Several noteworthy transactions in Q1 have proven 2016 to be successful thus far for Birmingham’s commercial real estate industry. The first three months of this year have seen numerous large-scale transactions including Southern Company Services’ lease of 670,000 square feet in the Colonnade South and Colonnade North buildings, HealthSouth’s corporate headquarters’ planned relocation to a 20-acre site at Liberty Park and Iron Point Partners’ purchase of 2000 International Park for $6 million, among others.
This strong start to the year indicates that Birmingham will continue to experience steady growth in the CRE market, particularly in the city’s downtown areas. Although CRE transactions and development in downtown Birmingham have recently been gaining momentum, several renewals and updates will need to occur for the city’s growth to continue.
Office transaction terms are currently being affected by high construction costs in the market, which may have repercussions on future office development. However, we expect to see growth in leasing and sales activity as well as an increase in rental rates in select markets. In addition, we foresee owner occupant sales continuing to rise and investment sales remaining very active.
Lastly, as more millennials enter the job market, companies are choosing to utilize urban work spaces as a means to recruit and retain these younger employees. Therefore, we foresee continued demand for “brick and beam” office spaces and additional relocation to downtown areas.