Birmingham’s multifamily market in Q3 2025 continued to face challenges as new supply outpaced steady renter demand, pushing the vacancy rate to 13.0%, among the highest levels in over 25 years. Despite net absorption of 485 units, sustained construction activity and the delivery of 560 new units contributed to persistent softness in occupancy. Class A properties were hit hardest, with vacancy reaching 18.2%, while more affordable Class B communities maintained relatively lower vacancy levels. Asking rents averaged $1,300 per unit, down 0.3% quarter-over-quarter, as owners resorted to concessions to compete for tenants amid record competition.
Submarkets such as Bessemer/Fairfield and Homewood experienced the sharpest annual rent declines, ranging from -2.6% to -3.8%, following substantial new completions. Though construction activity remains elevated, slowing development in the coming quarters should allow demand to gradually catch up, stabilizing rents in 2026. Despite this, Birmingham’s relative affordability continues to attract renters priced out of larger Southeastern markets, offering a cushion against deeper declines.
Key Findings
- Net absorption in Q3 2025 was the strongest since 2021, signaling resilient renter demand. However, the vacancy rate climbed to 13.0%, reflecting the lingering impact of heavy construction activity outpacing leasing momentum.
- Despite strong demand, asking rents slipped by 0.3% in the quarter to about $1,300 per unit, as elevated vacancies and heightened competition from new deliveries pressured rent growth.
- Sales volume reached $71.1 million with cap rates at 7.0% and price per unit at $119K, indicating investor caution as a result of over-supply driven vacancy increases and declining rent growth.
Birmingham Multifamily Supply & Demand Dynamics
Source: CoStar Group, Inc.
Birmingham Demographics
Source: CoStar Group, Inc.
- Unemployment Rate: 3.0%
- Current Population: 1,197,206
- Households: 475,397
- Median Household Income: $74,382
Birmingham, Alabama’s largest market with over 1.1 million residents, serves as the state’s primary economic hub with a diverse base in financial services, trade, government, and manufacturing. After population declines during the Great Recession, the region has steadily regained momentum and now supports over 575,000 jobs. Birmingham maintains a strong financial sector, while its expanding manufacturing base positions it to benefit from U.S. supply chain reshoring. The University of Alabama at Birmingham (UAB), the state’s largest public employer, has an annual economic impact exceeding $12.1 billion. Since 2018, over $725 million in mobility-related investment has created 2,200+ jobs, highlighting Birmingham’s emergence as a hub for electric vehicle production and innovation, led by Mercedes-Benz’s partnerships with UAB and Alabama Power.
Population, Labor Force, & Income Growth
Source: CoStar Group, Inc.
In the toughest entry-level job market in years, Birmingham rises above for its strong hiring, favorable salaries, and affordability.
Source: InBirmingham; Wall Street Journal
Birmingham Multifamily Construction
Development activity remained elevated in Q3 2025, with 1,400 units under construction and 560 units delivered during the quarter. Over the past year, 2,200 new units have been completed, well above the metro’s 10-year annual average of 860 units, flooding the market with new supply and contributing to rising vacancies and slower rent growth. Although construction remains active, the pipeline has contracted from a peak of 2,500 units to about 520, signaling that the pace of development is beginning to cool. Several major projects, including the 475-unit Colina Hillside and luxury developments like 20 Midtown Apartments, The Palmer Parkside, and Cortland Vesta, continue to reshape Birmingham’s urban landscape. While this robust pipeline will keep supply-side pressure on vacancies through the end of 2025, a slowdown in new starts should help the market begin rebalancing in 2026.
Units Construction Starts
Source: CoStar Group, Inc.
Units Under Construction
Source: CoStar Group, Inc.
Birmingham Multifamily Sales
Investment activity during Q3 2025 remained steady yet subdued in comparison to historical norms, with sales volume totaling $71.1 million and an average price per unit of $119,000. Transaction momentum has improved since late 2023 but continues to trail long-term averages due to elevated interest rates and modest rent growth. Cap rates averaged 7.0%, roughly 50–100 basis points above the national average, reflecting investors’ cautious approach to secondary markets. Most transactions involved private buyers, including notable Q3 deals such as Sage Equities’ sale of Stonegate Apartments for $47.1 million and the earlier $111 million sale Ridge Crossing to Canada-based Avenue Living. While overall deal flow remains lighter than usual, investor sentiment is stabilizing as cap rates level off and pricing expectations narrow, positioning Birmingham for a gradual rebound into 2026.
Birmingham Multifamily Sales Volume
Source: CoStar Group, Inc.
By the Numbers
Q3 2025 | Source: CoStar Group, Inc.
- Sales Volume: $71.1M
- Price Per Unit: $119K
- Cap Rate: 7.0%
- Vacancy Rate: 13.0%
- Rent Growth: (0.3%)
- Asking Rent Per Unit: $1.3K
- Under Construction: 1.4K units
- Delivered: 560 units
- Absorbed: 485 units
