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With the presidential election and fiscal cliff behind us, the mood among retailers, developers and brokers in the Baton Rouge market has turned to cautious optimism. This year, expect continued growth at a measured pace in the Baton Rouge retail market.
The Baton Rouge MSA is made up of nine parishes with a total population of 820,000. Over the past two years, the Baton Rouge MSA has seen employment growth increase at an average rate of 0.5 percent, with an unemployment rate currently at 6.2 percent, well under the national average. Home sales in 2012 were up 13.8 percent as compared to 2011, with average sales prices also increasing by 0.3 percent.
The Baton Rouge retail market is comprised of 12 million square feet. The market experienced slight improvement in 2012 with the vacancy rate down to 9 percent. Most of the vacancy is concentrated in less affluent areas in centers built prior to 1985.
Mirroring the national trend, month-to-month retail sales for East Baton Rouge Parish increased in 2012 as compared to 2011. On average, sales are 7.1 percent higher than 2011 and are on pace to return to pre-recession levels.
In 2012 Baton Rouge saw several retailers expand their presence and some new ones eyeing the market. Sam’s Club opened two stores, one new and one re-located. In January, the East Baton Rouge Planning Commission approved Costco’s site plan for a new 148,000-square-foot store, which is expected to open by 2014.
Several large retail developments have gained traction over the past year. Jones Lang LaSalle, serving as the court appointed receiver for Key Bank on Perkins Rowe, a mixed-use development with 365,000 square feet of retail space, has been successful in leasing vacant suites. Most recently, the firm has signed leases with VooDoo BBQ & Grill and Lava Cantina to fill spaces vacated by previous restaurants.
At Acadian Village, a 70,000-square-foot specialty retail center being developed by Commercial Properties Realty Trust, Galatoire’s Bistro has opened and joined Acme Oyster House. The building that will be home to Trader Joe’s and additional specialty shops is also under construction.
Some smaller projects also broke ground in 2012 including new unanchored retail centers on Siegen Lane and Perkins Road, as well as another retail center in Denham Springs near the Bass Pro Shop.
2013 will also be an important year for Juban Crossing, the project being developed by Creekstone Companies in Livingston Parish. The 470-acre developments suffered another setback when Gov. Bobby Jindal vetoed the bill that would have created a special taxing district to help finance up to $45 million in infrastructure improvements. An official announcement on the project, with which retailers have committed, is expected shortly.
Following the national trend, the Baton Rouge market has seen pharmacy and dollar store concepts vacate larger multi-tenant centers in favor of new freestanding construction. Walgreens, CVS/pharmacy, Dollar General, Family Dollar, O’Reilly Auto Parts & PetSmart each increased their store counts with new freestanding construction.
On the quick-service restaurant side, operators continue to remodel their existing portfolio instead of expanding store counts. Baton Rouge did see Chick-fil-A and Dairy Queen add new units in 2012. Activity from fast casual restaurants seeking 2,000- to 3,500-square-foot end-caps with patio space remained strong. Another active category was bedding retailers, with Mattress Firm leading the way.
One major shift in the retail market is that certain high-end retailers have been vacating the Cortana Mall trade area at Florida Boulevard at Airline Highway to locate in the more affluent areas of South Baton Rouge. The most recent departure is Ethan Allen Furniture. However, the boxes vacated by Toys “R” Us and Babies “R” Us were quickly filled by Furniture Mart and Big Lots. Dillard’s has converted to a clearance store concept and the space once occupied by Service Merchandise is now home to Virginia College. The perimeter retail activity at Cortana Mall remains strong with a new Sam’s Club that opened in 2012.
At the Mall of Louisiana, owned by General Growth Properties, activity remains strong. hhgregg has opened in the 25,000-square-foot space formerly home to Borders Books. According to mall officials, occupancies are in the high 90 percent range and sales have exceeded $500 per square foot.
On the investment sales side, volume remains weak despite demand from investors. The lack of available product, coupled with historically low interest rates, has driven cap rates down for the few quality investments that are on the market.
In 2013, look for measured growth in the retail market. Steady job growth, a stable housing market and stronger retail sales all point toward more retail demand in 2013. However, the lack of financing for new projects remains a concern and will keep new retail development at a minimum.
— Charlie Colvin, associate broker, Beau Box Commercial Real Estate