Reflecting national trends, 2013 and 2014 have seen Alabama's business health grow at a modest rate. The state was praised in a recent report by Area Development Magazine as being the fourth most friendly state for doing business.

Alabama maintains its place as a business friendly state due to its incentive programs, strong infrastructure and global access for foreign based companies. The state continues to shore up its economic growth by offering additional business incentives for 2015 and beyond.

Office Market

By the end of 2013, the Birmingham commercial leasing was at a positive 178,929 square feet (sq ft), a continued positive trend from 2012. Rental rates decreased by a -.45 percent as the asking price went from $4.00/sf in 2013 to $4.38/sf in 2014. Available subleasing shrank during this time, which indicates an economy that is slowly growing. Throughout the city, the average weighted rental rate for 2013 was $18.74 sf while Class A space went for $20.77 sf.

The Central Business District saw an increase in occupancy from 88.8% 2012 to 90.1% in 2013. The 11,118 negative absorption in the district was due to a federal government moving back to its office space during a scheduled renovation.

The submarket with the largest growth was the Midtown area, which grew from a 94.5% 2012 occupancy to a 97% 2013. Thanks to leasing by Baptist Health System, this area is expected to keep the city's highest occupancy rate and expand from 2013s 119,641 sq ft absorption. The 280/Southern market also saw an increase in occupancy rates, up from 88.3% to 89.1% by close of 2013. The area's absorption of 447,304 sq ft grew from 180,607 sq ft by the close of 2012.

Elsewhere in the city, the Hoover-Riverchase submarket experienced a growth of 86.5% occupancy, up from 85.4% in 2012. Continuing with a positive trend, 2013 saw the area's 21,872 sq ft occupancy grow from 2012's 19,772. The Vulcan/ Oxmoor submarket saw the most reversal in fortune as occupancy rates raised from 70.0% in 2012 to 71.4% in 2013. The area's absorption rate rose from 2012's abysmal negative 9,916 to a positive 3,284 in 2013.

While the first two quarters of 2014 saw direct negative absorption, the outlook remains positive for industrial leasing. Many local companies announced plans to expand during 2014 and 205. The state is aiding this expansion by offering major economic development projects for 2014 and through 2016.

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Retail Market

The retail market followed 2012's positive 292,159 sq ft absorption rate with an even stronger rate of 452,858 in 2013. Occupancy rates also rose slightly from 88.6% in 2012 to 89.9% in 2013. By the close of 2013, all markets experienced positive absorption with the exception of the Western submarket.

The Irondale/Eastwood market rose to a 95.5% occupancy rate, up from 91.8% in 2012. The Highway 31 South submarket grew the most, with a 96.9% occupancy rate from 2012's 98,3%. The Central Submarket saw a positive absorption of 40,452 and an increased occupancy rate of 90.8 up from 2012's 89.7%.

The Highway 280 submarket rental rates increased in 2013 to $18.70 per square foot, and the area saw a positive absorption of 86,893 sf. The area's occupancy rate increased to 91.5% in 2013 from 2012's 89.1%.

Industrial Market

Birmingham's industrial market experienced a 917,854 sf absorption rate, a 22.7% increase from 2012. Although the overall market saw a 83% occupancy rate, the rate remained flat throughout 2012 and 2013. The Central Business District saw a positive absorption rate at 18,852 along with a modest increase in its occupancy rate, 80.9%, up from 80.5% n 2012.

The Eastern submarket saw the greatest gains, with an occupancy rate of 84.2%, up from 82.7% in 2012. The Oxmoor Valley market enjoyed a 81,818 sq ft absorption rate, reversing a negative 136,712 rate from 2012. The direct occupancy rate at close of 2013 was 81.3%.

The Southern submarket's occupancy rate dropped to 87.9% 2013, from 90.8% in 2012. The area ended 2013 with a negative absorption rate of 115,734 sf. The Southwest market dropped absorption rates from 11,863 in 2012 to 3,000 in 2013.

Tax Breaks and Incentive Programs for Businesses in Alabama

Alabama has a strong business - friendly climate. Unlike many other states, Alabama does not impose an income tax on inventory. Specialized companies can receive an exemption for pollution control equipment. In addition, the state offer several tax abatement programs that are favorable to businesses. Currently, the state income tax rate for businesses is 5%.


The University of Alabama Center for Business and Economic Research:
EGS Commercial Real Estate:
Alabama Department of Revenue: and