Q2 2012 Birmingham, Alabama Commercial Real Estate Economy

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Q2 2012 Birmingham, Alabama Commercial Real Estate Economy

If a rising tide lifts all boats, as a popular metaphor for economic recovery puts it, that tide has not yet reached Birmingham. On the other hand, the tide is no longer going out. With respect to employment numbers, the economy of the local Metropolitan Statistical Area (MSA) has stabilized. According to preliminary data provided by the U.S. Bureau of Labor Statistics (BLS), local non-farm employment as of August was up 900 jobs (0.2%) from 12 months prior—an essentially flat performance. Moreover, the latest total was up 0.2% (800 jobs) from 24 months earlier as well. With the August employment total remaining down 8.1% (42,800 jobs) from the August 2007 peak, the return to pre-recession employment levels likely will be a protracted affair given recent growth rates.

Birmingham, a city of the Deep South, has not attracted those major growth drivers or the economic diversification such as have come to typify the cities of the “New South”—Raleigh, Nashville, Charlotte with their success in attracting new business, including high technology, factors which now contribute to stronger recovery patterns in these areas. Most major industry sectors within the Birmingham area economy, accordingly, have not yet manifested strong growth trends. The best local performance is indicated for Professional and Business Services, in which employment as of August was up 2,100 jobs (3.4%) from 12 months prior.

Moderate increases are seen as well in the Manufacturing sector. Along these lines, improvement in the national auto sector is expected to be helpful to Alabama automobile manufacturers, the Birmingham Business Journal reported in September. Thus, Honda announced in July that it would invest $115 million in and add 50 employees at its plant in east suburban Lincoln, this source reported at the time. Honda, “which has recently expanded its Alabama operations, has announced a total of 300 new jobs and investments of $390 million since fall 2011.” The Trade, Transportation and Utilities sectors also have seen recent positive net job creation. Construction, on the other hand, continues to slide. August employment therein was down fully 3,200 jobs (14.0%) over the latest 12-month span.

And all sectors of employment by Government—federal, state and local—have declined over the same period. Total public sector employment was down fully 4,400 jobs (5.5%) August-to-August. Indeed, Jefferson County, the site of the city of Birmingham, recently made national headlines by falling into bankruptcy. The $159.7 million general fund budget passed by the county this September was down fully 32.6% from the budget passed two years earlier, the Journal reported at the time. The reduction could have a range of effects. Included is an $11 million cut intended for Cooper Green Mercy Hospital’s payroll budget at the possible cost of 250 jobs.

Another item of bad news regarding housing, meanwhile, was recently published. “Alabama’s foreclosure starts skyrocketed in August,” reported the Journal in September citing national firm RealtyTrac. According to Zillow, 33% of homes in Jefferson and Shelby counties were “underwater” with negative equity—the worst performance statewide— noted the Journal in a separate September report. Prices have continued to decline. “Metro Birmingham home prices continued their year-over-year decline in July as Alabama reported the second steepest drop in prices,” according to this source citing CoreLogic. A 1.4% loss is indicated for the metro area for the period. Through the gloom, however, thin rays of light may be seen. According to Birmingham Association of Realtors as related by the Journal, the increase in home sales reported for August was the first July-to-August increase seen since 2006. Moreover, the month’s sales measured in total dollar volume “soared” 25% over the total recorded a year earlier. “[T]he evidence is mounting that metro Birmingham’s housing market has bottomed and is recovering,” comments the Journal.