Economic Overview
Alabama’s economy remains fundamentally healthy, supported by continued business investment and a stable labor market. 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%. In Birmingham, Brasfield & Gorrie broke ground on a $65 million headquarters expansion in the Lakeview District, adding 88,000 square feet of training and office space and accommodating some new full-time positions. Daxko also announced plans to relocate its global headquarters to Birmingham’s Central Business District (CBD) in April 2027, bringing more than 130 Birmingham-based employees to the new downtown office. These investments reflect continued business confidence in the region and support long-term demand for quality office space.
Supply And Demand
Birmingham’s multi-tenant office market recorded negative absorption of 51,396 square feet (sf) in Q3 2026, a continued negative trend from Q2 2026. As a result, direct vacancy increased to 16.3% in Q3 from 16.1% in Q2, while overall vacancy, including sublease space, rose to 19.7% from 19.3%. Leasing activity slowed to 99,500 sf leased in Q3, bringing the year-to-date total to 467,504 sf. Despite softer quarterly activity, Birmingham’s office market remains stable. Several smaller construction projects are underway, including a new Class A medical office building in Birmingham’s Midtown submarket and a 45,345-sf Class A office project within the redevelopment of the former Brookwood Mall site. With speculative development limited, continued recovery is expected with renewed leasing activity and absorption of existing space.
Pricing Trends
Birmingham’s average asking rents remained relatively stable in Q3 2026, despite softer leasing activity and absorption. The overall average asking rate ended Q3 at $22.02 per square foot (psf), from $22.00 psf in Q2 and $22.05 psf one year ago. Class A rates rebounded to $23.75 psf from $23.58 psf last quarter, while Class B rates eased to $18.60 psf from $18.92 psf. Overall, landlords have maintained asking rates, with little year-over-year change, despite shifts in occupancy and leasing activity.
