Economic Outlook
Alabama’s economy remains fundamentally healthy, supported by a strong business climate and continued investment across key industries. The state’s preliminary August unemployment rate held at 3.4%, up from 2.8% one year ago, but remains below the national rate of 4.2%. Alabama moved to No. 7 in Area Development magazine’s 2026 Top States for Doing Business rankings, earning high marks for its property tax environment, overall cost of doing business and labor cost competitiveness. The state also ranked sixth nationally for skilled trades employment growth, which increased 11.3% from 2019 to 2025, outpacing all neighboring Southeastern states. Together, these advantages strengthen the state’s industrial base, creating a favorable backdrop for industrial growth across Birmingham’s industrial market.
Supply and Demand
Birmingham’s multi-tenant industrial market softened in Q3 2026, with overall net absorption reaching negative 324,495 square feet (sf), compared with negative 80,287 sf in Q2. Direct vacancy rose to 8.3% from 7.1% last quarter, while overall vacancy increased to 10.6% from 8.7%. Sublease availability reached 392,007 sf, contributing to the widening gap between direct and overall vacancy. Leasing activity slowed considerably in Q3, bringing the year-to-date leasing volume to 469,669 sf. While below the pace of the last two years, leasing activity continues amid a more limited supply of available space. Despite softer demand, development and investment activity continued, reflecting ongoing investor confidence in our region. Amazon signed a lease for a build-to-suit on a 30.8-acre site located in the Central submarket, where a 245,440-sf warehouse is planned. Additionally, a 10.5-million-square-feet (msf) Southeast industrial portfolio was sold and financed, including 14 industrial buildings totaling approximately 2.6 msf in the Birmingham market.
Pricing
Industrial asking rents remained relatively stable in Q3 2026 despite rising vacancy. The overall average weighted net asking rate for the Birmingham market ended the quarter at $7.47 per square foot (psf), down slightly from $7.57 psf in Q2 but up from $7.40 psf one year ago. Service Center properties continued to command the highest rents at $11.36 psf, up from $11.18 psf last quarter. Office/Warehouse rates eased to $10.93 psf from $11.07 psf, while Bulk Distribution rates edged up to $7.13 psf from $7.07 psf in Q2.
