Shipt Tower Demonstrates Strength of Downtown Birmingham Real Estate Scene

Shipt Tower Demonstrates Strength of Downtown Birmingham Real Estate Scene

In sharp contrast to recent media portrayals, Shipt Tower, a key skyscraper in downtown Birmingham, does not signify a decline in the area’s real estate market, despite entering receivership. Appearing to generate a sense of apprehension with the news, some reports have implied that falling occupancy rates are largely to blame for the tower’s current predicament. A deeper understanding of the broader picture, however, reveals a rather different narrative — one that underscores the evolving dynamics of office spaces and boasts about the downtown region’s robust real estate power.

Shipt Tower Outshines Other Portfolio Holdings

Residing within a large portfolio of office properties, including four office structures in Hoover’s Inverness locality and a building in Columbia, Alabama, Shipt Tower is intertwined within an extensive mortgage strategy, commonly known as cross-collateralization. In this arrangement, if numerous assets within the portfolio underperform, the overall portfolio could potentially be at risk. Struggling more so than the Shipt Tower, other properties, such as those located in Inverness, have witnessed more extreme occupancy and revenue strains. Due to the portfolio’s cross-collateralization scheme, all of its assets, including the Shipt Tower, have subsequently entered receivership.

A Universal Struggle Among Office Buildings

As it stands, the overall real estate market is witnessing a struggle among various office buildings, particularly older properties not well capitalized, to appeal to new tenants in the emerging office demand climate. Adaptive reuse is becoming an increasing trend, viewed in downtown Birmingham’s conversion of the former AT&T tower into residential space, now aptly named “The 600”. And while not all buildings make suitable conversion prospects, this method provides opportunities for older properties to be acquired as assets by public and institutional buyers.

The Revitalization of Underused Buildings

Witnessing this firsthand, downtown Birmingham has seen an influx of similar acquisitions, with UAB taking over the Daniel Building for administrative offices; the Birmingham Board of Education consolidating administrative functions from three locations into the Willis Tower; and an acquisition of the Kemper Building (previously Birmingham News Building) by local entrepreneur, Alexander Shunnarah. Fortunately, these buildings will not sit unused, providing a beacon of hope for the Birmingham real estate market.

Downtown Holds Strong in Real Estate Submarket

Contrary to certain beliefs, office occupancy rates in downtown Birmingham for Class A buildings, such as Shipt Tower, are showing signs of strength. With a steady rate of 81% as of Q2 2024 and positive net absorption, these figures are outperforming many other Birmingham submarkets.

The focus remains on crafting downtown as the premium office market and hub within the region. Economic organizations are aligning with the city of Birmingham to translate this vision into reality. As the host of the University of Alabama at Birmingham, alongside over 66,000 jobs, the region’s largest concentration, it is apparent that downtown has already progressed as the prominent economic engine of Birmingham-metro area.

Through these trials, Shipt Tower continues to present as a strong real estate asset in a favorable location. As downtown advocates eagerly provide support, there is a shared optimism for the tower’s successful transition through its current challenges, and an anticipation for the growth and strength of downtown Birmingham’s real estate market.