2006 Annual Market Report | Birmingham, Alabama

Transcription

29
EGS, Inc. 2006 Annual Market Report
2006 Annual Market Report | Birmingham, Alabama
This report contains information available to the public, which has been relied upon by Eason, Graham & Sandner, Inc. on the assumption that it is accurate and complete
without independent verification by Eason, Graham & Sandner, Inc. Eason, Graham & Sandner, Inc. accepts no responsibility if this information should prove to be inaccurate or
incomplete. No warranty or representation, express or implied, is made by Eason, Graham & Sandner, Inc. as to the accuracy of the information contained herein, and same is
submitted subject to errors, omissions, and changes in market conditions.
table of contents
Letter from the President & CEO
4
Eastern
20
Company Vision
5
I-459/Southern
20
About EGS
6
Oxmoor Valley
21
C&W Alliance
7
Retail Market Overview
23
Real Estate Services
8
Central
24
Office Market Overview
13
Eastern
24
CBD/Downtown
14
Eastwood/Irondale
25
Midtown
14
Highway 280
25
280/Southern
15
Highway 31 South
25
Hoover/Riverchase
15
Hoover/Riverchase
26 Vulcan/Oxmoor
16
Northern
27
Industrial Market Overview
19
Western
27
Central
20
Company Overview
Dear Friends and Colleagues:
As President and CEO of Eason, Graham & Sandner, Inc., I am pleased to
introduce our 2006 Annual Market Report. This report details the progress
of Birmingham, Alabama’s commercial real estate market—office, industrial
and retail—over the past 12 months. Our economy continued to expand in
banking, healthcare and the service industries and saw significant growth
among automotive manufacturers and suppliers. Furthermore, the retail
sector experienced additional development of quality properties and the
introduction of new and varied retailers to our Birmingham market.
In the past year, Birmingham’s economy grew and so did our company. We
continued to recruit, retain, and reinvest in the best talent in our market. We
broadened the services that we offer and invested in significant new technology
to ensure our employees have the tools they need to serve our clients.
President & CEO
Joseph E. Sandner, III, SIOR
2005 was an outstanding year for us. Our professionals completed some
of the most noteworthy transactions in our market across all of our service
lines. We expanded our property management and accounting departments
to serve our continuously increasing portfolio. Our medical office management and leasing experience is second to none in a city that is a leader in the
healthcare field. In our brokerage operations, we completed the transition
from individual agents to specialized teams. These teams differentiate us from
our competition and enable us to better match the skills of our professionals
with each client’s needs and each transaction’s specific requirements.
We have continued to strengthen our relationship with Cushman &
Wakefield in our role as a member of the Cushman & Wakefield Alliance, which
is composed of best-of-class service providers across the country. We are
proud to be among the 18 Alliance firms serving 33 markets, which compliment Cushman & Wakefield’s international presence. We participated in an
initiative to place C&W Valuation Services employees in Alliance offices in
order to increase market coverage. Now in its third year, the program has
been a success, and we currently have two C&W appraisers in our offices.
We hope you find the information contained herein useful. We look forward
to the opportunity to add value for you with our understanding of the market, our
investment in technology and the professionalism of our people who bring it
all together.
Yours truly,
President & CEO
OUR VISION:
To continue building a competitive and
compassionate commercial real estate company,
which provides best-of-class services to our clients
and customers, in order to offer opportunity for our
people to achieve personal growth and financial success.
President & CEO
Marc A. Eason
Vice President
R. William Pradat, Jr.
Vice President
Mark D. Byers, SIOR
Vice President
Emris H. Graham, Jr.
Vice President
Robert A. Schleusner
Chairman
Eason, Graham & Sandner, Inc.
Our Growth
At Eason, Graham & Sandner, Inc., we have expanded our production volume every year since our founding in
1987. Now the dominant commercial real estate brokerage company in the state, the firm employs more than
50 people, handles transactions exceeding $200 million annually, and serves as the management and leasing
agent for approximately 7.2 million square feet of commercial property. In 2004, Eason, Graham & Sandner, Inc.
acquired another prominent Birmingham real estate firm, Johnson-Rast & Hays, which was founded in 1956, and
was the most prolific local developer of class A office, retail, and medical space in the city. The merger added
significant square footage to the company’s management portfolio, and a number of experienced, resourceful
professionals to our expert team.
Our Services
We assist our clients in every stage of the real estate process, representing them in leasing, brokerage,
sales, development and property management, providing strategic planning and research, site selection and
space location, among many other advisory services. Our real estate professionals offer an uncommon level of
service by continually seeing past the immediate transaction and instead advising the best strategy for every
client. We have detailed knowledge and understanding of the local business and real estate market and put this
information to work for our clients.
Cushman & Wakefield Alliance
In 2002, Eason, Graham & Sandner, Inc. was one of six founding
members of the Cushman & Wakefield Alliance, a group of
independently owned commercial real estate firms, which has expanded
estate provider in its respective market. As a member of the C&W
Alliance, we are able to offer clients access to a wealth of resources
and expertise spanning all areas of commercial real estate, such as
complex financing vehicles or warehouse/distribution center operations
assessment. Additionally, we partner with C&W and other members
of the Alliance to provide nationwide and international coverage for
brokerage and other real estate services, so clients can do business in
other markets while continuing to work with us, the local company they
know and trust.
to 18 members nationwide. Each member firm is the preeminent real
Brokerage
Services
Eason, Graham & Sandner, Inc.’s professionals are
active in office, industrial and retail markets,
optimally positioning and marketing our clients so as
to uncover hidden client opportunities. Supported
by our research and analysis capabilities, our professionals provide detailed market intelligence, including
market studies, demographic analysis, real estate
forecasts and custom-tailored reports.
Our brokers bring their in-depth knowledge and
analysis of market data to every client relationship.
Our understanding of the complex market helps us
secure the best opportunities for our clients.
