Birmingham is seeing modest Class A development with slightly more than 1,000 units under construction, according to Paul Earle, executive vice president of Colonial Properties Trust. Approximately 2,000 units were added over the past year, and another 194 units in two projects are planned but not yet under way.

Other trends that have become significant in Birmingham recently involve the renovation and resulting repositioning of communities built in the late 1970s and the 1980s. Mid-rise and high rise apartments have not been attractive investments in Birmingham as of yet. The renovation of downtown buildings into lofts continues to attract a limited number of interested renters. Developers in Birmingham are building Class A and AA communities that cater to the renter-by-choice renter profile.

Significant projects include Colonial Property Trusts' Colonial Grand at Liberty Park. "This is one of Birmingham's newest and few Class AA properties, as well as being one of the area's most significant developments," says Earle. "The introduction of Class AA apartments into the market has brought increased rent and increased amenities."

Two other Class AA developments are also under construction in Birmingham, bringing the total Class AA units under construction to approximately 600. While most of the construction over the past 12 months has offered average rents in the $.70 to $.76 per square foot range, $.90 per square foot rents are being commanded at Class AA property, according to Harbert Realty Services Mid-Year Report.

The majority of development is taking place in the Highway 280 submarket. The reason for development in this area is job growth. Highway 280 continues to be a retail hotspot and includes the completion of Phase II of The Summit, a regional retail development that opened in the fall of 1997. The renovation of Brookwood Village, a Colonial Properties Trust asset, is scheduled for fall 2001 and will further strengthen the Highway 280 corridor. Additionally, of the eight office submarkets, the Highway 280 area continues to post the highest occupancy rates and command the highest rental rates.

According to Harbert Realty Services, rental rates across the market have increased 2.09 percent over the last 6 months. The greatest increases were among properties built since 1990. In the Cahaba Heights/ Mountain Brook and Highway 280 submarkets, rent growth for properties built after 1990 was 5 percent, as compared to 2.59 percent for 1990+ built properties in the total market. Concessions as incentives became popular three years ago and are now slightly more prevalent with approximately 35 percent of the properties surveyed offering concessions. Concessions are most prevalent in the Highway 280 and Hoover/South submarkets. With concessions in play, effective rent growth is actually -1.49 percent over the past 6 months. The weighted-average rental rate for the Birmingham area is $589 per month with an average unit size of 1,005 square feet.

As of mid-year, occupancy in Birmingham is 93.5 percent, virtually unchanged from 93.7 percent at 1999 year-end. The only submarkets experiencing declines were the Cahaba Heights/Mountain Brook and Highway 280 submarkets, where the average occupancy declined 1.1 and 2.8 percent respectively over the past 6 months. It is important to note that these two submarkets are where the highest demand for units has occurred. These areas are also where the new product additions are concentrated.

In the near future, the Highway 280 submarket is the one to keep an eye on, primarily because of two new developments currently under construction and close to completion: 252-unit Lake Heather Reserve and 288-unit Crowne at Grandview. As mentioned, the Highway 280 submarket occupancies declined over the past 6 months by 2.8 percent, so as these units are delivered to the market, a further decline for this area would be likely. Fortunately, the submarket is one of Birmingham's fastest growing areas. Absorption for 1990 and older units in this submarket for the first 6 months of 2000 was 171 units. If that pace continues, occupancy rates should begin increasing by year-end 2001.

Overall, the Birmingham multifamily market is strengthening and should begin seeing increases in occupancy rates and rental rates. The Highway 280 submarket will weaken in the near future as units from the two under construction projects are delivered to the market, but since no new development projects are on the horizon for the submarket, it should begin strengthening by mid-2001.

Paul Earle is executive vice president of Colonial Properties Trust in Birmingham, Alabama.


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