“There are two seemingly conflicting trends unfolding in the Birmingham, Alabama, industrial market,” says Sonny Culp, vice president of Graham & Company. “First is an increase of development activity. This is joined by an increased vacancy percentage in existing product.”

Development activity has mostly consisted of build-to-suits or significantly pre-leased projects, although one 208,000-square-foot speculative building is under construction on Interstate 459 at Parkwest Corporate Center. Additionally, a couple of public entities have also delivered spec buildings to spur activity in new outer-lying industrial parks.

Local developers have been responsible for much of the industrial development, excluding relationship-driven build-to-suits such as FedEx and Graybar. The most notable new project is a 500,000-square-foot development by Graham & Company in Shelby County that started out as a 300,000-square-foot building pre-leased to Custom Warehousing. The building will open in December 100 percent leased to Custom. Another 112,000-square-foot project by Eason, Graham & Sandner in the north Birmingham area will have similar success upon completion with 60 percent of the space pre-leased to Chep Pallet. An additional 30 percent will be taken by the relocation of ACI Glass. The publicly built spec building at the Jefferson Metropolitan Industrial Park has been sold to a user, Plasti-Pak, which will expand the facility for beverage container production.

“2003 may see some new developers to the area pursuing automotive supplier build-to-suits,” Culp notes. In the first quarter, Graham & Company will break ground on a 465,000-square-foot cross-loaded project at the JeffMet Park. The project will be partially pre-leased to automotive suppliers. Much of the supplier activity is for specialized facilities such as the recently announced 300,000-square-foot metal stamping facility of Oxford Automotive, also at JeffMet. Tuscaloosa County is also garnering the interest of suppliers seeking close proximity to the Mercedes facility. To the east, Honda is expanding its production capacity and supplier activity is expected to increase as well. An Atlanta developer has optioned 35 acres in Lincoln near the Honda plant for a possible speculative project. Also, Graham & Company has closed on 35 acres closer to Birmingham at a location off of Interstate 20 in the Moody area. Construction on the first speculative building, 182,000 square feet, is expected to begin in early 2003.

The current vacancy rate of multi-tenant bulk warehouses is 13 percent. This base comprises 7.9 million square feet. “In a secondary market such as Birmingham, a few vacancies can significantly influence our market,” says Culp. Notable recent vacancies include 175,000 square feet by Mercedes-Benz and 61,000 square feet by Ace Packaging; both are automotive uses. Gallo Wines also relocated 125,000 square feet to Atlanta. Other vacancies can be attributed to recessionary trends affecting all markets and are projected to take longer than normal to re-lease. The usually strong Oxmoor submarket has also been affected with a 12 percent vacancy factor. The speculative Parkwest project is competitive to the adjacent Oxmoor area, so continued softness is expected in this area for the next 12 months.

“Next year will be interesting as new construction aimed at the automotive sector will continue on the outskirts of the metro area while the close-in area tries to rebound from vacancies brought forth by a poorly performing economy,” says Culp.

Sonny Culp, SIOR is Vice President of Graham & Company, Inc.

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