By Chad Thomas Hagwood
The most successful investors in Birmingham are those who have allowed the economy’s natural forces to do the work for them, counting on the city’s steady growth to raise rents and elevate operating income. Until about two decades ago, The Magic City was a sleeper market reserved for local multifamily investors, but the word has long since gotten out. Large, sophisticated institutions like Blackstone and Starwood Capital are now active participants.
Birmingham produces such stable results because it offers an attractive quality of life at a modest cost. It also hosts a vibrant arts and culture scene that includes Legacy Arena at the Birmingham-Jefferson Convention Complex and the Birmingham Museum of Art, world-class restaurants that include many James Beard Award winners, a leading public university in the University of Alabama at Birmingham (UAB) and one of the pre-eminent medical centers in the United States, the UAB Health System.
Birmingham’s newest concert venue — the 9,300-seat Coca-Cola Amphitheater — is complete and hosted its first performance on June 22.
At the same time, the cost of living in Birmingham is approximately 8 percent lower than the national average. MIT’s Living Wage analysis finds that a family of four with two working adults requires $102,600 before taxes to break even in Birmingham, $8,000 less than Nashville and $12,000 less than Atlanta.
Underpinning these advantages is a solid, diversified economy responsible for nearly one-third of the state’s GDP. Birmingham is a regional financial center. Regions Bank and Protective Life Insurance are headquartered here, and national banks such as PNC, Wells Fargo and Truist have a large presence.
Birmingham is also an automotive hub. Mercedes-Benz and Honda both have megafacilities in the area. And UAB, the state’s largest employer, provides a stable foundation that serves as a baseline for the economic activity.
Thanks to its welcoming business environment, Birmingham continues to attract new development. For instance, food and beverage manufacturer J. M. Smucker, famous for its jams and jellies, opened a $1.1 billion manufacturing plant last year in the outer suburb of McCalla, creating approximately 750 new jobs for the metro area.
In May 2024, Coca-Cola United (the third-largest bottler of Coca-Cola products in the U.S.) announced a $330 million investment in a new headquarters and distribution center in Kingston, just northeast of downtown. The facility is scheduled to open in 2027.
Taken together, all these factors help explain why Birmingham has become one of the top large metropolitan areas in the nation for job growth. According to the BLS, from June 2023 to June 2024, the Birmingham-Hoover metro area experienced a 1.9 percent increase in nonfarm payroll employment, adding approximately 10,600 jobs.
Supply Constraints Portend Rebound in Rents
Unlike most major metros and the national apartment market, Birmingham’s cyclical multifamily construction wave peaked in 2023 rather than in 2024. With approximately 3,000 units in progress as of mid-March, the number of apartments under construction represents 3.1 percent of 2024 stock, half the national rate of 6.3 percent.
Consequently, Birmingham has not suffered from the oversupply issues that have challenged other markets. With a narrowing construction pipeline, home ownership costs exceeding the cost of renting, and robust in-migration, it makes sense that Birmingham has been able to sustain approximately 3 percent rent growth over the past year while many other Sun Belt cities struggled with negative growth.
Not surprisingly, downtown Birmingham has experienced an influx of development — and not by accident. The Alabama Historic Rehabilitation Tax Credit Program, enacted in 2013, led to the renovation and reuse of such landmarks as the Pizitz Building (a former department store, now a mixed-use development with 143 luxury apartments), the Redmont Hotel and the Lyric Theatre.
The Birmingham Railroad Park, an attractive urban oasis, opened in 2010. The adjacent Regions Field, home to the double-A Birmingham Barons, hosted its first game in 2013. And the Birmingham Intermodal Facility, which brings travelers and commuters downtown, opened in 2017. The transportation hub integrates passenger rail lines, long-haul and city buses and offers a dedicated airport shuttle.
These developments, among others, remade the downtown as a hub for young professionals, and multifamily investors took note. Recent projects include the 228-unit Parker Parkside Apartments, the 272-unit James on Highland and the 273-unit The Tracks.
Developers have also been at work in the southern suburbs. The Dobbins Group is building two multifamily complexes, one in Homewood and the other in Hoover, totaling almost 800 units. EBSCO Industries recently opened the 321-unit Whitby near the intersection of U.S. Highway 280 and State Route 119, and it has another project in development across Route 119. The 274-unit Inkwell on Grandview in Cahaba Heights is another example of a recently opened project along the U.S. Highway 280 corridor.
Market Fundamentals Are Stable
The influx of new apartments in 2023 caused the vacancy rate in Birmingham to inch over the 7 percent mark in early 2025, according to Yardi Matrix. However, this vacancy rate is skewed by both the downtown submarket as well as challenged Class C properties throughout the market.
Vacancies are considerably lower in submarkets outside the urban core that have not experienced much construction recently. Similarly, while average rents have grown across the metro, many owners in central Birmingham offered concessions to new renters in 2024.
The average asking rent in Birmingham as of April 2025 was $1,327, according to RentCafe. Birmingham’s lower costs ensure that it will continue to attract renters from nearby states. Average rents in Tampa are $2,046, Atlanta $1,758, and Austin $1,656.
Like the rest of the nation, multifamily transactions have been episodic in Birmingham, which means that quarterly totals can vary considerably. Nonetheless, transactions continue to occur across the metro area.
For instance, in February, EBSCO purchased a 272-unit apartment complex in Vestavia for $63 million, and Avenue Living purchased a 720-unit property in Hoover for $111 million.
Looking ahead to the remainder of 2025 and beyond, slowing construction and steady absorption suggest that vacancies will trend down, owners will continue to raise rents across the metro area, and downtown rents will rebound.
While Birmingham will be subject to trends affecting the national multifamily market, its affordability, quality of life and diversified economy will continue to make it an attractive alternative to other Southeast metros.
Chad Thomas Hagwood is senior managing director and southeast regional director for Lument.