Commercial Real Estate in Mobile

By E. Bradford Ladd Jr.

In examining the three primary divisions within Mobile’s commercial real estate market (office, retail and industrial) it becomes clear that, from a product standpoint, the Mobile commercial market has fared better than other markets around the country. 

Mobile’s demand for office space is currently stronger than the national average, resulting in elevated lease rates and a reduced inventory level. The vacancy rate for office space is in the 4.4% range with an average lease rate of $17 per square foot, up from last year’s average lease rate of $16 per square foot. Many ask how COVID-19 impacted the office market moving forward. According to the CCIM Institute, 58% of workers are now fully back in the office, 29% are working hybrid schedules and 13% are fully work-from-home.

While office space is in demand, retail space is quite the contrast. This sector of the commercial real estate market is weaker than the national average. Despite weaker conditions, lease prices rose faster than the national average, while the vacancy rate is lower at 3.9%.

If you look at the final category, you will see that the industrial sector remains stronger than the national average, as absorption of industrial space remains very strong. Market cap rates currently average 9% with a vacancy rate of 4.9%. Mobile has greatly benefited from companies such as Airbus and Austal and their supply chains.

The two largest obstacles that I see facing the commercial arena moving forward are excessively high insurance rates and rising interest rates. These two contributing factors lead to a decline in the frequency of transactions. Cap rates trending upward and an excessive rise in insurance premiums result in lower values in a market where supply is down.

The Alabama Center for Real Estate/Alabama Commercial Real Estate Index provided data for analysis. 

E. Bradford Ladd Jr. is vice president of Sales & Leasing for Roberts Brothers Commercial & Property Management, Inc.