“There has been little change in occupancy across Birmingham’s retail market in 2012, a trend which is likely to continue through the remainder of the year,” Cushman & Wakefield noted in a second quarter report. Citing small improvements in occupancy, Reis’ data largely confirm the observation. Vacancy rates, moreover, remain elevated. According to the firm’s second quarter reporting, vacancy in the community-neighborhood shopping center market was 15.3%, down 10 basis points for the quarter, down 20 since year-end amid 26,000 square feet of positive net absorption (and no new supply added) during the first half of the year. By August, 6,000 square feet of negative net absorption returned the rate to 15.4%. The second quarter national rate for this property category, meanwhile, was considerably lower at 10.8%. Local power center vacancy, while improved, also remains elevated. At 7.2%, the second quarter rate was up 10 basis points for the period but was down 90 year-over-year. The second quarter national rate was 6.3%.
Rent growth reflects the general sluggishness. At $14.57 psf and $12.28 psf, asking and effective averages for the second quarter were each up 0.1% for the period following gains of 0.4% the quarter before. No changes followed in July. At $19.20 psf, the second quarter mean asking price for non-anchor power center space was down 0.9% for the period but was up 0.4% year-over-year.
Development activity is minimal. Reis reports a 200,000-square-foot freestanding building under construction at Grove at Hoover II in south suburban Hoover. No other new retail centers of any description have completed in 2012 to-date or were under construction as of September. On the other hand, however, the flurry of apartment and office development on the Southside neighborhood near Railroad Park and the new baseball stadium (see Special Real Estate Factors, the Office, and Apartment Space sections above) could open the door to additional retail
projects as well. “Several local developers are already scouting for opportunities near the ballpark site south of Railroad Park, and multifamily and retail will likely lead off,” an executive with Watts Realty Company informed the Journal in August. In addition, a late-August article in the Journal reported the pending start of the “massive” 22-acre Gardendale City Center mixed-use development in north suburban Gardendale. Plans call for more than 44,000 square feet of retail, a cinema, a hotel, and office space. The area’s largest current project is the $60 million makeover of the 26-year-old Riverchase Galleria in Hoover, now “in full swing,” the Birmingham News reported in August. The revamped mall will include a new Von Maur department store. Planning includes 178,000 square feet of neighborhood center retail at the Lane Parke at Mountain Brook Village development in Mountain Brook.
Reis expects moderate positive net absorption in the community-neighborhood shopping center market over the remainder of the year to lower its vacancy rate to 15.1%. Gains at about 1.0% are forecast for the mean asking and effective rents for the year all told. The market should be a little stronger in 2013. Development should proceed selectively. “[W]e anticipate that Birmingham’s retail sector will benefit from increased consumer demand, as national retailers continue to drive activity and store closures diminish,” notes Cushman & Wakefield.