Tenant Representation
Eason, Graham & Sandner, Inc. has been the leading
tenant representation firm in Birmingham since 1987,
representing both national and local firms. It is our
goal to establish a relationship with each client, to
understand the company and its strategic real estate
objectives and provide advisory support, instead of
simply treating each transaction as an isolated deal.
This comprehensive approach provides our clients
with the highest level of service they have come to
expect. Our in-depth lease analysis and market
knowledge enable our professionals to present the
best options to our clients. We are well known for
being client focused—our priority is to listen closely to
each client, devising unique solutions and structuring
creative deals to meet their individual needs.
Agency Leasing
Our leasing portfolio consists of a wide array of
office, industrial, medical and retail properties. Our
leasing agents develop and execute customized
leasing plans to efficiently and effectively achieve
client goals. Landlords and property owners are
provided with detailed market and transaction
analysis to allow our clients to make the most informed
decisions. Our agents have been involved in some of
the most significant leasing transactions occurring in
our market.
Investment
Sales
Intense competition for hard assets over
the past several years has made it increasingly
difficult to find worthy, undervalued properties
suitable for investment. Eason, Graham &
Sandner, Inc. offers a full of array of services
to
help
investors
maximize
investment
decisions and dispose of properties once
full valuation has been achieved.
Our
investor
unsurpassed
clients
insight
benefit
that
from
results
the
from
the full range and breadth of our market
activities. The real-time market knowledge that
we gain in buying, selling, financing and valuing
properties is gathered, analyzed, and applied
for the benefit of our investor clients. We
identify opportunities to achieve superior riskweighted returns in investment products. We
also have the capability through our alliance
with Cushman & Wakefield to advise clients on
a variety of other investment options.
10
Development
Services
Using a team approach, Eason, Graham & Sandner, Inc.
provides comprehensive development services. We
can work with clients to take properties through every
stage of development, including:
• Conception
• Site selection and land acquisition
• Management of zoning and site issues
• Selection of general contractors, architects,
engineers and other team members
• Construction management
• Financing and construction draw requests
• Leasing
• Property management
We bring a team of experts to every development
project, drawing on our significant experience in
developing office, industrial, retail and medical
properties. Together, our development team works
with owners to meet their vision for the property as
well as their economic goals for the project.
Property
Management
Services
Eason, Graham & Sandner, Inc. provides comprehensive
property management services to a portfolio of
quality retail, office, industrial, and medical properties.
Our group partners with property owners
to achieve specific objectives for their properties.
Our services include annual budget preparation, customized monthly reporting and operating cost bench-
11
marking. Our managers work closely on a day-to-
day basis with those responsible for accounting and
leasing at each property in order to achieve a
complete understanding of the property that goes
beyond what is ordinarily offered in the marketplace.
As in all our lines of business, our focus as a
property manager is providing best-of-class services
for our clients. We employ more managers per square
foot of managed space than any of our competitors.
This arrangement allows each manager to maintain
a balanced, sustainable portfolio and to work
closely with property owners to determine and meet
their goals.
12
EGS, Inc. 2006 Annual Market Report • Of
fice Market
Office Market Overview
During 2005, Birmingham’s office market experienced a year that was
stable and marked by repositioning. There was not any significant new
construction in the office market in 2005. The suburban markets fared well with
increasing rental and occupancy rates while the Central Business District
(CBD) experienced a slight decline in occupancy rates.
Overview
2004
2005
207
199
Market Size (sf)
17,319,285
16,873,489
Availability (sf)
1,977,357
1,871,593
Number of Buildings
Occupancy Rate
Absorption (sf)
88.6%
88.9%
(73,543)
(84,788)
Weighted Average Rental Rate* $16.67
$17.85
Class A
$19.72
$20.22
Class B
$14.78
$14.83
Business Park**
$13.89
$14.69
*Weighted average rental rates are calcualted by summing the gross
potential rents (GPR) in the market and dividing by total available space.
GPR are determined by multiplying the available space at a specific
property by its quoted rental rate.
Much of the available space in the market was a result of changes at several
corporate headquarters located in the city. CareMark relocated out of state,
Infinity Insurance relocated within the market, and Washington Group and
Wachovia significantly downsized. Meanwhile, Birmingham continued to
absorb the accompanying vacancies. For instance, Wachovia’s acquisition
of longtime Birmingham institution SouthTrust Bank resulted in Wachovia
reducing its office space in the CBD by 100,000 square feet. While the CBD
submarket still reflects evidence of that vacancy, the market experienced only
85,000 square feet of negative absorption for 2005, so the market as a whole
tolerated this downsizing quite successfully.
Across the board, companies are focusing on efficiency and using their space
well. This trend of closely monitoring occupancy costs contributed to a 2005
performance that was largely unchanged from 2004. While much of the
leasing that occurred during the year involved smaller transactions and
renewals of large tenants, there were a few significant deals that helped fill
lagging vacancies. And the prospects for the coming year are optimistic:
although 2005 saw no significant new office construction in the Birmingham
market, the year ended with two projects on the horizon in the Midtown
submarket.
13
**Business Park rental rates have been adjusted to full service by adding
$4.00 to the quoted rental rates.
2,500,000
225,000
2,000,000
150,000
1,500,000
75,000
1,000,000
0
(75,000)
500,000
(150,000)
0
Dec-01
Dec-02
Dec-03
Dec-04
CBD/Downtown
Midtown
280/Southern
Hoover/Riverchase
Vulcan/Oxmoor
Absorption
Absorption Trend
Dec-05
Absorption (square feet)
Available (square feet)
Historic Available Space and Absorption by Market
EGS, Inc. 2006 Annual Market Report• Of
fice Market
Birmingham Office Market
• Class A buildings are generally the newest buildings
in each market, being multi-storied, well maintained,
professionally managed and perceived to be in
desirable locations. Suburban single-tenant buildings
are included in the report only when they anchor an
otherwise multi-tenant development.
