Demand ‘pretty hot’ for office space in Huntsville – AL.com

Call it another marker of growth in a city defined in part by its growth.

Amid job growth and a sizzling housing market, consider this: Available office space in Huntsville is almost non-existent.

In fact, conservative estimates put office space at about 95 percent occupancy – which is driving up prices.

It may not be as sexy as high-profile growth in Huntsville such as the Mazda Toyota plant or even adult playgrounds such as Dave & Busters and Topgolf. But it’s just as revealing.

“The market is hot, vacancy is low and demand is still very good,” said Kyle Collins, senior vice president and principal at Colliers International in Huntsville. “Any time you come into a city and you see cranes hanging in the air, you know that economy is very, very good.”

Indeed, those cranes are out there building new office space in response to demand.

Some examples:

On Memorial Parkway, Times Plaza is nearing completion with more than 35,000 square feet of office space.
On Joseph Lowery Boulevard, Redstone Federal Credit Union is building a five-floor, 66,000 square-feet building for its first downtown branch which includes two floors of office space to be leased.
At MidCity District, two office buildings with 350,000 square feet of office space were announced in October.
At Redstone Gateway, developers broke ground on a 76,000 square foot office building in March and announced it was 100 percent leased by July and another office building is in the plans.
At Constellation development downtown, an office tower perhaps as tall as 20 stories is planned and developer D. Scott McLain said he is already getting inquiries from potential tenants for a project yet to break ground.

“Any time you’re in that top 5 percent to 1 percent of vacancy, it’s considered a hot market,” Collins said. “Just from 33 years of experience, the market is extremely active and rental rates are expanding and increasing.

“And the demand is really what drives it. We’re not getting 15 phone calls a day. But we’re getting a very steady interest and a lot of traffic going through our vacancies. And as that vacancy number shrinks, it becomes very difficult. And it becomes a landlord market rather than a tenant market.”

redstone credit union downtown hsv — The Redstone Federal Credit Union office building under construction in downtown Huntsville in November 2019.

McLain traced Huntsville’s office space crunch to the whirlwind growth of the city – starting with the space race in the 1960s.

“When we grew so rapidly in the 1960s, we went out in the cotton fields and put up Quonset huts and whatever we could because we had to have it immediately to absorb the growth,” he said. “Downtown developed more slowly.”

Indeed, McLain spoke from his office in a downtown Huntsville building he said was about 100 years old.

“Clearly, the largest concentration of office space is Research Park,” said McLain, referring to Cummings Research Park – the second largest research park in the country. “People who need an office in Research Park want an office in Research Park because it’s Research Park.

“But our town, a lot of people want a downtown office. Some you might expect – businesses and lawyers and accountants. So we have a great need for that but not much space.”

Downtown is also in the midst of a revival with new hotels and an expanding Von Braun Center among the highlights. A focus has also been on making downtown a gathering spot in the city with entertainment districts and a refurbished Big Spring Park.

But those projects get more attention and generate more excitement than office space.

“Office space tells you about your economy from the standpoint of people,” Collins said. “Is employment going up? Are people hiring? That’s the takeaway that offices tell you. It’s not as sexy as MidCity, Topgolf, Dave & Busters.

“An office building needs to be functional. It needs to have technology and it needs to be affordable to a certain extent. But it does have a direct effect on employment. When you see office demand going up, you know employment is going up.”

The demand has come from those already in Huntsville, Collins said, as well as newcomers. Those already in the Rocket City often want to consolidate a growing business under one roof rather than having employees spread out in different off-site offices.

60K sq ft office buildings rendering MidCity — A rendering of a 60,000 square foot office building planned for MidCity in Huntsville.

“That’s obviously very inefficient,” he said. “We see some of those tenants that say we need to be in 15,000 square feet instead of three spaces of 5,000 square feet.

“But I have seen a good, solid amount of new blood coming into the market. Most of that has been the smaller tenants who I guess have heard Huntsville is heating up and they want to have a presence here. Or maybe they need to have a presence here to compete for (government) contracts and things of that nature. When I say it’s a good, healthy balance, that’s what I would say.”

So even if office space isn’t sexy, it is hot in Huntsville.

Which begs the question, just how hot is it?

“I’ve been in Huntsville 22 years,” Collins said. “I would say it is very close, if not equal to, the best of times in the last 22 years. I’m not going to say it’s better. There have been other times it was rocking and rolling pretty good. But it’s been rocking and rolling pretty good since 2016.

“My staff, I tell them, ‘I know you’re busy, I know you’re worn out. I know you think you can’t get everything done in 8-10 hours. But there will be a day when you won’t have so much to do. We’re busy and everybody else is, too.’”