Ironvest Partners is a commercial real estate firm so, why is the residential condo market an important topic for us to discuss? First, more residents bring an additional demand for businesses like pharmacies, restaurants, venues, etc. to our city. This, of course, affects the commercial real estate market and creates a need for more space. Secondly, existing buildings that are developed as condos could easily be redeveloped into something else like office or retail space. In turn, the supply of buildings is reduced, which then increases the price of commercial properties.
Quite possibly the hottest sector in the Birmingham real estate market is residential condo sales in the city center. Recently, there have been a variety of successful condo developments in our city. The Burger Phillips building was converted from 35 apartments to 35 condos, all of which have been sold. If a condo unit becomes available in one of the existing condo buildings, it might last 30 days on the market. Row 5 Development on Morris Avenue is a new building that was completed in 2017 and quickly sold out. The same can be said for Founders Station at 2015 1st Avenue North. The question is, what made these projects successful? For one, they were unique. These units were not cookie cutter units like the stick frame midrise apartment projects that are being built these days. Another reason for success is the large size of many of the buildings in the city center. The developers are creating smaller spaces within these large buildings, which creates affordability for most people. Nice units, with parking, in the 1,000 SF range, are selling for around $250,000. This is an affordable figure for the public and a figure that makes sense for a developer. Additionally, there is so much to experience within the city these days. In one evening, without ever getting in a car, you can enjoy a meal at a nationally acclaimed restaurant, see a show at a first-class venue, and enjoy an evening stroll in a safe and aesthetically pleasing public park. During business hours, walking to work and other client’s offices makes for a pleasant commute, as well.
On the other hand, there are a few problems I see with future condo development in Birmingham. The first thing I have noticed is that as the demand for residential condos continues to rise, there will not be enough supply for the consumer. This is a good problem to have, but overall, developers have been reluctant to continue to keep up. However, the supply/demand is favorable to a developer and the pricing also makes sense. I expect developers to become more aggressive in residential condo space over the next two years.
Another market component that could negatively impact condo sales are the hundreds of new apartment rentals coming online. It will be interesting to watch how these new apartments lease up compared to the other few thousand new units that have been online in the last 3 years. One creative solution that might be a compromise for producing more condos, as well as appealing to those in the market for an apartment, can be seen by the developer of Lakeview Green. This development will have both rental apartments and condos for sale. This is a new concept for Birmingham but could be a trend we see more of in the future. I will continue to follow this sector closely and write an article revisiting the topic in the coming year.