Today’s guest columnist is David Fleming.
Local media outlets have recently shared that Shipt Tower in downtown Birmingham has entered receivership.
The implications of the headlines and articles suggested declining occupancy played a key part in contributing to the tower’s current circumstances.
While this one building became the focus of media headlines, the story is a larger one and worth understanding in the context of the evolution of office buildings and the strength of downtown Birmingham.
Shipt Tower outperforming other assets in portfolio
Shipt Tower is part of a portfolio of office properties that include four office buildings in Hoover’s Inverness neighborhood, as well as a building in Columbia, South Carolina. These properties, being a part of a portfolio, are part of a mortgage strategy where they are cross-collateralized. While this is a common strategy for financing real estate holdings, it means that if multiple properties in the portfolio are performing below expectations, the entire portfolio can be threatened.
This is precisely the case for Shipt Tower in Birmingham. While Shipt Tower’s occupancy has declined since Baker Donelson moved across the street in 2023, it is still outperforming some of the other assets in the portfolio. Other properties, such as the Inverness assets, are more stressed for occupancy and revenue than the tower, but due to the cross-collateralization on the mortgage, all assets in the portfolio are in receivership.
Office buildings everywhere, especially older properties that are not well capitalized, are struggling. It is a time where many office buildings are wondering how to attract tenants in the “new normal” for office demand – some even consider conversions to other uses. One does not have to look far to see this adaptive reuse at play in downtown Birmingham with the conversion of the former AT&T Tower to its current use as residential space, The 600.
Not all buildings are good conversion candidates, but it does allow some older buildings to become assets for public and institutional owners. We have witnessed this in the acquisition of the Daniel Building by UAB for administrative offices; the Willis Tower by the Birmingham Board of Education to consolidate administrative functions from three locations into one; and the acquisition of the Kemper Building (former Birmingham News Building) by Alexander Shunnarah. These buildings will not sit vacant, and that is great news!
Downtown office occupancy performing stronger than other Birmingham submarkets
Overall, office occupancy in downtown Birmingham for Class A buildings, like Shipt Tower, is at 81% as of Q2 2024 with positive net absorption. Compared to other Birmingham regional office submarkets, this is one of the strongest occupancy rates.
At REV, we want downtown to be the premier office market and location for the region. We work daily with our allies who share common goals, like the City of Birmingham, to transform that vision into a reality. As the home of UAB, as well as more than 66,000 jobs (the largest concentration in the region), downtown is already a major economic driver of the Birmingham-metro area.
We are downtown advocates, and we are looking forward to supporting Shipt Tower as it works through its current challenges. We know it is a great office building and is well positioned, both physically and iconically, to be a strong real estate asset for our city and region.
David Fleming is the President and CEO of REV Birmingham, an economic development nonprofit with a mission to create vibrant commercial districts in the Magic City. A native of the area, David lives with his wife and son in Crestwood.
David Sher is the founder and publisher of ComebackTown. He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).
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Invite David to speak for free to your group about how we can have a more prosperous metro Birmingham. dsher@comebacktown.com.
Good news as David Fleming and Rev Birmingham are very good assets for the City and County. Please consider to being an advocate for racial and economic justice for all citizens in this city and county and state!!!
I applaud the efforts and goals of Rev Birmingham!
However, in my view, our economic development leaders must first face and rid our community of its reputation of gun violence. Birmingham is ranked next to the top nationwide! Attracting new business and industry will help fill those vacancies and sustain our economy. As a Birmingham native and longtime commercial realtor, I know that outside investors are reluctant to set up shop in a hostile and dangerous environment.
I hear and agree with you. Today, almost every major city has violence issues, but Birmingham’s is mainly concentrated in certain areas, not downtown or surroundings. The reputation is accurate, and until guns are prohibited, nothing will get better.
Guns are not the main problem. It is the condition of the human heart. Human beings have to decide not to kill other human beings. That is not something that can be changed by legislation.
This is a total sales piece. Yes what he’s saying is true and yes there’s a broader context, but that small portfolio is mostly Birmingham area and the whole thing is in distress which isn’t good.
If you just look at Shipt’s track record and how they’ve certainly not helped the Bham area, they’ll abandon the property too. There’s really no reason for them to be there.