In the 1800s, it was the largest state in the Alabama Territory. By the turn of the next century, it was a flourishing cotton trading center. Yes, Huntsville has been a success story since its inception. But what stands out in this city's history may be its transformation since the 1950s, when the community shifted dramatically from being an agricultural leader to a high-tech aerospace hub. Today, Huntsville is not only a mecca for space technology but also one of the hottest commercial growth markets in the Southeast, and on the short list for almost any company looking to take up space in the region.
This growth has produced a bevy of service industry jobs and attracted young college graduates who have boosted Huntsville's overall multifamily occupancy rates to an attractive 94.3 percent, according to the mid-year 2007 Huntsville Apartment Survey conducted by Birmingham, Ala.-based Rock Apartment Advisors. With an average rent growth of 4.5 percent, local rents also are on the rise. Segmented out by product type, Class B and C units typically rent for $300 to $500 per month, while new Class A construction typically rents for $600 to $800 per month. Yet, based on the growth history of this northern Alabama leader, the best in occupancy and rents is yet to come.
IN HIGH GEAR In 1950, Alabama's Sen. John Sparkman brought a group of German rocket scientists to town. Soon after, Huntsville became the birthplace of groundbreaking rocket technology that aided in wartime victories and sparked an aerospace industry that would put the first Americans in space—and on the moon.
Overnight, Huntsville grew from 10,000 residents to more than 150,000. It attracted major industrial firms such as NASA, IBM, and Brown Engineering, which entered the market seeking rocketry contracts. It also welcomed Cummings Research Park, the second-largest research park in the nation and the fourth-largest in the world.
Today, Huntsville is Alabama's third-largest city, boasting a local presence by many Fortune 500 companies and, according to the Huntsville Chamber of Commerce, a metro area population of approximately 376,000 residents. What's more, every seventh resident is an engineer, so this significantly white collar employment force earns an average household income of just under $60,000 per year—that's the highest per capita income in the Southeast. As such, the area balances the charm and opportunity of a traditional tertiary market with the distinct Silicon Valley feeling of, “We've arrived.” In reality, however, Huntsville's evolution—and consequently the evolution of its local multifamily market—is still under way, with one of the area's most influential chapters now unfolding.
JET SPEED AHEAD As a military town, Huntsville has fallen naturally in line with the efforts of the Base Realignment Committee (BRAC), which, several years ago, was assigned to identify and consolidate obsolete U.S. military bases. During this process, BRAC identified Huntsville as a new home for displaced military personnel. After this reorganization, BRAC estimates that, by 2011, Huntsville will welcome 4,700 core Army Materiel Command employees and another 20,000 to 30,000 in support staff, most of whom will require off-base housing.
Because Huntsville does not have the inventory to satisfy this influx of renters, it has quickly shifted into warp speed. In 2007, Huntsville's local inventory of 16,000 units (not including duplexes or complexes with less than 60 units) grew by 4,000 new apartments. An additional 3,603 units are in the pipeline, according to the Huntsville Apartment Survey. This is noteworthy considering that in the last 12 months, Huntsville absorbed just 359 units, a mere shadow of the absorption rate that will be needed to off set new construction and keep the multifamily market in balance. Observers, however, believe the necessary absorption rates are achievable based on current metrics.
A plethora of developable land and few geographic barriers have allowed new multifamily construction to rise up marketwide. Still, building is occurring principally within the “triangle” formed by Huntsville, Decatur in the southwest, and Athens in the northwest. In this area of town, development is fervent with apartments, malls, and mixed-use centers such as Bridge Street Town Centre, a project in western Huntsville on Old Madison Pike, just off Highway 255. Developed by Santa Monica, Calif.-based O&S Holdings, Bridge Street Town Centre combines retail, dining, and entertainment—including a new movie theater and lounge concept—with a lake and gondola rides, and a nearby Westin hotel crowned with million-dollar-plus condominiums.
On the multifamily front, apartment development in Huntsville's western suburbs illustrates the area's resurgence of Class A, three-story or townhouse-style buildings, which the area had not seen recently. An example of this type of amenity-heavy Class A project is Ashbury Woods, a 372-unit complex in southwest Huntsville. Being constructed by North Royalton, Ohio-based Gross Builders, Ashbury Woods offers one-, two-, and three-bedroom units ranging in size from 926 square feet to 1,366 square feet; rents range from the high $600s to the high $900s per month. Designed with “traditional Southern charm,” the units offer private garages, private patios or balconies, optional fireplaces, and a full-size, in-suite washer and dryer. Common areas include a clubroom with a kitchen and fireplace, exercise facility, billiards room, coffee bar, Internet café, business center, pool and spa, playground, sport court and putting green, and car wash. The project is located just south of I-565 and immediately west of the Army's Redstone Arsenal, which will bode well for the relocation of Army Materiel Command employees. Construction at Ashbury Woods is still underway, though the first units of the project were delivered in mid-2007.
SPACE PLANNING With military efficiency, Huntsville is using bare land to build Class A apartment space, but it is also improving existing multifamily product. Through rehab and repositioning, builders are reshaping Class B and C space across the marketplace. Popular areas of town for renovation include the southeast submarkets, once a more affluent part of town that now consists primarily of large Class B complexes. In the Class C and D submarkets to the southwest, properties are being refurbished and rents have improved from $200 or $300 per month to $500-plus per month.
Some of Huntsville's most recent large rehab endeavors include the 394-unit Overlook apartments and the 404-unit Stone Brook apartments, both of which are located in the West Huntsville sub-market. The Overlook apartments are being renovated in house by Tuscaloosa, Ala.-based Sealy Realty Co., with numerous upgrades, as well as the renovation of the property clubhouse set for completion in May. During the renovation, Sealy reported renting between nine and 12 apartments per week at the new market rate of $499 or more per month for one-bedroom units and $534 or more per month for two-bedroom units. As it renovates the Overlook, Sealy also is developing Emerald Ridge, a Class A gated community within a new lifestyle property on Plummer Road.
According to New York City-based research firm Real Capital Analytics, Huntsville's larger, renovated Class B properties are trading for $40,000 to $50,000 per door. Class B fourplex units are selling for a slightly higher $50,000 to $60,000 per door. Class C units sit in the $20,000-to-$30,000 per door range, though some are securing upwards of $35,000 per door.