Birmingham 1Q 2024 Market Report

MARKET SNAPSHOT

AVERAGE RENT

$1,185 1Q 2024

1Q 2024 RENT CHANGE

-0.7%

OCCUPANCY RATE

90.0% 1Q 2024

ANNUAL OCCUPANCY CHANGE

-20 BASIS POINTS

TOTAL OPERATING EXPENSE ANNUAL CHANGE

8.6% (FEB 2024)

NET OPERATING INCOME ANNUAL CHANGE

0.1% (FEB 2024)

* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.

** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.

KEY TAKEAWAYS

  • Multifamily Starts Plunge: Multifamily starts in Birmingham have dropped significantly, from 2,200 in 2022 to just over 800 in 2023. This reduction in new construction will help support the Birmingham multifamily market in the latter half of 2024, returning it to historical performance levels.
  • Rent Growth to Accelerate Heading Into 2025: Despite a slight year-over-year rent decrease, Birmingham rents are expected to increase by 3.3% by early 2025. In the present, affordable submarkets like Walker County have shown healthy rent growth, illustrating the varied performance across the market.
  • Positive Absorption: Demand is anticipated to remain positive through 2024, supported by Birmingham’s strong and diversified economic foundation and one of the lowest unemployment rates in the nation at 2.8% as of March 2024.

Supply & Demand

1Q 2024

98 Units

QUARTERLY DEMAND

120 Units

QUARTERLY COMPLETIONS

Annual Demand vs Completions

Demand Trends

In the first quarter of 2024, the Birmingham apartment market showed positive demand, reducing the supply-demand gap with a net absorption of 98 units against the delivery of 120 new units. Submarkets such as Shelby County, Downtown Birmingham, and Cahaba Heights significantly contributed with net absorptions of 63, 60, and 45 units, respectively. However, these gains were offset by negative absorption in other submarkets, affecting the overall market level.

Construction Trends

In the first quarter of 2024, Birmingham’s apartment inventory grew by 120 units, all within the Downtown Birmingham submarket. This declining pipeline of new deliveries throughout the year is a positive trend for many local operators. Notably, over the past year, Downtown Birmingham and Shelby County have been the primary hubs of construction activity, contributing 55% and 40% of the new units, respectively, up to the end of Q1 2024.

Occupancy & Rent Trends

OCCUPANCY TRENDS

The average apartment occupancy rate in Birmingham declined slightly by 20 basis points over the year leading up to March 2024, stabilizing at 90%. This reflects the market’s resilience as it gradually adjusts from peak supply levels. Despite the overall downward trend, quarterly occupancy rates remained relatively steady, decreasing by just 10 basis points. Notably, Shelby County experienced a substantial annual occupancy increase of 330 basis points. Furthermore, nine of Birmingham’s 15 submarkets reported occupancy rates above the market average, with Bibb County leading at 96.9%, followed by Blount, Chilton, and St. Clair Counties, each surpassing 94%.

$1,821

Average Monthly Mortgage Payment

RENT TRENDS

As of the first quarter of 2024, the average monthly rent for an apartment in Birmingham was $1,185, significantly lower than the national average of $1,680 and the averages in larger Southeastern markets like Atlanta, Nashville, and Charlotte, where rents exceed $1,500. Over the past year, effective annual rent growth in Birmingham remained fairly stable but experienced a slight year-over-year decline of 0.7%—the first drop in at least five years. However, forecasts indicate that rental rates may increase above 3.0% by early 2025 due to a slowdown in new unit deliveries. Birmingham’s affordability could be advantageous in the coming years, potentially attracting individuals priced out of the larger regional markets.

$1,185

Average Monthly Rent

Submarket Rent & Occupancy

Submarket Construction Pipeline

Sales Activity

Amid rising debt costs, transaction volume for conventional apartments in Birmingham totaled only $83.4 million in the past year, according to MSCI, significantly below the historical average of $395 million. During this 12-month period, only five properties changed hands. The scale of this decline is underscored by the absence of any recorded conventional multifamily transactions exceeding $2.5 million in the fourth quarter of 2023 or the first quarter of 2024. Despite being a lower-velocity market compared to major Southeastern cities like Nashville or Atlanta, Birmingham’s prices remain lower than these markets, offering potential discounts to investors willing to explore opportunities there.

TRANSACTION VOLUME


Annual Transaction Volume


Y-O-Y Change


Annual Individual Transaction Count


Price Per Unit


Annual PPU Change

* Trailing 4Q average PPU

* Preliminary Data from RCA – Individual transaction $2.5M +

Income & Expense Analysis

Please note that the income and expense data presented in this section is sourced from third-party providers. Our firm does not provide any warranty or guarantee as to the accuracy or reliability of this information. We recommend that users exercise their own discretion and professional judgment when interpreting and utilizing this data.

Income & Expenses

Income AssumptionsValue / UnitYear Change (%)
Rental Income / Occupied Unit$1,147.085.0%
Recoverable Expenses / Occupied Unit$90.2012.0%
Other Income / Occupied Unit$75.92-1.8%
Total Income / Occupied Unit$1,313.195.0%
Rental Income$1,044.574.1%
Recoverable Expenses$82.1211.1%
Other Income$69.17-2.6%
Total Income$1,195.864.2%
Operating ExpensesValue / UnitYear Change (%)
Payroll$133.294.3%
Repairs & Maintenance$51.048.5%
Leasing$49.30-1.6%
General$32.956.2%
Marketing & Advertising$18.2510.9%
Repairs & Maintenance$94.862.7%
Cleaning$18.046.3%
Roads & Grounds$13.697.2%
General$63.120.9%
Administrative$42.5912.4%
Security$8.6412.6%
General$33.9412.4%
Management Fees$37.962.6%
Utilities$115.345.1%
Electric$23.5711.8%
Gas$0.8420.5%
Water/Sewer$90.943.4%
Real Estate & Other Taxes$121.4013.6%
Insurance$54.1432.2%
Other Operating Expensees$1.90
Total Operating Expense$619.728.6%
Value / UnitYear Change (%)
Net Operating Income$576.140.1%

Market Outlook

Birmingham has shown resilience amid challenging market conditions. Despite a steady influx of new supply, apartment absorption has remained positive in recent years. As of the first quarter of 2024, 2,219 rents units are under construction, with 1,940 of those units expected to be completed within the next year. However, demand is expected to continue to be positive, bolstered by Birmingham’s strong and diversified economic foundation.

With one of the nation’s lowest unemployment rates at 2.3%, Birmingham enjoys economic stability. The University of Alabama at Birmingham (UAB), the area’s largest employer, has about 21,000 employees. Other significant employers include Regions Financial, Honda, Publix, and Brookwood Baptist Health. 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.

Sources: Yardi Matrix; Costar; MSCI.

To Gain Further Insights Into The BIRMINGHAM Market Please Reach Out To Our local Team

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Brett Meinzer

Managing Director
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Senior Director
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Kendall Adams

Senior Director
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Chris Wilson

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