Report Finds 17% of Birmingham Apartment Assets Are Distressed

Birmingham, Ala.–As many as 9,000 units, or about 17 percent of Birmingham’s stock is considered distressed, according to a recent report issued on the Birmingham, Ala. apartment market.

According to the first quarter survey from Marcus & Millichap, distress continues to be limited to larger properties averaging more than 500 units in size, but may expand to include smaller assets. The report advises that this may provide an opportunity to investors.

The report predicts that investment activity will likely be muted in the near term because of soft market fundamentals, which have kept owners from selling properties, while a number of investors wait to see more definitive signs of an economic recovery. The report said that transaction velocity has fallen nearly 50 percent over the past year.

Developers have cut back on their building activity in response to the poor economy, and the firm projects that apartment deliveries will fall this year, for the second consecutive year.

While Marcus & Millichap predicts that employment will start to grow in the second half of this year, Birmingham’s apartment vacancy rate should reach 10.3 percent, up 30 basis points from the rate at the end of last year. Asking rents are also expected to fall in tandem, dropping 0.3 percent to $703 per month this year, while effective rents will decline 0.8 percent to $651 per month.