• Class B properties are generally either smaller or
older buildings or are in secondary locations. There is
often functional obsolescence associated with these
properties. Both class A and class B properties are
typically leased on a full-service basis including all
building services such as janitorial, utilities, common
area maintenance, taxes, insurance, etc.
• Business Parks (flex space) are usually one-level
office products with limited storage, assembly and
loading capabilities. These properties are primarily
leased on a modified net basis, which includes base
year taxes, insurance and common area maintenance
in the rental rate.
CBD/Downtown Office Market
Midtown Office Market
Historic Available Space and Absorption
200,000
1,200,000
300,000
250,000
250,000
200,000
200,000
150,000
150,000
100,000
100,000
50,000
150,000
1,000,000
600,000
0
400,000
50,000
800,000
100,000
-50,000
200,000
14
-100,000
0
-150,000
Dec-01
Dec-02
Dec-03
Dec-04
0
50,000
-50,000
0
Dec-05
Dec-01
Dec-02
Dec-03
Dec-04
fice Market
Available Space
Year End Absorption
Available Space
Year End Absorption
Available Space Trend
Absorption Trend
Absorption Trend
CBD/Downtown
There were a number of large blocks of space, each
consisting of more than 50,000 square feet, still available in
at least six downtown buildings. One large block of 100,000
square feet was a result of the acquisition of SouthTrust Bank
by Wachovia. While the process will be slow, the market
seems to be incrementally absorbing the vacancies. In
one notable deal, Alabama Gas Corporation leased an
additional 60,000 square feet of downtown office space.
Following a nationwide trend, Birmingham continues to see
professional firms considering relocating their offices from
downtown to the suburbs. At the same time, however, more
and more redevelopment projects are underway for urban
living such as lofts and condominiums, for which a good
deal of interest is being generated. As the area becomes
repopulated, that trend may eventually spur growth in the
downtown office market.
CBD
2004
2005
29
29
5,165,764
5,165,764
86.4%
84.1%
Absorption (sf)
(6,679)
(115,251)
Weighted Average Rental Rate
$19.11
$19.77
Class A
$20.95
$21.47
Class B
$16.06
$15.93
Business Park
$14.20
$13.95
Number of Buildings
Market Size (sf)
Occupancy Rate
Midtown
The Midtown submarket continued to experience heavy
demand during 2005, evidenced by asking rental rates for
the most sought-after existing properties rising to $23 per
square foot per annum. The area has found favor among
tenants mainly because of its location. The submarket is in
close proximity to a number of affluent residential areas,
which are home to many decision makers, and also offers
an abundance of free parking and only a short drive to
downtown amenities.
Dec-05
In a year without many changes, an agreement by Synovus
Mortgage to lease 26,000 square feet in the Midtown
market was noteworthy. Midtown will also be home to
two significant construction projects that are on the horizon, both set to begin construction during 2006. One
building will be 150,000 square feet and has preleased 50
percent of the space, and the other will be 80,000 square
feet. Also in the Midtown submarket, Southern Progress
Corporation announced plans to vacate 40,000 square
feet to move to a third building on its campus. Although
these plans and the new construction will offer 270,000
square feet of new space, absorption is expected to occur
quickly based on current demand in the Midtown submarket.
midtown
Number of Buildings
Market Size (sf)
2004
2005
58
58
3,661,950
3,661,950
Occupancy Rate
94.3%
94.1%
Absorption (sf)
30,363
(7,731)
$16.86
$16.23
Class A
$18.61
$18.43
Class B
$14.56
$15.06
n/a
n/a
Business Park
280/Southern
With 93 percent occupancy, an increase from 90 percent
in 2004, the 280/Southern submarket continues to
reflect the growing population rates of north Shelby County.
Additionally, rental rates for the submarket increased in
2005 for all classes of buildings. However, with at least one
large block of sublease space vacant, which totals 135,000
square feet, construction has slowed in the area.
Even without new construction underway, the submarket
continues to see positive leasing activity. In two of the year’s
substantial leasing deals, Infinity Insurance leased 120,000
280/Southern Office Market
Hoover/Riverchase Office Market
600,000
200,000
600,000
500,000
150,000
500,000
400,000
100,000
150,000
100,000
0
300,000
50,000
200,000
0
200,000
100,000
-50,000
100,000
-50,000
300,000
-100,000
50,000
400,000
-150,000
-200,000
0
-100,000
Dec-01
Dec-02
Dec-03
Dec-04
-250,000
0
Dec-05
Dec-01
Dec-02
Dec-03
Dec-04
Available Space
Year End Absorption
Available Space
Year End Absorption
Absorption Trend
Absorption Trend
square feet and L.M. Berry leased 30,000 square feet,
both along the Highway 280 corridor. In what was the most
significant transaction in the market during 2005, Metropolitan
Life sold Inverness Center, its office park of seven buildings,
to TIAA-CREF. The $92.7 million transaction included 1 million
square feet that had been owned by Metropolitan Life since
the 1970s.
more class A office space. However, vacancies will have to be
absorbed and rental rates may have to rise before developers will
be willing to invest in new construction in the area.
hoover/riverchase
Number of Buildings
Market Size (sf)
280/southern
Number of Buildings
Market Size (sf)
Occupancy Rate
Absorption (sf)
2005
2004
45
46
5,145,908
5,211,853
92.7%
92.5%
(82,289)
(14,479)
$18.03
$18.25
Class A
$18.71
$18.93
Class B
$16.03
$16.07
Business Park
$16.01
$16.22
Dec-05
2004
2005
52
50
2,068,696
1,982,696
Occupancy Rate
84.7%
85.5%
Absorption (sf)
92,811
28,732
$14.90
$14.95
Class A
$17.74
$18.30
Class B
$14.07
$13.95
Business Park
$14.71
$14.50
Hoover/Riverchase
15
During 2005, office activity in the Hoover/Riverchase submarket
fice Market
was relatively unchanged from 2004, remaining at 85 percent
occupancy. While the submarket is largely a retail market, it
is close to the sizable residential development in Hoover and
is an ideal location for office tenants who enjoy its proximity to
services and retail. Although it contains only three class A office buildings and consists mostly of class B properties, Riverchase houses a substantial amount of owner-occupied space
and boasts three major users—Blue Cross/Blue Shield, BellSouth
and AmSouth—that could serve to draw in other companies.
