. In Q3, Daniel Corp. purchased downtown’s Financial Center in the central business district, and in Q4, the Historic Federal Reserve announced its first large tenant in the central business district.
Leasing and sales activity continued, along with a very active investment sales market and the rise of owner occupant sales. Construction costs on office renovations remained high, which affected transaction terms in the market. Most notably, advancements in the multi-family and retail sectors have brought several high profile projects to the area, which should have a positive impact on the office market. There were several big moves announced in 2016, from which we have not yet seen a direct impact. However, we can expect that these announcements may start to influence the market beginning in 2017.
Notable Transactions in 2016
- Iron Point Partners purchased 2000 International Park in Birmingham, Ala., for $6M.
- Southern Company Services signed a 670,000-square-foot office lease in the Colonnade South and Colonnade North buildings.
- Carr Riggs & Ingram doubled its office space and relocated to approximately 34,000 square feet at 3700 Colonnade.
- HealthSouth is relocating its corporate headquarters at Grandview Plaza to a 20-acre site at Liberty Park. Construction on the 200,000-square-foot facility began in August 2016.
- KBR, Inc. signed a lease to occupy 80,000 square feet at the Galleria Tower in Hoover, Ala., for floors 4, 11, 12 and 14 of the tower for approximately 400 employees.
- Chase Corporate Center, a 211,000-square-foot, Class A office building in Hoover, Ala., sold to Priam Capital in Nashville, Tenn.
- Total Quality Logistics (TQL) leased 14,000 square feet of “brick and beam” space at 2317 3rd Ave. N.
- Lloyd Gray Whitehead & Monroe relocated to 18,000 square feet at the 880 Building, which is located on the former Trinity Medical Center Campus.
- Charter Communications signed a lease for 17,000 square feet at the BB&T Bank building.
- Dent Moses expanded into a 14,000-square-foot space at Lakeshore Park Plaza.
- Insurance Office of America leased 19,000 square feet of office space at Grandview 1.
- Farris, Riley & Pitt expanded into 13,000 square feet of space at the Financial Center.
- Daniel Corp. purchased downtown’s Financial Center.
Looking Forward to 2017
There are a few large tenants currently in negotiations to relocate, which could create opportunities in 2017 that have not existed in the past few years. Some large relocations in the 280/459 submarket are beginning to affect the market as evidenced by a few large blocks of space being available.
In Birmingham’s office market, there should be sustained expansion from existing companies and firms with a continued migration in from the suburbs. Location drivers will continue to influence the market. Additionally, design factors and considerations are currently, and will continue to be, at the forefront of decision making when business owners are selecting a new office space. Birmingham has experienced this with companies who are looking for open office spaces, as well as those who are looking to work from a space that reflects their culture.
Additionally, we expect 2017 to see a continued increase in technological advancements, a push toward urbanization and trends from the differentiated lifestyle patterns of millennials.
Drone footage and images will continue to gain steam in 2017, as more CRE firms are becoming increasingly innovative and finding new ways to highlight properties.
Millennials & Urban Development: A Continued Trend
According to the Birmingham Business Journal, the Magic City has made recent strides in recruiting and retaining young professionals, but likely still has ground to cover to make up for losses prior to 2010. Data from the American Community Survey showed the city of Birmingham ranks seventh among the 150 largest U.S. cities for growth in young professionals over the past five years.
Nationally, the trend shows that millennials continue to flock to urban centers and employers are following them. Downtown Birmingham’s Thomas Jefferson Tower, 20 Midtown and the Pizitz building developments will all be areas to watch in 2017.
Not all is lost on suburban offices, especially if more focus is put on providing access to great amenities. This is a good sign for real estate along Hwy 280, which has recently become a “second city center” for the area.
New technology and urban development continue to shape our reemerging city, along with its CRE market. Continued growth and momentum will usher in the New Year and set the region on a path for greater prosperity. There is no better time than now to be a part of #BhamCRE.