Birmingham Commercial Office Space for Rent

Q4 2025

Birmingham Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Birmingham commercial real estate (CRE) market is navigating a period of stabilization and cautious optimism in late 2025. The Office sector faces headwinds with vacancy near 15%, though Class A assets in the CBD and Midtown are outperforming [1, 2]. Industrial fundamentals remain healthy, with steady demand for modern distribution space and vacancy holding around 4% [3, 4]. Retail is resilient, with high occupancy and positive absorption in key corridors like U.S. 280 [5, 6]. Multifamily is tightening as new deliveries slow, supporting rent growth and high occupancy [7].

TenantBase Proprietary Data [10] highlights the distribution of active tenant demand over the last 90 days (140 total deals):

  • Retail/Storefront led market activity with 50.00% of all searches [10].
  • Warehouse was the second most active sector at 26.43% [10].
  • Office accounted for 24.29% of total search volume [10].

Office Market

Market Overview Birmingham's office market is experiencing a "flight to quality," with tenants gravitating towards amenity-rich spaces in the CBD and Midtown submarkets. While overall vacancy remains elevated, top-tier assets are seeing steady activity.

  • Vacancy & Availability: The overall vacancy rate stands at approximately 14.8%, with Class A vacancy notably lower at 11.2% [1]. The Midtown submarket remains the tightest with a vacancy rate of 9.5% [2].
  • Net Absorption: Net absorption was slightly negative in Q3 2025, primarily due to downsizing in older Class B and C properties [1]. However, Class A space saw positive absorption, highlighting the bifurcated nature of the market [2].
  • Rental Rates: Asking rents have remained stable, averaging $21.50 per SF full-service, with Class A rates reaching $25.00 per SF [1].
  • Market Drivers: TenantBase data shows a preference for shorter lease terms, with 38.24% of office inquiries seeking leases of Less than one year [10].

TenantBase Activity [10]

  • Demand Share: Office accounted for 24.29% of total search volume [10].
  • Lease Term Preference: Demand is split between short-term flexibility and longer commitments:
    • Less than one year: 38.24% of deals [10].
    • 3-5 Years: 26.47% of deals [10].
    • 5+ Years: 20.59% of deals [10].
  • Size Requirements: The average lower size requirement for office space is 2,000 SF for short-term leases, increasing to 4,125 SF for 5+ year terms [10].

Industrial & Warehouse Market

Market Overview The Birmingham industrial market remains a strong performer, supported by its strategic location as a logistics hub and steady demand from manufacturing and distribution users.

  • Vacancy & Rent: Vacancy remains low at 4.2%, with limited speculative construction keeping supply in check [3]. Rents have risen to $6.25 per SF (NNN) for warehouse distribution space [3].
  • Demand & Supply: Leasing activity is driven by automotive suppliers and e-commerce distribution [4]. The market is seeing a "flight to quality" as tenants seek modern facilities with higher clear heights and power capacity [4].
  • Leasing Highlights: TenantBase data shows a mix of demand, with 37.50% of warehouse inquiries for 1-2 Year terms and 18.75% for 3-5 Year terms [10].

TenantBase Activity [10]

  • Demand Share: Warehouse accounted for 26.43% of total search volume [10].
  • Lease Term Preference: Demand is strongest for short-to-mid-term commitments:
    • 1-2 Years: 37.50% of deals [10].
    • 2-3 Years: 18.75% of deals [10].
    • 3-5 Years: 18.75% of deals [10].
  • Size Requirements: The average lower size requirement for warehouse space is 2,000 SF for 1-2 year terms, increasing to 13,750 SF for 3-5 year terms [10].

Retail Market

Market Overview Birmingham's retail sector is vibrant, supported by steady population growth and a diverse economy.

  • Vacancy & Availability: Retail vacancy is tight at 3.8%, with prime corridors in Hoover and Homewood boasting near-full occupancy [5].
  • Rental Rates: Rents are climbing, with new construction in lifestyle centers commanding upwards of $28.00 per SF [5].
  • Construction: Development is active but focused on mixed-use projects and grocery-anchored centers to serve growing suburban communities [6].

TenantBase Activity [10]

  • Demand Share: Retail/Storefront activity dominated with 50.00% of all search volume [10].
  • Lease Term Preference: Retail tenants show a preference for mid-term stability:
    • 3-5 Years: 34.21% of deals [10].
    • 1-2 Years: 26.32% of deals [10].
    • 2-3 Years: 26.32% of deals [10].
  • Top Locations: Tenant interest is highest in Birmingham (City) (16 deals) and Hoover/Riverchase (9 deals) [10].

Multifamily Market

Market Overview The multifamily market is stabilizing after a period of rapid supply growth, with demand remaining healthy due to job creation.

  • Vacancy & Occupancy: Vacancy held steady at 6.5% in Q3 2025, with occupancy rates consistently above 93% [7].
  • Rents: Rent growth has moderated to 2.1% year-over-year, averaging $1,250 per unit [7].
  • Construction: The pipeline is active, with over 2,000 units under construction, but starts have slowed, which will help balance the market by late 2026 [8].
  • Investment: Investor interest remains strong, driven by Birmingham's affordability and steady economic growth [7].

2026 Outlook

Looking ahead to 2026, Birmingham is positioned for continued stability and gradual growth.

  • Office Recovery: The office market is expected to stabilize as tenants right-size their footprints and flight-to-quality trends continue [1].
  • Industrial Strength: The industrial sector will remain a top performer, with vacancy expected to remain low as demand for modern logistics space persists [3].
  • Retail Resilience: Limited new supply and steady consumer spending will keep retail vacancy low and rents rising [5].

Sources

  1. Graham & Company: Birmingham Office Market Report 2025
  2. Cushman & Wakefield: Birmingham Office MarketBeat Q3 2025
  3. Graham & Company: Birmingham Industrial Market Report 2025
  4. Cushman & Wakefield: Birmingham Industrial MarketBeat Q3 2025
  5. The Retail Coach: Birmingham Retail Market Analysis 2025
  6. Cushman & Wakefield: Birmingham Retail MarketBeat Q3 2025
  7. Berkadia: Birmingham Multifamily Report Q3 2025
  8. Yardi Matrix: Birmingham Multifamily Market Report – September 2025
  9. Birmingham Business Alliance: 2025 Economic Outlook
  10. TenantBase Proprietary Market Data (Birmingham - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.