Additionally, reasonable class A rates hovering around $18.30 per
square foot may attract more activity to the submarket.
With outstanding residential areas and strong tenants, the
Hoover/Riverchase submarket has the demographics to support
16
400,000
60,000
350,000
30,000
0
2004
Number of Buildings*
23
16
1,276,967
851,226
250,000
-30,000
200,000
-60,000
150,000
-90,000
100,000
-120,000
50,000
Absorption (sf)
2005
70.7%
81.3%
(107,749)
23,941
$12.02
$13.32
Class A
n/a
n/a
Class B
$11.77
$13.45
Business Park
$12.51
$13.00
-150,000
75
Ba
nk
65
h w ay
Hig
ad
he
Vulcan/Oxmoor
For years, the Vulcan/Oxmoor submarket has been more
of a business park and light industrial market than a class
A office market. However, the submarket is poised to
develop into a larger office market in the near future for a
number of reasons.
31
Graysville
Centerpoint
Trussville
78
79
BIRMINGHAM
o
R
No
Ave
Rd
e
1st
lair
Le
ntc
Old
Mo
v.
H
up
er
459
ad
o
Mountain
d
yA
Valleevallo R
Brook
nt
ive
Dr
re
o
sh Vestavia Hills
e
ak
R
ill
er
S
Mo
ss
em
Warrior Rd
M
t’s
an
Gr
Pleasant Grove
ad
ds
Rd
Hueytown
Creek Pk
Bessemer
eR
Hoover
wy
160
280
C
nR
d
Rid
g
Sh
ad
es
yt o w
Be
L
oad
por
t
59
Birmingham
International
Airport
v
A
ley
Fin
ig
hw
ay
259
Birming
1
y1
wa
gh
Hi
Tarrant
Fultondale
Adamsville
ue
H
31
ah
Inverness
119
da
le
Ro
ad
459
V
There is a great deal of undeveloped land in the area with
infrastructure already in place. The extension of Lakeshore Drive will likely attract developers; Wachovia has
already committed to building its Technology Center in
a new park under development by the Jefferson County
Development Authority. The new Ross Bridge development,
including a luxury hotel and conference center adjacent to
a successful Robert Trent Jones championship golf course,
has already opened in the submarket. The residential,
retail and office components of the Ross Bridge
development are under construction. Already home to
headquarters offices of companies like Saks/Parisian, as
well as three major operations centers—Regions Bank,
Wachovia and State Farm Insurance—the Vulcan/Oxmoor
area is still pioneering but has the demographics and
supportive amenities to grow into a more competitive
office market in the future.
Gardendale
Pinson
oa
d
Absorption Trend
*As buildings have shifted functionality or become functionally obsolete, we have adjusted our market
survey to exclude these buildings. Three buildings in the Vulcan/Oxmoor submarket are now included
in our industrial statistics, and four other buildings were removed from the survey completely. These
changes have led to a reduction in the tracked square footage and more accurately reflect the condition of the current submarket.
yR
Dec-05
aV
a ll e
Dec-04
Year End Absorption
Va
lle
yP
a rk
wa
y
Centerpoint Road
Dec-03
Available Space
ab
Dec-02
Pin
so
n
Dec-01
ck
y
0
Occupancy Rate
Ro
vulcan/oxmoor
Market Size (sf)
300,000
fice Market
Vulcan/Oxmoor Office Market
ey
all
Pelham
CBD/Downtown
Hoover/Riverchase
Midtown
Vulcan/Oxmoor
Highway 280/Southern
17
EGS, Inc. 2006 Annual Market Report • Of
fice Market
18
EGS, Inc. 2006 Annual Market Report• Industrial Market
Industrial market Overview
Birmingham’s industrial market saw strong, dynamic activity during 2005,
continuing to build on the momentum of a growing economy and the metropolitan
area’s particular success in the automotive and healthcare industries. The area also
began to gain more attention as a distribution center.
Overview
2005
2004
Number of Properties
129
128
Market Size (sf)
12,305,444
12,184,272
Availability (sf)
1,812,631
1,349,927
85.3%
88.9%
303,471
462,704
Occupancy Rate
Absorption (sf)
$4.13
$4.21
Bulk Distribution
$3.18
$3.38
Office/Warehouse
$6.28
$5.96
Service Center
$6.93
$6.72
• Service Center space is generally more than 50
percent office finish, has grade-level loading and
ceiling heights of less than 16 feet. The bays are
generally 1,500 to 5,000 square feet.
Much of the vacant speculative space in the market was absorbed this
year, including 130,000 square feet of a 182,000-square-foot building that had been
slow to lease. Some of this space was filled by automotive suppliers, delivering to the
state’s Mercedes-Benz, Honda, Hyundai and Toyota plants; Birmingham’s central
location makes it an ideal spot from which to do business with any of the four automotive manufacturers. As this space has been absorbed, a number of significant new
developments have taken shape.
As Birmingham’s industrial market continues to experience positive growth, the
new space is expected to be steadily absorbed. In addition to the automotive
suppliers, bulk distribution firms—especially distributors of retail goods—are also
showing increasing interest in the metropolitan area. These types of businesses have
been particularly drawn to the speculative construction underway, interested in the
ability to secure space quickly.
