CITY HIGHLIGHT, MAY 2005

BIRMINGHAM IMPROVES OVER LAST YEAR

Birmingham, Alabama, is seeing a continued rise in retail development. The surge picked up speed last year and will continue in 2005. This year also looks to be a positive one for the city’s office market. Showing signs of recovery last year, with absorption levels rising and vacancy rates dropping, the Birmingham office market is on its way to having a banner year in 2005.

Retail

Bayer Properties is developing Cahaba Village, a 45,800-square-foot mixed-use project along U.S. Highway 280 at Green Valley Road.

Major developments currently under construction or recently announced include:

• Colonial Properties Trust’s Colonial Promenade Alabaster, an 800,000-square-foot center located at Interstate 65 and U.S. Highway 119 in Birmingham’s southern market. Set to open within a few months, this power center is anchored by Lowe’s, Wal-Mart, Belk, Ross Dress For Less, Bed Bath & Beyond, Old Navy, Books-A-Million and AmStar StadiumCinemas.

• Colonial Pinnacle at Tutwiler Farm, a 450,000-square-foot lifestyle center located in Birmingham’s northeast market. Construction has just begun on this center, which will be visible from Interstate 459, Interstate 59 and U.S. Highway 11. Similar to the highly successful Summit, developed by Bayer Properties, Colonial Properties Trust’s Pinnacle at Tutwiler Farms will be an open-air, suburban lifestyle center. The anchor tenants include Parisian, JC Penney, Best Buy and Belk. The center is scheduled for a fall 2006 opening.

• The Summit (Phase IV), an 80,000-square-foot addition to the highly successful lifestyle center that Bayer Properties developed in 1997. Phase IV is anchored by The Cheesecake Factory.

• SOHO Square, a 5-acre retail, residential and government center located in Downtown Homewood. The project will contain Homewood City Hall, two buildings with retail space and residential units, and an underground parking deck. City Market, a specialty food and dining store along with other specialty shops and restaurants, will complete the retail space. Construction on the project began in May 2004 and is schedule for completion this October.

• The Falls at Grants Mill, a 115-acre lifestyle center to be located on the west side of I-459, across from Grants Mill Auto Mall in Irondale. Birmingham-based Chase Commercial Properties LLC and Williamsville, New York-based Eastbourne Investments, LTD are developing this project with an estimated cost of $200 million. Anchor tenants are expected to be announced in the near future and if all proceeds as scheduled, The Falls at Grants Mill will open in late 2006.

• Wal-Mart continues to be a driving force in Birmingham with the addition of four new Supercenters during 2005.

The majority of new retail developments in Birmingham follow the path of growth that is generally south and east of I-459. However, there are some notable in-fill developments taking place, such as Homewood’s SOHO Square, described above, and Bayer Properties’ Cahaba Village, a 45,800-square-foot mixed-use project that will take the place of the infamous “dirt pile” along U.S. Highway 280 at Green Valley Road.

In the near future, definitely keep and eye on the northeast submarket  (Trussville), and the southern submarket (Highway 280 Corridor and Hoover). New residential growth continues to be significant in these areas, and the success of the current retail centers suggests that this pattern will continue. In addition, the northern submarket (Fultondale/Gardendale) has seen steady residential growth over the past 5 years and there are rumors of two major retail projects in their planning stages. It would not surprise me to see the northern submarket double its retail square footage over the next 5 years.

— Donna Cox, CCIM, associate broker, Coldwell Banker Commercial-Eyster Properties

Office

One Federal Place, a 310,000-square-foot building in Birmingham’s central business district, sold for $58 million early this year.

Activity in Class A buildings continued with the sale of SouthTrust Tower to Atlanta-based Barry Real Estate. Barry purchased the 511,000-square-foot building for approximately $50 million, planning for a major renovation after SouthTrust Bank vacates 100,000 square feet. Another trophy property in the central business district, One Federal Place, sold in early 2005 to an investment group using overseas capital. The 310,000-square-foot building sold for $58 million, or $187.10 per square foot, which is believed to be a record price per square foot for a Birmingham multi-tenant office building. “Revitalization” continues to be the buzz word within the CBD, with former suburbanites beginning to move back to the city center for the convenience of working within blocks of their loft residences. 

Atlanta-based Barry Real Estate purchased the SouthTrust Tower, a Class A, 511,000-square-foot building, for approximately $50 million.

As predicted, new speculative construction was non-existent in all Birmingham submarkets in 2004. Although this trend is expected to change, the shift will be gradual, as almost any new office project will require significant pre-leasing prior to beginning construction. Average Class A rental rates currently are between $18 and $19 per square foot, getting closer to the $20 to $22 per square foot rate that is needed for new construction. 2005 looks to be another progressive year for the Birmingham office market as it continues on a gradual recovery.

— Dan Lovell, SIOR, director — office group, Graham & Company

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