USA - ALABAMA Trends and Developments Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser and Katie Sinclair, Dentons
Suburban popularity is buoyed by the continued disinterest in office spaces and historically low inventory for potential buyers. The resulting out - come makes sense: if more people are staying at home in the suburbs, they are more likely to shop and support businesses in their immediate areas. Just as businesses followed people into cities, businesses are likely to follow the labor force into the suburbs, particularly given the low - er rents and commute times. This proved to be true even with the prices of goods and services facing high rates of inflation. Even as Gen Z joins the workforce, millenni - als are still considered a vital source of talent and remain the focus of HR professionals. They also remain the largest group in the workplace, with the power to set and maintain trends and to request change, particularly accommodation for work-from-home flexibility and coworking solutions. Millennials’ homebuying decisions are disproportionately based on convenience and proximity to work; in other words, the decision on where to purchase a home relates directly to the job location. Coupled with millennials wish - ing to become first-time homebuyers are those who have finally recovered from the financial cri - sis of 2007–2008, resulting in a pent-up demand for quality homes in convenient locations. Office As is to be expected, the movement of office properties on the market continues to be mini - mal. Unlike in multifamily, which sees turnover from year to year even during difficult climates, office leases are generally much longer, and are showing signs that they are unlikely to reach pre- COVID-19 pandemic norms any time soon. While remote work was already growing in popularity, the pandemic jump-started a new normal for office work that creates an interesting dynamic. Nationally, office buildings as assets became
higher risk. However, many workers in Alabama have returned to the office; as such, compared to the national landscape, there have been fewer office space foreclosures in Alabama. Further, organizations and companies moving to Alabama cities such as Huntsville and Birming - ham suggests that entities, not just individuals, may be looking to transition to more affordable places for central hubs. Even so, Birmingham continues to be an attractive destination for businesses. Brassfield & Gorrie announced plans to invest USD18.9 million to expand its national headquarters in the Lakeview District of Birmingham, and start-up Primordial Ventures recently announced plans to construct a USD3.3 million manufacturing operation in the city. Suburbs and Office Space Perhaps surprisingly, the US suburbs continue to hold a large percentage of total office space inventory and occupancy. Undoubtedly, this stems from cheaper land, availability, and a desire for spacious sites. Though vacancy has historically been higher in the suburbs, the gap between the central business district (CBD) and suburbs shrunk to a mere 35 basis points just prior to the pandemic. Annual growth rates for the suburbs have held steadier than the rates for the CBD in the past five years. Vacancy rates peaked in mid-2010, though rates declined fast - er in the suburbs than in the CBD. From 2005 to 2015 – just ten years – the CBD rent premium more than doubled. The Birmingham office market ended Q4 of 2023 with a positive net absorption totaling 89,117 square feet and a vacancy rate of 19.0%, according to Cushman & Wakefield’s Market - Beat report. With vacancies very slowly dropping and softening demand, owners are continuing to raise rents, though at a slower pace. Commer -
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