Birmingham ended the year at 87 percent occupancy, an increase from 84
percent in 2004, with overall rental rates increasing. There is just over 1.5 million
square feet of space available, but the positive trends in the market suggest that this
space will be absorbed rapidly. Looking to 2006, the market is expected to continue
the positive trends it has experienced throughout 2005. Birmingham will continue to
generate automotive business and to draw interest as a regional distribution center.
• Office/Warehouse space is generally between 20
19
and 30 percent office finish, has either dock-high or
Birmingham Industrial Market
feet. The bays are primarily from 5,000 to 15,000
Available Space and Absorption by Market
square feet.
2,500,000
600,000
• Bulk Distribution space is usually small percentage of
office finish, less than 15 percent. There are many
deeper. Additionally, the buildings may have rail
service. Industrial rental rates are quoted one of
two ways; either an industrial gross rate, which
includes an amount for base year taxes, insurance
Availability (square feet)
Ceiling
heights are 20+ feet, and the buildings are generally
200,000
1,500,000
0
1,000,000
(200,000)
500,000
(400,000)
and common area maintenance, or triple net rate,
which is net of those three expenses.
0
(600,000)
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Oxmoor Valley
I-459/Southern
Eastern
Central
Absorption
Absorption Trend
loading doors, generally all dock high.
400,000
2,000,000
EGS, Inc. 2006 Annual Market Report • Industrial Market
grade-level loading, and ceiling heights of 16 to 20
Central Industrial Market
Available Space and Absorption
1,000,000
300,000
200,000
800,000
0
(100,000)
400,000
100,000
600,000
(200,000)
200,000
(300,000)
0
(400,000)
Dec-01
Dec-02
20
Dec-03
Dec-04
Absorption
Absorption Trend
Central
Historically strong, Birmingham’s Central submarket
is the oldest industrial area in the city. Mostly filled
with industrial supply companies, who by nature tend
to stay in one place and locate near each other, the
submarket remains generally healthy. During 2005,
occupancy rose to 84 percent from 81 percent in 2004.
While there is no new speculative development and
none is expected in the near future, its downtown
location and proximity to the airport and major interstates
should keep this submarket stable despite the trend of
industrial growth along the outskirts of the city.
Eastern
Central
2004
2005
41
40
4,360,473
4,239,248
Number of Buildings
Market Size (sf)
Occupancy Rate
83.5%
88.8%
Absorption (sf)
69,381
246,566
$3.90
$3.71
Bulk Distribution
$2.74
$2.99
Office/Warehouse
$4.18
$4.03
Service Center
$8.16
$6.17
2005
2004
Number of Buildings
Market Size (sf)
17
17
1,129,217
1,129,217
Occupancy Rate
73.6%
83.3%
Absorption (sf)
99,374
109,422
$4.01
$3.72
Bulk Distribution
$3.51
$3.44
Office/Warehouse
$5.91
$5.35
Service Center
$8.50
$8.00
I-459/Southern Industrial Market
600,000
350,000
500,000
300,000
400,000
Eastern Industrial Market
500,000
300,000
200,000
200,000
150,000
100,000
100,000
150,000
0
50,000
100,000
250,000
(100,000)
400,000
50,000
0
300,000
(50,000)
200,000
(100,000)
(150,000)
100,000
(200,000)
0
(250,000)
Dec-01
Dec-02
Dec-03
Dec-04
Available Space
Absorption
Absorption Trend
Dec-05
(200,000)
0
Available Space
Dec-05
Eastern
While the Eastern industrial submarket is healthy, there
is limited industrial growth in the area. Encompassing
Pinson Valley, the airport area, Irondale and Trussville, the
Eastern submarket has experienced the least amount of
speculative construction of the three perimeter submarkets.
The Pinson Valley area of the submarket is located eight
to ten miles from a major interstate highway and its
activity is mostly generated from within the immediate
area. Speculative construction in this area is unlikely.
Additionally, some areas of the submarket have terrain
that would be difficult to develop on a large industrial
scale. Still, the Eastern submarket fared well in 2005, with
occupancy rates rising to 83 percent from 74 percent in
2004. The substantial increase in occupancy was due
to absorption of 110,000 square feet in the submarket
during the past 12 months.
Dec-01
Dec-02
Dec-03
Dec-04
Available Space
Absorption
Absorption Trend
Dec-05
I-459/SOUTHERN
The I-459/Southern submarket continues to be the
newest and most active in terms of deal flow and
development. Tenants and investors are continually
interested in the area mainly because of the availability of land, proximity to interstates and infrastructure, and
ongoing population growth in the area. All of the significant new
industrial construction during the past 12 months was in the
I-459/ Southern submarket, and the new construction is leasing
quickly.
700,000
150,000
600,000
100,000
500,000
50,000
400,000
0
300,000
(50,000)
200,000
(100,000)
100,000
(150,000)
0
(200,000)
Dec-01
Dec-02
Dec-03
Dec-04
Available Space
Absorption
Absorption Trend
65
hway
o
reek Pk w
Hoover
ad
oa
d
ey
R
Va
ll
280
Inverness
y
160
31
V
da
le
Ro
ad
459
119
ey
all
Pelham
21
Eastern
Oxmoor Valley
Central
I-459/Southern
OXMOOR VALLEY
Number of Buildings
Market Size (sf)
Occupancy Rate
2004
2005
22
22
2,723,691
2,723,691
77.9%
82.4%
Absorption (sf)
8,532
123,661
$5.38
$5.92
Bulk Distribution
$4.10
$4.20
Office/Warehouse
$6.84
$6.81
Service Center
$6.56
$6.55
As the metro area continues to sprawl, the Oxmoor Valley
submarket is being viewed increasingly more as a central,
rather than southern, location. New interest in the area is being
generated by the development of Ross Bridge, which includes a
luxury hotel and conference center adjacent to a Robert Trent
Jones championship golf course. Increased residential and the
potential for retail and office development will continue to keep
this market active.
