As an expression of confidence in the strength of the post-Katrina economy, new life has sprung up in the New Orleans area retail real estate market in the form of “national developers and retailers…coming to town as first-time investors,” The New York Times reported in September. Among the new endeavors is Howard Hughes Corporation’s $70 million planned renovation and expansion of the “struggling” Riverwalk Marketplace in New Orleans. The developer cites “opportunity not only in the city’s robust travel industry but also in the thriving downtown where residents live, work, and play,” relates the Times. Moreover, although the revamped project, renamed Outlet Collection at Riverwalk, is located near the French Quarter, it is expected to draw business from residents in New Orleans “and beyond” as well as from tourist traffic. A total of 50,000 square feet of newly built space will bring the project’s total inventory to 250,000. Reis expects construction to begin and end in December 2012 and October 2013.
In Slidell on the suburban North Shore, meanwhile, Summit Fremaux, a major often-delayed and downsized mixed-use development, is now moving forward. Locally-based Stirling Properties recently acquired the 400-acre project from Atlanta-based Bayer Properties. “Nothing has changed relative to the tenant leases or anticipated opening time frame, which is set for spring 2014,” according to the city. Committed tenants include Kohl’s and Dick’s Sporting Goods. Reis reports 700,000 square feet of retail in two phases planned and proposed. In Covington, also on the North Shore, an 85,000-square-foot expansion of the River Chase power center delivered in June. A 136,000-square-foot Sam’s Club completed at the same development this October. Also in Covington, Colonial Properties’ 520,000-square-foot Nor du Lac lifestyle center has yet to complete development. The center opened in September 2010. Tenants include Kohl’s and Dollar Tree. And in August, N3 Real Estate announced plans for a $32 million expansion of Algiers Shopping Center at General DeGaulle and Holiday drives, CityBusiness reported in August.
New construction will roughly double the size of the center, to 250,000 square feet. New tenants include Ross Dress for Less and Petco.
As it has in so many other ways, Hurricane Katrina left its mark on the local community-neighborhood shopping center market. The inventory count at the end of 2006 was down fully 32.9% from two years earlier. The loss left this sector with 6.9 million square feet of existing stock, very little of which has been replaced. The subsequent onset of the recession added a rising vacancy curve and subsequent flat performances to the market’s troubles. With no noteworthy improvement, vacancy has run steadily at or above 11.0% since the fourth quarter of 2010. It closed the second quarter of 2012 at 11.0%; it had risen to 11.2% by the end of third quarter, according to Reis’ First Glance report of the new data. Thus, while net absorption was positive at 18,000 square feet through the first half of the year, losses followed in the third quarter. Rents are similarly stagnant. At $14.86 psf and $13.24 psf, asking and effective averages each was up 0.2% since year-end. The asking mean added three cents the quarter after. No space of this type has completed construction since 27,000 square feet delivered in 2010. Only 54,200 square feet, all in the Mid-City Market neighborhood center in New Orleans, were under way per the date of this report. Construction began in July and will complete in February 2013.
Modest improvement in demand and a decline in the vacancy rate to below 11.0% are expected for the remainder of 2012. Rent growth should remain flat. A moderately better performance is anticipated for 2013. The new activity in New Orleans and on the North Shore is encouraging.