Q1 2025 Alabama Multifamily Market Report
Key Findings
- Demand in Birmingham has been strong since the beginning of 2023, with net absorption totaling 987 units in 2024 and 67 units in Q1 2025. This level of demand is significantly higher than the market’s 10-year yearly average of 570 units.
- A recent slowdown in construction starts results in the restoration of owners pricing power, allowing room for increasing rental rates.
- Vacancies remain high, however the rate has declined since its peak in mid-2024. With around 900 units scheduled to be delivered throughout 2025, the vacancy rate is projected to increase. Even so dampened development starts will help lower the elevated rate.
By the Numbers
- Sales Volume: $267.7M
- Average Sale Price Per Unit: $141K
- Cap Rate: 6.9%
- Vacancy Rate: 11.8%
- Rent Growth: 1.1%
- Average Market Asking Rent Per Unit: $1.3K
- Units Under Construction: 2.4K
- Units Delivered: 0
- Units Absorbed: 67 | Source: CoStar Group
Birmingham Demographics
- Unemployment Rate: 2.8%
- Current Population: 1,197,120
- Households: 477,932
- Median Household Income: $69,549
Birmingham has a diverse economic base, with strong financial, trade, government, and industrial sectors. The city employs approximately 575,000 people, and the region’s strong manufacturing base should benefit it in the long run as corporations reassess their supply chains and seek to relocate manufacturing activities back to the United States. Alabama is a well-known supplier and manufacturing hub for automobiles.
Market Performance
Birmingham’s multifamily rent growth has followed a similar trend to the vacancy rate. Owners lost pricing power in 2024, and market rent growth slowed. Concurrently, vacancy rates have remained high, owing to an influx of new development in year end 2023 through 2024. However, demand in 2025 is strong and recent low deliveries and construction starts have contributed to a decline in the vacancy rate.
The average rent for Class A properties is $1,664 per month, which is comparable to the average in Atlanta, Nashville, and Charlotte. To compare, the national average stands at $1,750 per month, and the average in the large Southeastern markets are $1,670 per month or more. Birmingham’s lower prices may benefit the market in the coming years, attracting firms and individuals priced out of larger regional marketplaces.
Construction
While construction activity remains strong, construction starts are slowing which is good news for owners looking to leverage to increase rental rates. The market’s construction pipeline has shrunk from over 3,100 units last year to 2,100 units now, which remains higher than the market’s historical level. Downtown Birmingham has an abundance of vacant office and industrial space, well fit for multifamily conversions.
Sales
Sales volume as of Q1 2025 stands at $268M, in comparison $328M overall for 2024 and $32.6M in Q1 2024. Since early 2022, market cap rates have largely followed the national trend of increasing although they have recently leveled out. The current rate is about 50-100 basis points higher than the national average, at roughly 7.0%.