459
Ca
nR
d
Mountain
Brook
ha b a
eR
L
ive
Dr
re
ho
es
ak
oad
Hueytown
Bessemer
Oxmoor Valley
The Oxmoor Valley submarket demonstrated positive trends
during 2005. Occupancy in the submarket rose to 82 percent
from 78 percent in 2004. There was no new construction in the
submarket but positive absorption of 123,661 square feet helped
tighten the available space and brought rents up slightly.
Pin
so
n
ds
v.
yA
Valle
Rid
g
Warrior Rd
ck
y
Pleasant Grove
ad
Ro
$7.55
ig
hw
ay
$5.85
$7.66
R
No
Ave
Rd
e
1st
lair
Le
ntc
Old
Mo
o
$6.48
Service Center
Rd
R
ill
Office/Warehouse
por
t
Sh
ad
es C
$3.95
yt o w
$4.74
$3.85
ue
H
$6.19
Bulk Distribution
259
59
Birmingham
International
Airport
v
A
ley
Fin
H
(16,945)
Birming
up
er
189,680
79
BIRMINGHAM
er
S
95.0 %
1
y1
wa
gh
Hi
M
t’s
an
Gr
95.4%
Centerpoint
Trussville
Tarrant
Fultondale
Adamsville
ss
em
Absorption (sf)
4,092,063
Be
Occupancy Rate
4,092,063
Gardendale
78
49
Va
lle
y
Hig
Market Size (sf)
49
31
Graysville
2005
Pinson
Pa
rk w
ay
Centerpoint Road
d
ea
kh
Number of Buildings
2004
Dec-05
75
Ba
n
i-459/Southern
A 550,000-square-foot building currently under construction has preleased 450,000 square feet. Another
250,000-square-foot building has an 83,000-square-foot
tenant moving in, with leases out on more of the space. In
addition to the new space already leased, there are other
projects just completed or under construction that will
create new, available space for the market. A 247,000-squarefoot project is ready for tenants, and site work is under way
on a 380,000-square-foot building. When all of this new
construction is complete, the size of the submarket will
increase by 34 percent.
Oxmoor Valley Industrial Market
22
EGS, Inc. 2006 Annual Market Report • Retail Market
Retail market Overview
Birmingham’s retail market was in excellent condition at
the close of 2005, continuing to build on a long tradition as
a regional shopping destination. In a sprawling market that
includes more than 22 million square feet, less than
10 percent of space was available at year end. Colonial
Promenade at Alabaster, a 300,000-square-foot power
center, opened this year as well as several grocery-anchored
centers.
As is true in cities across the nation, Wal-Mart continues to
influence Birmingham’s retail market. The discount store has
had phenomenal success in the grocery market, gaining a
Overview
2004
2005
157
significant share of the local grocery market. Another trend
158
shaping the area is Wal-Mart’s decision to close some of
23,113,760 22,870,249
its existing stores and relocate to newly constructed super
2,413,448
2,262,066
89.6%
89.5%
centers in nearby locations. For instance, the company plans
(152,474)
1,382
Weighted Average Rental Rate $10.76
$12.39
super center at the now defunct Eastwood Mall, which will
Number of Buildings
Market Size* (sf)
Availability (sf)
Occupancy Rate
Absorption (sf)
to close the Wal-Mart store in Irondale and construct a new
$13.15
$13.88
be demolished. Despite the vacancies left by a number of
Neighborhood
$9.91
$10.85
Winn-Dixie grocery stores that have closed and Wal-Mart’s
Community & Power
$8.77
$11.90
$18.34
$14.90
relocation plans, the Birmingham retail market remains
Unanchored & Specialty
Regional & Super Regional
healthy with more than 90 percent of space occupied.
*Eastwood Mall, consisting of 555,000 sf, was removed from the survey
in 2005 as it is mostly vacant and no longer available for lease. Two
new developments were added to the market, but the net effect was a
reduction in the total square footage of 243,511 sf.
Birmingham Retail Market
Historic Available Space and Absorption by Market
0
2,000,000
grocery or drug store anchor.
by a grocery, drug, home improvement or department
Available Space (square feet)
• Community & Power centers are generally anchored
1,500,000
(400,000)
1,250,000
(600,000)
1,000,000
store and has a wider range of apparel and soft goods
750,000
than a Neighborhood center.
500,000
• Regional & Super Regional centers are generally
250,000
a mall or open air development anchored by large
0
(800,000)
(1,000,000)
(1,200,000)
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
department stores with a wide range of apparel
Central
Eastern
and other soft goods stores. Retail rates are typically
Highway 280
Highway 31 South
Hoover/Riverchase
Northern
Western
Absorption
quoted on a triple net rate, which is net of taxes,
insurance and common area maintenance.
Absorption Trend
Eastwood/Irondale
center anchored by a grocery store or large drug store.
(200,000)
1,750,000
2,250,000
a center of 10,000 to 12,000 square feet without a
• Neighborhood retail space is generally a shopping
23
200,000
2,500,000
• Unanchored & Specialty retail space is generally
Central Retail Market
100,000
350,000
50,000
300,000
0
250,000
(50,000)
200,000
(100,000)
150,000
(150,000)
100,000
(200,000)
50,000
(250,000)
400,000
350,000
150,000
300,000
100,000
250,000
50,000
200,000
0
150,000
(50,000)
100,000
(100,000)
50,000
(150,000)
(300,000)
0
Dec-02
Dec-03
Dec-04
0
Dec-05
(200,000)
Dec-01
Dec-02
Dec-03
Dec-04
Available Space
Absorption
Available Space
Absorption
Absorption Trend
Absorption Trend
Central
The oldest and most established retail submarket in the
Birmingham area, the Central submarket maintained
occupancy of 91 percent during 2005, virtually unchanged
from recent years. New development continues to occur
in the area. The Summit, an 838,455-square-foot life-style
center, continues to expand bringing new tenants to the
Birmingham market. The new Soho development in
downtown Homewood is set to open in early 2006,
and will bring several tenants that are new to the area
to its 30,000 square feet of retail space. The mixed-use
project also includes 75 condominiums as well as public
buildings such as the new Homewood City Hall. Cahaba
Village, which is under construction along Highway 280 in
Mountain Brook, will house 45,000 square feet of
retail space and 22 condominiums. Due to the
buying power of the residential population in the Central
submarket, the area will continue to generate interest from both
developers and tenants.
