“I see friends shaking hands, saying how do you do…”
Like many urban city centers, New Orleans has faced unprecedented challenges from COVID-19 over the past 19 months. The metro area lost more than 85,000 jobs between second-quarter 2019 and second-quarter 2020. In an economy heavily reliant on tourism, Orleans Parish was the most impacted with over 41,000 jobs lost, predominantly in the hospitality sector.
Retailers — and their employees — depend on the large boosts of economic activity provided by large-format gatherings such as conventions and festivals like Jazz Fest, French Quarter Fest, and Mardi Gras, all of which were cancelled for the past 24 months. Additionally, the very active hurricane seasons of 2020 and 2021 resulted in devastation from three major storms in economic centers along our coastal community. New Orleans is still navigating clean-up efforts following Hurricane Ida, which landed Aug. 29, while real estate developers, builders and tenants face even more pricing and timing challenges due to material and worker shortages that were further hindered by storm activity.
Richard Weber Jr. of Corporate Realty
However, we are marching in the right direction. Cruises are resuming from Port of New Orleans (Port NOLA). Business travelers are getting back on the road. Offices are welcoming back more and more people. Most importantly, the streetcars are filling up, live music is back in our venues and kitchens are prepared to serve our distinctive cuisine to the visitors who are, if not yet overflowing, certainly crowding our streets again — which precipitates the return of our employees. New Orleans’ most valuable asset is its people, which includes both our optimism and our ability to adapt and move forward. This is also our approach to real estate.
The local entrepreneurial spirit remains strong and creative. Regional and national retailers, restaurateurs and hoteliers remain attracted to our character and community. This demand continues to keep inventory relatively low as stable retail rents continue to be the norm in a city that benefits from the preservation of real estate to maintain its character. In a market dominated by infill projects, retail opportunities remain opportunistic. This in turn creates a need for tenants to have a plan in place and react quickly when the opportunities do present themselves.
This confluence of obstacles has unfortunately led to some business doors being closed, which affected certain neighborhoods more than others. These include the Central Business District (CBD)/Warehouse District, the French Quarter and Magazine Street. However, when these doors close, they do not stay closed for long.
Not only is the demand high in these neighborhoods, but so are average retail rents. They remain near pre-pandemic rates, which is a standard higher level than the average retail rent of $21 per square foot in other areas of Orleans Parish. The CBD/Warehouse District still leases at $28 to $35 per square foot; the French Quarter commands $60 to $80 and Magazine Street still asks $25 to $35.
Downtown continues to benefit from development activity with significant projects. The Four Seasons Hotel and Private Residences, which just opened in September 2020, is a $325 million renovation of the former World Trade Center along the Mississippi River curve. It features 340 hotel rooms, 92 condominiums and restaurants helmed by local chefs Alon Shaya and Donald Link. The $60 million Virgin Hotels New Orleans opened in Oct. 2020, while a planned consortium between River District Neighborhood Investors LLC and the Ernest N. Morial New Orleans Exhibition Hall will develop 39 acres adjacent to the convention center.
This more than $1 billion investment, spearheaded by local Lauricella Land Co., will result in a new mixed-use neighborhood development to include entertainment, retail, residential and hospitality options.
Outside of New Orleans, the suburban areas of Metairie, Elmwood, Harvey, Mandeville, Covington, Slidell and Hammond have seen larger power centers continue to expand throughout the past five to 10 years. This shift away from, or redevelopment of, enclosed malls in these markets is almost complete. Population growth, good school systems and more opportunities afforded by a work remote economy continues to fuel development.
Both service-oriented (i.e. medical) and everyday-need tenants (i.e. grocery) are increasingly demanding more space when retail boxes become available. Although not specific to Louisiana, these non-traditional retail tenants continue to find success backfilling boxes left behind by Sears, Stage Stores, Stein Mart, Pier 1 Imports and others.
Specialty grocers (Louisiana is included in Aldi’s new expansion territory along the Gulf Coast) and medical users are giving landlords more options and therefore opportunities to increase additional traffic to their center. Ochsner Health, the region’s largest healthcare provider, is currently converting the former Sears box store in the newly renamed Clearview City Center in Metairie into a 185,000-square-foot “super clinic” and backfilling a former Cost Plus box in River Chase Shopping Center in Covington.
Perhaps it is this pressure that causes T.J. Maxx, Marshalls, Hobby Lobby, Burlington, Five Below and others to look for growth opportunities in smaller tertiary markets where rental rates are not as stressed.
Louisiana is projected to recover most of its jobs lost by second-quarter 2022. We are ready for spring of 2022 when we will (hopefully) open our doors for Mardi Gras and Jazz Fest and all the glory that is New Orleans in the springtime. Then we can, collectively, open our arms and march and dance and shop and dine and embrace a return to normal.
“And I’ll think to myself, what a wonderful world.”
— By Richard Weber Jr., Sales and Leasing Associate of Corporate Realty. This article originally appeared in the October 2021 issue of Southeast Real Estate Business.