Who are all these people moving downtown?

Birmingham’s building boom continues to send ripples of construction activity throughout the downtown area and nearby neighborhoods. Nowhere is this more obvious than in the housing market, as numerous new condominiums, apartment complexes and mixed-use developments have popped up throughout the city center over the past few years.

According to data from the Birmingham Business Alliance, there are nine multi‐family development projects that either have been completed recently or are currently under construction in greater downtown. Combined, those projects have 1,864 units and 2.25 million square feet of space, at a total cost of $379 million.

And those numbers don’t include the $40 million, 196-unit apartment project planned to open in Five Points South in 2019, or the newly announced Lakeview complex that will have 30 condos, 73 apartments and nearly 40,000 square feet of retail space.

After decades of watching the Birmingham population sprawl into the suburbs, the city’s recent renaissance has resulted in a fresh demand for urban living, and developers are scrambling to keep pace. What exactly has caused this increased interest in downtown housing? Who is moving into all these new complexes? And is this growth trend sustainable? Bham Now went looking for some answers, and here is what we discovered:

It all dates back to the Great Recession

Like most of the country, Birmingham’s real estate market was hit hard by the banking crises and economic downturn of 2008-09. Financing for major construction projects dried up, and most housing development came to an immediate halt.

A prime example is the plot of land off Clairmont Avenue directly across from Highland Park Golf Course. Two older apartment complexes on that site were demolished in advance of a multimillion-dollar condo plan that was proposed in 2008. But that deal was scrapped after the recession hit, and the land remained empty until 2015, when construction began on the newly opened Park 35 luxury apartment complex.

“A lot of the activity we’re seeing is simply catch-up from the years and years of nothing taking place,” said Beau Bevis, president and CEO of ARC Realty. “We saw almost zero product being put on the market for about 7 years, because there was no financing available. So while this building resurgence might look like an over-saturation, in realty it’s just catch-up.”

Downtowns are cool again

Urban renewal is happening in cities throughout the nation, as many people become disillusioned with suburban living. The original appeal of suburbia was to get away from the congestion of downtown and move closer to nature. Then nature was replaced with strip malls and traffic lights, and the congestion for commuters became worse than anything they had experienced downtown.

“The national trend certainly has been a movement toward urban redevelopment and living,” said Edwin Moss, executive vice president of commercial real estate firm J.H. Berry & Gilbert. “We now have a significant demand of people wanting to live in an urban environment. That’s the driver for a lot these developers.”

So at the same time that housing production in the heart of Birmingham slowed to a trickle, the desire to be in the downtown area became as great as it had been in more than a half-century. From the creation of Railroad Park and Regions Field to the renewal of Second Avenue North and the Avondale neighborhood, there has been a steady rise in attractions luring people downtown.

“There is a national trend of people moving back into urban areas, but that alone has not driven all the growth we’ve seen in Birmingham,” said Alan Reeves, economic development project manager for the Birmingham Business Alliance. “You have to have something to draw people here. And there was a deliberate effort by the leadership in Birmingham – from both a public and private standpoint – to offer up some opportunities for those developments and catch on to the national trend.

“So the demand versus the supply finally hit that critical point where you started seeing more downtown development. (Playing catch-up) certainly is a factor, but that does a disservice to just how far this community has come.”

Who are these people?

There is no doubt that Millennials are the driving force behind much of the rise in downtown living, especially the demographic referred to as Young Professionals (ages 25 to 34 with at least a college bachelor’s degree).

According to data from the BBA, the number of YPs living in Birmingham grew by 56.2 percent from 2010 to 2015, the seventh-largest increase in the nation (the national average was 17.6 percent). And that number is likely to expand significantly, since the current data ends before most of the new housing options became available.

“We do relocation work for Regions Bank and the UAB School of Medicine, and we’re seeing young professionals coming to Birmingham for the first time who want to stay,” Bevis said. “It wasn’t that long ago that young professionals came here and checked off what they needed to do on their resume so they could get to Nashville or Atlanta. Now we’re starting to capture them.”

There also is a second demographic embracing the move to downtown, and that is Baby Boomers (ages 53 to 71), the same people who preferred the suburbs for so many decades. As their children move out of the house, many Baby Boomers are looking to downsize their lifestyle and now prefer a smaller space that doesn’t require yard work. According to the BBA data, the percentage of Baby Boomers living in Birmingham increased 7.5 percent from 2010 to 2015.

“Young professionals will continue to drive it, but there is certainly a good number of empty nesters from the suburban markets who are now interested in urban living,” Moss said. “We’re even seeing people who own homes in a suburban market and don’t want to fully commit to urban living yet, so they get a downtown apartment. That gives them the flexibility of testing out urban living before maybe making a long-term commitment.”

How long will this downtown housing boom continue?

That is the crystal ball question. Bevis said the occupancy rate for downtown housing currently is more than 90 percent, so for the short-term there appears to be plenty of demand. For the long-term, however, the downtown population will need to increase in order to accommodate many more major projects, and that likely will require substantial job growth.

“I think we’ve developed plenty of supply, at least for this cycle, where the current demand will get serviced over the next couple of years,” Moss said. “Now we need to have some job growth. Developers look at two things: the supply of available units and job growth. We’ve had a lack of quality supply and a new desire of people to live in Birmingham, but we haven’t had the job growth numbers yet.

“What we have done is create a good situation where an employer can look at Birmingham and say they can come here and get quality employers and recruit people to the city. So we have the framework built to where we’ll be able to provide that to a good-sized employer that we don’t have yet, but I predict will come in the next couple of years.”

And if the jobs come, along with the people, then developers appear eager to build more downtown housing.

Do you live downtown?  Would you move downtown?  We’d love to hear your thoughts.