CENTRAL
Market Size (sf)
Occupancy Rate
Absorption (sf)
EASTERN
2005
2004
Number of Buildings
Market Size (sf)
27
28
3,354,065
3,379,065
Occupancy Rate
95.5%
91.3%
Absorption (sf)
63,209
(140,091)
$8.91
$8.48
$10.71
$12.33
$7.79
$9.08
$14.15
$6.84
n/a
n/a
Neighborhood
Community & Power
Eastwood/Irondale Retail Market
700,000
50,000
0
600,000
(50,000)
2004
2005
30
30
3,353,984
3,353,984
91.4%
91.1%
3,664
(11,537)
$13.15
$13.76
$13.52
$13.48
Neighborhood
$10.97
$11.62
Community & Power
$13.99
$13.34
$20.69
$18.74
500,000
(100,000)
400,000
(150,000)
(200,000)
300,000
Number of Buildings
Dec-05
is under construction, which will include a Best Buy, Parisian,
Belk and JCPenney, all new tenants for this submarket.
Dec-01
150,000
24
Eastern Retail Market
450,000
(250,000)
200,000
(300,000)
100,000
(350,000)
0
(400,000)
Dec-01
Dec-02
Dec-03
Dec-04
Available Space
Absorption
Absorption Trend
Dec-05
Eastern
Affected by local trends, the Eastern submarket experienced negative absorption of more than 140,000 square
feet due to the closing of a grocery store and the relocation
of a Wal-Mart store. Occupancy rates dropped from 95
percent in 2004 to 90 percent in 2005.
Eastwood/Irondale
Eastwood/Irondale continued to see tenants withdraw from
the submarket during 2005, as has been the rule for the past
few years. This year, Century Plaza, once a retail stronghold
for the area, lost several tenants. But despite the slow exodus
of tenants at Century Plaza and the closing of Eastwood Mall,
the area finished the year at 83 percent occupancy.
With rapid residential growth in sections of this submarket,
efforts are underway to lease available space to new
tenants. A new grocery-anchored center opened during
2005, and new space at Colonial Pinnacle at Tutwiler Farms
Plans are in the works to help revitalize this submarket, which
is one of the oldest retail areas of Birmingham. Wal-Mart
plans to close its Irondale store and relocate to the Eastwood
Mall site. The move will likely attract additional new tenants
Highway 31 South Retail Market
to the area and may also renew interest in nearby Century
Plaza. While the news is positive for Eastwood and the city of
Birmingham, Irondale may struggle to attract new tenants to the
vacated space.
120,000
250,000
110,000
200,000
100,000
90,000
2005
2004
Number of Buildings
Market Size (sf)
Occupancy Rate
Absorption (sf)
9
8
2,402,932
1,847,777
75.5%
83.3%
(32,400)
(101,300)
$11.01
$11.98
$12.00
$12.00
Neighborhood
$5.59
$5.00
Community & Power
$9.62
$9.42
$14.00
$14.00
Highway 280 Retail Market
225,000
0
200,000
(8,000)
150,000
(16,000)
125,000
(24,000)
100,000
75,000
175,000
(32,000)
50,000
(40,000)
25,000
(48,000)
0
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Available Space
Absorption
Absorption Trend
At the southeastern-most end of the market, the last few years
have seen the construction of The Village at Lee Branch, a
500,000-square-foot development. At the intersection of
Highway 280 and I-459, the redevelopment of Colonial Town
Park at Colonnade has spurred creative use of space such as
Gold’s Gym locating in a building that was originally a movie
theater. With the highest retail rental rates in the metro area,
the submarket is expected to remain active and healthy.
HIGHWAY 280
Number of Buildings
Market Size (sf)
2004
2005
23
23
3,549,131
3,549,131
Occupancy Rate
95.1%
94.2%
Absorption (sf)
(4,713)
(29,577)
$14.04
$17.92
$15.36
$16.81
Neighborhood
$16.79
$17.06
Community & Power
$12.56
$19.01
$32.00
$30.00
100,000
60,000
50,000
50,000
40,000
0
30,000
20,000
(50,000)
10,000
(100,000)
0
Dec-01
Dec-02
Dec-03
Dec-04
Available Space
Absorption
Absorption Trend
Dec-05
Highway 31 South
The Highway 31 South submarket experienced significant
residential growth, and ongoing retail development in the
area is expected to continue. During 2005, the area
experienced negative absorption of 60,952 square feet
because Winn-Dixie closed two grocery stores along the
corridor, but the submarket still finished the year with more than
91 percent of space leased.
A new 300,000-square-foot center, the Colonial Promenade
Alabaster, opened during 2005 with anchor tenants
Wal-Mart, Lowe’s, Belk, and Bed Bath & Beyond, along with
other retail stores and restaurants. Construction on the
second phase of this center, which will be an additional 300,000
square feet, is scheduled to begin in 2006.
HIGHWAY 31 SOUTH
Number of Buildings
Market Size (sf)
2004
2005
12
13
1,002,664
1,308,664
Occupancy Rate
97.8%
91.9%
25
Absorption (sf)
10,820
222,048
$15.03
$14.93
$10.00
$10.00
Neighborhood
$15.17
$15.07
$9.00
$12.00
n/a
n/a
Highway 280
The Highway 280 submarket represents a major growth
corridor for the Birmingham retail market. Stable during 2005,
the submarket finished the year with almost 95 percent of space
leased and continues to be one of the two strongest retail
submarkets in the area. Retail development along this corridor
has expanded quickly in recent years in answer to rapid residential growth in northern Shelby County.
