DHI Releases Office Market Study

By Abigail Harrison, DHI Communications Coordinator

Downtown Huntsville, Inc. (DHI) is prioritizing growing the office market after a study released by DHI and Value Tech Realty Services revealed that tight vacancies and other challenges could be a threat to downtown Huntsville’s current market.

According to Rob Buddo, CEO of Downtown Huntsville Inc., a healthy office vacancy rate is around 10% to allow room for growth. The current downtown office landscape shows that there is only a 5.1% vacancy of office space, which means there is not a lot of available room for businesses who want to move to or expand their space in downtown.

Office space is a major driver of economic development in downtowns across the country. It attracts businesses and jobs, which in turn generates tax revenue and supports other businesses in the area, such as restaurants, retail stores, and service providers.

A lack of people visiting downtown businesses during the day could lead to challenges for retail business owners, which rely on support from daytime patrons. DHI wants to address these problems before they happen so that businesses can continue to grow and thrive downtown.

“We are an organization that advocates to grow and create a vibrant, diverse, and economically sustainable downtown,” Buddo said. “For us to do that, we’ve got to grow our retail, and in order for us to grow retail, restaurants, and bars, we need to grow our daytime headcount. That’s a major market that is supporting our existing retail and restaurants.”

The office study’s goal was to understand the demand for office space, identify potential tenants, estimate construction cost, and develop strategies to offset potential challenges.

DHI hired Value Tech in May 2023 to use their strategies to interview stakeholders, such as business owners, developers, employers, and city officials, to understand the challenges that they were facing in the current market. They used that information to determine potential incentives that could make downtown office space more attractive.

“The office report helped us identify what those incentives could be, and now we’re working on finding ways and best practices that we can try to implement in downtown,” Buddo said. “So, we’re looking at things like parking strategies, different signage options, ways to leverage programs, and different ways to incentivize office growth.”

With the release of the office study, DHI’s next steps include having ongoing conversations with developers and brokers to encourage office development, advocating for city incentives for downtown office projects, modeling different incentive options to determine their effectiveness and feasibility, and researching case studies and other programs that could be modeled to encourage office development.

“We have a lot of work to do following this report, but it helped provide the roadmap of how much space we need, what those rental rates would potentially look like, and what steps we can take to make office space downtown more enticing. Now we're working on finding ways to implement that,” Buddo said.

DHI has partnered with ValueTech before to develop other reports and strategic plans that have helped grow development in other areas of downtown Huntsville. Those reports can be found on DHI’s website at https://www.downtownhuntsville.org/reports.