The pandemic has had a prominent effect on most things like restaurants, nonprofits and social gatherings. But what about commercial real estate—how is it faring? We spoke with local agents from Shannon Waltchack and Hydinger Stewart & Chew, Commercial Properties, LLC to find out. Here’s what we learned.
The All-Important Question—Cost
When searching for that prime piece of commercial real estate, one of the first things to consider is price. There’s no point in checking out places that are out of your price range, after all. So, we asked the all-important question: What are current trends in rental rates for commercial real estate in downtown Birmingham?
“Generally speaking, rental rates for class A office space are in the low to mid $20s per square foot. Inventory levels remain steady with many groups looking to renew in their current location as opposed to shopping for new space. At the start of the pandemic, activity levels decreased significantly but are steadily making a return to normal.”Michael Warsaw and Jackson Parker, Brokers, Shannon Waltchack
Sorrell Chew, real estate agent from Hydinger Stewer & Chew, Commercial Properties LLC concurred, stating: “Traditional office buildings range $20-$26.50. Landlords are not giving as much tenant improvement allowance dollars. Tenants have to make do and/or come out of pocket. Longer term leases—7-10 years—usually get tenants more TI allowances for space renovations.”
Current Cosmetic Trends in Commercial Real Estate
Due to COVID-19, social distancing is of utmost concern for those currently in the market for commercial real estate in Downtown Birmingham. This means renters are seeking creative layout solutions in order to ensure the safety of employees.
“More than ever, flexibility matters in an office environment. Open floor plans that allow for creative layout solutions tend to be most requested by tenants in the market. Companies want to create an environment where employees are comfortable and most productive.”Michael Warsaw and Jackson Parker, Brokers, Shannon Waltchack
Where are successes?
When a pandemic hits, the economy suffers. So businesses have had to get creative to keep striving. Or, at least keep afloat.
So what type of commercial real estate businesses have continued to do well in 2020?
“There’s activity in all sectors. Investments are in demand, but valuations are heightened which slows down buyers jumping in.”Sorrell Chew, Real Estate Agent, Hydinger Stewart & Chew, Commercial Properties LLC
According to Warsaw and Parker, the businesses that have prevailed through the pandemic have been those willing and able to adapt and reinvent themselves.
We’ve seen a lot of that happening around Birmingham. The popular weekend event Eat in the Streets, for example, has allowed local restaurants to expand their commercial space by moving their business outside in order to serve more customers, while abiding by CDC health guidelines.
The Bottom Line
Now that we’ve learned a few things, what is the answer to the question “How is commercial real estate current faring in Birmingham?” Warsaw, Parker and Chew all agree that though there are a few hiccups, it is doing surprisingly well.
So, is this a good time to rent commercial estate?
“In today’s competitive market, it is advantageous for companies contemplating leasing space to be proactive in their search. Companies have certainly reevaluated the way office space is utilized, but generally agree on the importance of in-person collaboration.”Michael Warsaw and Jackson Parker, Brokers, Shannon Waltchack
“It’s decent. Large blocks of available space exist but not seeing landlords being overly aggressive to get them leased. Still quoting high asking rental rates. Smaller spaces are not as plentiful.”Sorrell Chew, Real Estate Agent, Hydinger Stewart & Chew, Commercial Properties LLC