By Illyshia Parker – Commercial Real Estate Reporter, Birmingham Business Journal
Original Post from Birmingham Business Journal
Birmingham is poised to receive a record amount of new speculative space in the next year from local and out-of-state developers, according to local experts.
Eight projects currently in various stages of construction around the market will deliver 1,391,000 square feet of available space. The 311,900-square-foot Academy Logistics Center in Bessemer is the largest speculative building and only cross-dock project in the works, and the smallest is a 112,000-square-foot project in McCalla by Texas-based developer Prestige Development.
The solid demand for industrial space in Birmingham reflects a trend that’s present in most U.S. markets. With interest rates on the rise, existing rents are also going up. According to Gardner Lee, principal at Growth Capital Partners, market rents have increased by double digits over the past few years.
“Second-generation space continues to see increased rents with rents broadly ranging from $5 to $6 per square foot,” said Sonny Culp, senior vice president at Graham & Co.
Industry experts are waiting to see how Birmingham swallows this absorption, which includes about 2.3 million square feet of available second-generation space scattered in all submarkets. In Q1 of this year, the south submarket absorbed 235,000 square feet of Class A second-generation vacancy.
One recent deal was Growth Capital Partners arranging the purchase of two adjacent Class-A facilities in Alabaster for a total 404,000 square feet of space.
“Shelby West presented a unique opportunity to acquire two Class A facilities in Birmingham, a market where this type of transaction doesn’t occur often,” Lee said in a release.
Although demand continues to exceed supply, Amazon’s decision to slow consumption of bulk distribution and fulfillment space suggests e-commerce is coming off its Covid-induced boom, but despite the recent pullback, e-commerce continues to take down large amounts of space, Lee said.
“The entire world is in the process of realigning supply chains, re-shoring where possible and recognizing the need to be closer to customers,” he said.
Graham & Co., which closely tracks inventory as well as prospects in the market, remains optimistic that absorption trends will continue despite not knowing if the recent activity in Birmingham is an aberration or a new normal.
“There are Southeastern primary markets that have been hot and more developers now have Birmingham, as well as Huntsville, on the radar,” Culp said. “Given the pipeline, caution is merited as we see what the market does. The value of the combined new deliveries is about $120 million not including any portion that may be pre-leased.”