SOUTHEAST SNAPSHOT, OCTOBER 2007

Birmingham, Alabama Industrial Market

The Birmingham industrial market continues to grow at a slow, but steady pace, which isn’t so bad in light of the recent interest rate and stock market volatility. So far, mega projects have dominated the headlines in 2007 while the Birmingham bulk warehouse market continues to slowly absorb the Class A bulk that has been developed by local developers in the last several years. New Class A bulk development by local developers in 2006 and 2007 has out paced absorption, resulting in an overall market occupancy of 83.4 percent at year-end 2006. The construction of new speculative product has slowed, and no new construction is slated for 2007. This should allow for positive absorption for the remainder of 2007 and 2008, resulting in a healthy balance by late next year. The net rental rates for newer class A bulk space have remained strong, ranging from $3.85 to $4.35 per square foot. In addition, there is a good supply of Class A/B space at very attractive rates, including the 500,000-square-foot Meadowcraft space. The current supply of warehouse space within the metropolitan Birmingham area is both geographically and monetarily diverse, giving a user numerous choices depending on their location requirements. Although the current inventory is more than adequate, it will become increasingly difficult to expand the bulk market due to the rough terrain surrounding Birmingham. Fortunately, the “acceptable” development boundaries for the Birmingham Metro area are being expanded towards the Honda and Mercedes plants, which are located 30 to 50 miles from the CBD.

Expansions and large warehouse user sales account for the majority of the industrial activity in 2007. Cascades Sonoco recently signed a long-term lease, expanding to 178,000 square feet, to produce roll loads for the paper industry. US Pipe purchased the 415,000-square-foot former Williams Bridge facility in April and will invest more than $45 million to increase their Ductile Iron Pipe production. AHT, a division of Commercial Metals, purchased the 230,000-square-foot former Shelby warehouse.

The automotive sector continues to be the engine for much of the local and statewide expansion. Many of the 2007 projects are either directly automotive related or were attracted to Alabama due to the success of Mercedes, Honda, Hyundai and Toyota. Honda supplier, Yachiyo Manufacturing, will invest $44 million to expand its operation; and German Mercedes supplier, WKW Erbsloh, has announced a new $12.4 million plant in the Birmingham metropolitan area.

Statewide, ThyssenKrupp, a German steelmaker, announced a $3.7 billion project in Mobile, Alabama, to supply the automotive industry in Alabama; and Children’s Place just completed its new 728,000-square-foot distribution center in Fort Payne, Alabama.

— Ogden S. Deaton, SIOR, is senior vice president of Graham & Company/CORFAC International in Birmingham, Alabama.


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