$1,209 2Q 2024
0.2%
90.3% 2Q 2024
-10 BASIS POINTS
312 [YTD: 518]
580 [YTD: 700]
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
Multifamily demand in Birmingham has been strengthening over the past two quarters, yet it hasn’t kept pace with the influx of new deliveries, with absorption totaling 518 units during this period. The second quarter saw the highest demand in Downtown Birmingham, with renters absorbing 137 units. Shelby County and Cahaba Heights also experienced notable absorption, with 80 and 64 units, respectively. Most other Birmingham submarkets posted modest positive absorption or remained flat during the quarter.
Apartment construction activity in Birmingham remains robust, with 1,900 units delivered over the past four quarters—far surpassing the 10-year annual average of 800 units. Most of these new units have been concentrated in Shelby County and Downtown Birmingham. However, the construction pipeline has decreased from last year’s peak of around 3,000 units to the current level of 1,780 units as construction starts have been trending downward over the past four quarters.
Average occupancy for stabilized multifamily assets in Birmingham has fallen modestly over the past year as demand has not kept pace with the new supply. Birmingham’s current occupancy rate is 90.3%, near an all-time low for the market and well below the national average of 92.7%. Occupancy rates are lowest in the upper-tier segment, which recorded an average occupancy rate of 85.8% in the most recent quarter. With another 1,780 units under construction, Birmingham’s occupancy rate is likely to decline moderately in the medium term, as new supply is expected to outpace net absorption over the next few quarters.
The Birmingham multifamily market has seen a surge in new inventory over the past 12 months, putting downward pressure on occupancies across the metro. Consequently, owners and operators have lost pricing power, with effective rents remaining essentially flat over the year ending in June 2024. Most of the new supply has been in the upper-tier property segment, where rents have declined by 1.5%. In contrast, rent growth has been positive for the mid-range and lower-tier segments, recording a 1.1% annual increase.
The average effective rental rate in Birmingham is $1,209, significantly lower than the national average of $1,694 and the averages in large Southeastern markets like Atlanta, Nashville, and Charlotte, where rents can exceed $1,600. Birmingham’s affordability could prove advantageous in the coming years, drawing corporations and individuals who find larger regional markets too expensive.
Average Monthly Mortgage Payment
Average Monthly Rent
According to data from MSCI, only one multifamily deal has been executed in the Birmingham metro in 2024. Brookfield purchased Timber Leaf, a single-family build-to-rent community in Greenwood, for $24.8 million, or $270,000 per door in June of this year. Build-to-rent single-family developments have gained popularity in the Birmingham area over the past four years, growing from two communities totaling 296 homes to eight communities totaling 821 homes in 2024.
* Trailing 4Q average PPU
* Preliminary Data from Costar – Individual transaction $2.5M +
|
Under 35 Years
|
35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
|
75 to 84 Years
|
85 Years & over
|
|---|---|---|---|---|---|---|
|
0.2%
|
-1.1%
|
0.2%
|
0.2%
|
0.6%
|
-0.1%
|
0.2%
|
The 65-74 age group is the fastest-growing renter demographic in the Birmingham metro area, increasing by 0.6% from 2019 to 2022. This trend underscores a rising demand for housing conveniently located near healthcare facilities and lifestyle amenities such as parks and golf courses.
The Birmingham multifamily market is seeking stability as an influx of apartment units has weighed on market fundamentals. However, there are signs that the market is past the worst of the supply expansion. Demand is trending upwards while the number of units under construction is decreasing. As of the end of the second quarter of 2024, 1,780 rental units are under construction, with 1,110 units expected to be completed over the next four quarters.
Birmingham boasts one of the nation’s lowest unemployment rates at 3.0%, providing economic stability. This, coupled with its affordability, makes it a prime candidate for corporate expansion. A recent example of this dynamic is CModel Data Inc., a San Francisco-based data tech company, announcing plans to move its headquarters to Birmingham. The company, which develops business intelligence tools integrated with artificial intelligence, anticipates creating upwards of 100 jobs in Birmingham over the next year.
Substantial government employment further anchors the region’s economy. Birmingham’s affordable cost of living and diverse job opportunities make it an attractive destination for individuals and families.
