The local apartment market runs strong, charged by resurgent demand and supported as well by the recent cutback in construction. Indeed, unlike many metro areas in which the robust demand trends of 2010 and 2011 have been followed by smaller (yet still substantially positive) net absorption totals in 2011, Reis expects the local net for 2012 to exceed last year’s. Alongside 334 units of new market-rate supply, all delivered in the Parc at Grandview project in east Birmingham in March, first half 2012 market-rate net absorption was counted at 554 units, a sum exceeding the total recorded for all of last year. July and August followed with 140 more. Vacancy ended the latest quarter at the relatively comfortable rate of 6.3%, down 30 basis points for the period, down 150 year-over-year and the lowest since the fourth quarter of 2007. The performance of rent reflects the strengthening of other market parameters. At $742 and $703 per month, asking and effective averages for the second quarter were up 0.9% and 1.2% for the period and were up 1.6% and 2.0% since year-end in the wake of respective gains of 2.8% and 3.2% in 2011. Gains of 0.5% and 0.7% followed in August as the vacancy rate shed 10 additional basis points.
Construction is the emerging story. The delivery of two additional projects since the second quarter brought the 2012 delivery total to completion: in August the 51-unit Southbrook Apartments finished in the North submarket and the 54-unit 29 Seven finished in the Central submarket. Three others with a combined total of 595 units were under way per the date of this report. Two, with a combined total of 345 units, are given 2013 completion dates: the 223-unit Tapestry Park Apartments is scheduled to deliver in April at Montclair Road and Beech Circle in the Central submarket; due on line the same month in Homewood (in the same submarket) is The Hills, a 122-unit project at 1832 E. Oxmoor Road. Without a designated completion date at present, the 250-unit Ashby at Ross Bridge broke ground in January in south suburban Bessemer. Again in the Central submarket, a November 2012 start is scheduled for a 276-unit complex at the Lane Park at Mountain Brook Village mixed-use development Mountain Brook.
As some of these projects may suggest, central Birmingham, including downtown, is gaining increased interest among metro area residents and developers (see Special Real Estate Factors). With construction of the new ballpark for the Birmingham Barons minor league baseball team under way on the Southside (just south of the Central Business District (CBD). “chatter about nearby development opportunities” is now heard, the Birmingham Business Journal reported in September. “Three multifamily developers are looking to build apartment buildings in the surrounding area.”
A fourth, meanwhile, is looking to buy and renovate the historic but vacant 20-story Leer Tower located near Railroad Park downtown. Owners of the tower and out-of-area investors signed a 90-day contract in August, the Journal reported at the time. “The new owners would likely renovate the 158,000-square-foot tower for apartments.” Apartments, indeed, would be a welcome addition to the area, which is expected to develop rapidly as several big projects come online in coming years, city officials informed the source. In addition, Oxmoor Valley to the southwest of Birmingham has been described as “a sweet spot” for residential development. Two projects with a combined total of 552 units recently were announced for sites on Lakeshore Parkway in this area, the Journal reported in April.
Amid ongoing favorable absorption numbers, the new supply expected to deliver in 2012 and 2013 should hold the vacancy rate near but below 6.0%. Gains of 3.0% and 3.8% are forecast for the mean asking and effective rents for 2012 all told. The higher completion total anticipated for 2013 should see commensurate demand. The greater downtown area bears watching.