Commercial Real Estate Update Q1 2021

Recently, I have been asked the following questions on a repetitive basis. I thought it might be helpful to share some insight on some hot real estate topics.

Why is commercial real estate doing so well?

  1. Interest rates are at all time lows. We can do commercial loans at 3.75% compared to 5% pre-covid.
  2. The government has flooded the economy with hundreds of billions of dollars via PPP, personal stimulus money, etc. This has propped up the overall economy and added jet fuel to the fire.
  3. Inflation is a real fear for many people, and real estate is a great hedge for that fear.

How would I push our city forward economically via real estate related concepts?

  1. Think about how Panama City Beach, Dollywood, and MS casinos market themselves. Why does Birmingham not have a regional or national marketing campaign? Right now, we have one of the greatest opportunities we have ever had to capture talented migrant populations. Let’s spend the time, money, and effort to brand ourselves for all the reasons you and I choose to live here.
  2. I would be doing everything I could to recruit technology companies to our city. These are the jobs of the future. We should have a targeted, creative incentive plan enticing companies to come to our city. For example, offer tax incentives after the company is successful and not on the front end. This way we are protected as a city, and the new companies are incentivized. We have a good base of tech companies already and have the success of Innovation Depot. This goal can be achieved in Birmingham.
  3. I would open up flights at our airport to cities that we do not already fly to. These cities should have jobs of the future and growing populations like Austin, TX , San Francisco, CA, and Raleigh, NC . Why are we not flying direct to these cities? Let’s do what it takes to make it happen. Negotiate with the airlines, offer subsidies for a year if the airlines don’t hit a certain profit point, immediately recruit talent, tourists, and businesses to Birmingham from these cities.

What are growth Areas for Birmingham in the next 5 years?

  1. Crestwood/Avondale: Home prices were sub $100,000 in 2010; now homes are selling over $400,000. Commercial lease rates were sub $8 SF NNN, and now they are $14 SF NNN or higher. This area is going to continue to boom.
  2. West Homewood: This is a rare combination. They have land and affordable real estate in a city with good leadership and a great school system. This area has big MO at its sails, and I see industrial, retail, and residential real estate performing very well in the next 5 years here.
  3. Gardendale: A sleeper pick for a major growth area. UAB just made a major ancillary hospital investment. The city is clean and safe. With its proximity to downtown, mixed in with affordable and available land for growth, this city should grow for years to come.

Give us your development Predictions.

  1. We will continue to see large Industrial businesses announcing expansions and relocations to Birmingham with automotive, trucking, and construction related companies leading the way.
  2. Regional Headquarters of a Fortune 500 company will move to Birmingham providing 250-500 new jobs.