70,000
EASTWOOD/IRONDALE
150,000
80,000
Community & Power
26
Hoover/Riverchase Retail Market
350,000
HOOVER/RIVERCHASE
100,000
50,000
Market Size (sf)
25,000
Occupancy Rate
95.2%
94.1%
Absorption (sf)
85,940
(52,041)
$18.55
$15.01*
$12.31
$14.66
(75,000)
Neighborhood
$12.00
$12.17
(100,000)
Community & Power
$17.04
$15.77
(125,000)
$22.26
$28.25
200,000
(25,000)
150,000
(50,000)
0
100,000
50,000
0
(150,000)
Dec-02
Dec-03
Dec-04
Available Space
Absorption
Absorption Trend
There are plans for more development in the Hoover/
Riverchase area during 2006, and as the strongest retail area in
the city, it is expected to continue to attract the attention of retail
investors and developers. Patton Creek, a 600,000-square-foot
power center, and the Riverchase Galleria continue to thrive, at
99 and 98 percent occupancy respectively.
24
4,821,251
4,821,251
Western Retail Market
675,000
100,000
600,000
50,000
525,000
450,000
0
375,000
300,000
(50,000)
225,000
150,000
(100,000)
75,000
(150,000)
0
Dec-01
Dec-02
Dec-03
Dec-04
Available Space
Absorption
Absorption Trend
Dec-05
Hoover/Riverchase
Consumers across the state and the region continue to view the
Hoover/Riverchase area as a major shopping destination, and
as a result, the submarket remains the largest in the Birmingham
Metro area with over 4.8 million square feet of space. Although a
Winn-Dixie grocery store closed in the submarket during 2005,
the area still finished the year with 94 percent of space leased.
24
*At year end 2004, 40% of available space in the submarket was at Patton Creek,
which leases at $21.00 psf. Currently, less than 3% of available space is at Patton
Creek, which accounts for the noticable decrease in the total market average
weighted rental rate.
Dec-05
Dec-01
2005
Number of Buildings
300,000
250,000
2004
75,000
Northern Retail Market
100,000
0
150,000
(50,000)
100,000
31
Graysville
Gardendale
79
78
(100,000)
BIRMINGHAM
ed
s
Av
ig
hw
ay
Mountain
Brook
d
119
ad
Ro a
Ro
Hoover
ck
yR
idg
e
280
31
Ca
160
Sh
ade
kwy
s Creek P
Bessemer
459
oa
d
H
ive
Dr
ore
sh
ke
La
nR
d
Northern
The Northern submarket, which includes the communities of
Forestdale, Tarrant, Fultondale and Gardendale, experienced a
slight decrease in occupancy during 2005, but activity seems to
be improving for the area. Although a grocery store closed in
the submarket and created a significant vacancy, the submarket
still experienced a slight increase in rental rates, both for the
overall market and for each property type.
.
y
Valle
Hueytown
yt o w
Absorption Trend
Warrior Rd
ue
H
Dec-05
No
Rd
Ave
1st
lair
Le
ntc
Old
Mo
459
ad
Ro
ley
Val
ba
a
h
Inverness
ad
Dec-04
Absorption
Birmingham
International
Airport
yd
al e
Ro
Dec-03
Pleasant Grove
ss
em
Dec-02
Available Space
Fin
Rd
Be
Dec-01
port
er
Su
pe
r
(200,000)
Birming
v
A
ley
o
0
259
1
y1
wa
gh
Hi
R
ill
(150,000)
59
Centerpoint
Trussville
M
t’s
an
Gr
50,000
Pinson
Tarrant
Fultondale
Adamsville
75
y Parkway
nk
Pin
so
Centerpoint Road n Valle
200,000
Ba
R
50,000
h w ay
Hig
ad
he
250,000
65
300,000
ll
Va
e
Pelham
Eastern
Eastwood/Irondale
Northern
280 Corridor
Western
Hoover/Riverchase
Central
Highway 31 South
A new power center is planned in Fultondale, and construction is
scheduled to begin in 2006. The center’s tenants will include
Target, Belk, Ross and Best Buy.
NORTHERN
Number of Buildings
Market Size (sf)
Occupancy Rate
Absorption (sf)
2004
2005
13
13
1,682,701
1,682,701
76.1%
75.5%
(166,144)
(7,675)
$9.01
$9.25
$9.00
$9.00
Neighborhood
$9.04
$9.08
Community & Power
$8.97
$9.35
n/a
n/a
Western
Experiencing a slight increase in occupancy, the Western
submarket ended 2005 at 83 percent, up from 81 percent
a year before. Much of the available space is functionally
obsolete and may not be absorbed quickly. While several new
retail properties have found success along the western loop of
Interstate 459 in the past several years, there has been no new
significant construction in the area for some time.
The Western Hills Mall is currently under redevelopment,
which is expected to bring new activity to the immediate area.
A Wal-Mart super center is to be constructed on the site.
27
WESTERN
Number of Buildings
2004
2005
19
19
2,965,117
2,965,117
Occupancy Rate
81.4%
83.0%
Absorption (sf)
67,150
47,382
Market Size (sf)
Weighted Average Rental Rate*
$6.41
$11.66
$8.50
$6.00
Neighborhood
$9.15
$6.33
Community & Power
$4.86
$12.31
$17.98
$14.24
*Substantial variance in available space from 2004 to 2005 and wide ranges in rental
rates within the property types account for the large differences in the weighted average rental rates for the Western submarket.
www.egsinc.com • 205.939.4440

2006 Annual Market Report | Birmingham, Alabama

Transcription

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