Although 2001 has just begun, prospects for the Birmingham market are already extremely positive. Continued high occupancy rates in the city's commercial real estate market have spurred significant real estate development in all sectors. Office development is high, retail is strong and the industrial market is thriving due to the entrance of two major automobile companies.

Office

Downtown Birmingham is to be the recipient of two new office towers, the first in over 10 years. Locally based Brookmont Realty Group is constructing Concord Center, an 11-story, 150,000-square-foot office building. The project is due to be completed in the spring of 2002 with the lead tenant, the law firm of Lange, Simpson, Robinson & Sommerville, occupying the top three stories. Another local developer, Sloss Real Estate Group, in a joint venture with Atlanta's Barry Real Estate Company, has announced the construction of a 286,000-square-foot tower to be anchored by the state's largest law firm, Bradley Arant Rose & White. Completion is slated for the fall of 2002.

One major downtown redevelopment is planned by Birmingham's Bayer Properties. The company has acquired a city landmark property, the Pizitz Building, and intends to refurbish the seven-story facility for Class A office and specialty retail use.

These new developments will ease the 95 percent occupancy rate for Class A buildings in the downtown market. The speculative space available in these new buildings along with vacancies created by anchor tenants relocating will provide the market with at least three years of space based on historical absorption rates.

In Birmingham's suburban office market, new development of Class A product is taking place only in the Midtown and Southern submarkets. Last year, the Birmingham firm of Daniel Realty Services delivered two 100,000-square-foot Class A high-occupancy buildings to the Southern submarket in Meadowbrook Corporate Park. One is fully leased and the second is 80 percent full, and Daniel Realty has begun construction of a third 100,000-square-foot facility that is slated for completion this fall. Also in the Southern market, Koger Equity Inc.'s 150,000-square-foot 3500 Colonnade building is 60 percent leased, and Eason, Graham & Sandner, Inc. has completed its 60,000-square-foot Acton Ridge development for McLeod Software, which will occupy 40,000 square feet.

In Midtown, a suburban office development of 120,000 square feet is well underway with Colonial Bank anchoring the project with 50,000 square feet, which will serve as the bank's Birmingham headquarters. Additionally, Daniel Realty has completed its 122,000-square-foot University Park building, which is now 90 percent leased.

Given the fact that no other major Class A office projects have been announced, it appears that overall, suburban development and absorption are in relative "lock step" with one another.

Flex

Only one flex project is being built in the city at present. Lakeshore Crossings, developed by Brookmont Realty Group, is 50 percent leased in its initial 58,000-square-foot building. Another 60,000 square feet is scheduled for delivery to the market this fall. Brookmont has also announced plans to develop a speculative 60,000-square-foot research and development facility in the University of Alabama at Birmingham's research park.

Industrial

Two recent major announcements have solidified the already tight industrial market in the Birmingham area. Mercedes Benz plans to build a second automobile plant just west of Birmingham in Vance, Alabama, with a price tag of $600 million. Additionally, a $440 million Honda facility is under construction in Lincoln, Alabama, just east of Birmingham. Numerous suppliers for these automakers are making their way to Alabama to be ready for the plant openings in late 2003 and late 2001, respectively.

In response to the emergence of the auto industry in the area, Jefferson County has opened Jefferson Metropolitan Park, a 750-acre planned industrial park along Birmingham's western perimeter. Anchored by a newly constructed 600,000-square-foot OfficeMax distribution center, Jefferson Metropolitan Park has constructed a 100,000-square-foot speculative building that is being offered for sale.

Privately developed speculative industrial/distribution projects are underway in other areas of the city. In the Southern market, Eason, Graham & Sandner is completing the last phase of its 700,000-square-foot Cahaba Valley Business Park, an office and warehouse development located along Interstate 65 in rapidly growing Shelby County. The park is 98 percent leased. Additionally, in the Central/Oxmoor market, Eason, Graham & Sandner has completed the 185,000-square-foot first phase of Shades Creek Business Park and acquired adjacent property for the 130,000-square-foot second phase of the bulk distribution development.

In Calera, Alabama, south of Birmingham, Graham & Company has begun construction on Shelby Commerce Park, a planned 1.4 million-square-foot bulk distribution center. The initial building of 208,000 square feet is 25 percent leased. In the Eastern market, Graham has announced plans to construct a 60,000-square-foot bulk building on a site in Old Leeds Park and a 200,000-square-foot distribution facility at the Brompton exit along Interstate 20.

Retail

On the retail scene, Target made its first appearance in the Birmingham market in late 2000. Birmingham-based Colonial Properties Trust developed Colonial Promenade at Tutwiler Farm, a 212,000-square-foot Target Superstore/Home Depot-anchored center in the rapidly growing Trussville area. Colonial Properties Trust also developed the 388,000-square-foot Colonial Promenade at Trussville, a Wal-Mart Superstore-anchored development located in the same market. Bayer Properties Inc. of Birmingham developed the second Target Superstore along the U.S. Highway 280 corridor in north Shelby County, the fastest growing county in Alabama. Construction is now underway by Bayer Properties on River Ridge, a 136,000-square-foot shopping center adjacent to its Target development. This project is anchored by Best Buy.

Also located on Highway 280 is The Summit, a 165-acre mixed-use development by Bayer Properties. The company is currently developing the 103,000-square-foot second phase of retail shops in the immensely successful center. Bayer has also begun the third phase, which will be anchored by a 100,000-square-foot Saks Fifth Avenue -- Alabama's first -- and offer an additional 50,000 square feet designed for unique fashion and lifestyle retailers. The complex is scheduled to open in the fall of 2001. According to Jeffrey Bayer, President of Bayer Properties, "We are pleased that 24 of our retail tenants have chosen The Summit as their first and only stores to date in Alabama."

Additionally, Colonial Properties Trust has undertaken a $50 million redevelopment of Brookwood Village in the midtown area of Birmingham. Completion of work on the 800,000-square-foot project is scheduled for this fall.

Although Christmas sales for some retailers were short of projections, many specialty stores fared well during the holiday season. The Birmingham metropolitan area's stability over time in all sectors of the commercial real estate market have made it an attractive place to do business for both tenants and developers. Population and job growth have created many opportunities and that trend should continue, despite any moderate downturn in the economy.

Marc Eason is vice president of Eason, Graham & Sandner in Birmingham, Alabama.


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