Take a look at the current retail landscape, not only in New Orleans, but far beyond the Big Easy, and you will find this sector has changed drastically over the past decade. Some argue retail is dead, while others cling to the notion that every market goes through cycles, and this has been going on long before the dawn of any Tricentennial festivities.
Somewhere between these two extremes is the confluence of trends, data, outliers, gossip and pontificating cries, that when carefully dissected, should provide the necessary context to obtain an understanding of the current retail market in New Orleans, as well as the opportunities that exist in the future. Make no mistake, retail in New Orleans is changing, but the restaurant sector is a bedrock, creating fresh concepts, diversifying the city’s food offering and strengthening the overall retail market.
Jack Eglé, Beau Box Real Estate
It’s futile to deny the impact technology has had on the overall retail market, and New Orleans is no exception. Retailers that derive a large portion of revenues from the sale of goods that can be purchased online are finding it difficult to compete due to the cost of operating a brick and mortar location. Of course, this is only part of the story.
On a micro level, the city has witnessed a tremendous amount of development over the past few years, especially downtown, which has driven up the price of land considerably, along with all elements of development and construction. Couple this with the fact that New Orleans has a limited supply of areas to develop, and it makes for an environment where the cost to operate retail space has increased drastically.
Unfortunately, this dynamic has led to the turnover of numerous retail tenants, but it has also opened the door for new concepts and ideas to take hold. In no place has this been more evident than the restaurant sector.
New Orleans has always been revered and celebrated for its food scene, so any activity in this arena garners attention. One frequent locally discussed statistic is the number of restaurants open previous to Hurricane Katrina compared to the current count. Roughly speaking, the former figure is 800 and the current is 2,200, a 175 percent increase. This has led to a substantially more competitive landscape vying for local and tourist dollars.
Competition tends to expose some, but it also highlights those restaurants that are committed to evolving, understanding their customers and consistently executing at a high level. Restaurateurs are being forced to narrow their focus and really hone in on how they want to bring value to their customers. One shining example is LeBlanc + Smith, a local restaurant group that operates four establishments that create customer experiences. Despite the onslaught of technological advances, it is still impossible to replace an authentic human interaction, and there is no time or place to share such an experience that is more sacred in New Orleans than while breaking bread and raising a glass.
From a real estate perspective, the three most evident results of this still unfamiliar environment are: a trend toward smaller, more intimate restaurants; the willingness of an unproven concept to take a calculated risk on an inferior location with lower occupancy costs; and the desire of tenants to only lease second generation restaurant spaces, thus saving the money that would otherwise be spent on installing fixtures in a space they typically don’t own. Of course, there are always exceptions to the rules, the most obvious being a known commodity, whether a chef or concept, and an A-plus location.
With this knowledge, there are opportunities for landlords, developers and real estate professionals to influence the future design of restaurant spaces, and in a broader sense, the entire retail market in New Orleans.
The most important factors will be creating mixed-use developments with a thoughtful cotenancy mix that drives traffic throughout the day; well-designed buildings with smaller spaces that are inviting, visually appealing and easily accessible; and landlords that take the time to understand the needs of tenants and work toward creating relationships advantageous for both parties’ success.
There are a handful of such projects currently being developed in downtown New Orleans, notably the redevelopment of the Wm. B Reily & Co. Inc. building and adjacent land at the corner of Magazine and Girod streets in the heart of the Warehouse District into high-end multifamily and retail, as well as the redevelopment of the World Trade Center overlooking the Mississippi River into a Four Seasons hotel with residential condos, as well as a restaurant and cultural attraction. Development is also spilling into nearby areas such as the Garden District and Mid-City, where land values are more attractive.
— By Jack Eglé, Agent, Beau Box Real Estate. This article originally appeared in the October 2017 issue of Southeast Real Estate Business.