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Retail Traffic

Overlooked no more

Retailers finally discover the under-stored, mid-size markets of Louisiana, Alabama and Mississippi.

Big cities like Atlanta and Dallas might not get too excited when a new SuperTarget, Costco, or Bed, Bath and Beyond rolls into town. But don't tell that to towns such as Montgomery, Ala., Lake Charles, La., or Southaven, Miss.

These smaller markets - and others like them throughout the Gulf States - are enjoying an upsurge of interest from a wide variety of retailers that previously passed them by on the way to more populous locations.

"Louisiana's mid-markets - the mid-size cities such as Lafayette or Baton Rouge or Lake Charles where you have a couple hundred thousand people in a trade area - those cities have been `under-stored' as compared to major cities such as New Orleans or Houston," says Patti Bender, an executive with Houston-based developer Weingarten Realty Investors. "There hasn't been an over-building process there. Those cities are in very good shape to accept more retail."

Throughout this three-state area, developers say business has never been better.

"I'm in charge of the leasing effort for Colonial and I've never been busier," proclaims Paul Glascock, senior vice president of leasing for Birmingham, Ala.-based Colonial Properties. "We've signed more leases than we ever have in terms of square footage and in terms of number."

Like other developers, Glascock says he hasn't heard anything that would point to a slowdown in economic activity. "I haven't had heads of real estate or retailers call me and say we've got to turn around on this deal or that because the business isn't there," he asserts.

The area continues to enjoy strong growth. For example, along the Louisiana, Mississippi, and Alabama coast, 22,740 new jobs were created in 1999, according to The Louisiana Economic Outlook: 2000 and 2001, published by Louisiana State University.

From all indications, the three states are still chugging along, enjoying a vibrant, solid economy that is drawing an increasing number of national retailers to these markets. While they may not be economic engines comparable to Atlanta, these states are nevertheless enjoying a level of economic activity and prosperity that was unthinkable a few years ago.

Louisiana In Louisiana, New Orleans has been primarily a slow growth market that is now seeing increases in personal income, according to Rick Kirschman, senior sales associate with New Orleans-based Latter and Blum, Inc. Realtors.

"The key growth sector of the economy has been tourism," he says. "We are the second most desired market as a destination for conventions. We're seeing a lot of redevelopment of downtown class `C' office space. So, when you take a look at our retail such as the French Quarter, Canal Street has seen some good activity in restaurants and tourist related retail."

With its limited land area, finding desirable property in New Orleans can be difficult.

"New Orleans is not a typical market from the standpoint that - if you look at Dallas and Atlanta - there's always another interchange and lots of ground," explains Kirschman. "The main part of the population is landlocked. There is really just one commercial artery that is predominating - that's the Veteran's Boulevard corridor that runs largely from Causeway to Clearview. It's larger than that, but that's where you see a lot of people wanting to be."

That fact has not stopped an increasing number of retailers from entering the market. Kirschman notes that the major growth in the New Orleans MSA has come in St. Tammany Parish, as well as in a few community markets such as the Covington/Manderville and Slidell trade areas.

Retail sales grew by 6% or more in most parishes of the New Orleans area. Shopping center occupancy rates were unchanged in the area, but rose to 93.1% on the Mississippi coast. The metro office market was largely unchanged at 86%. Consolidations in the oil industry and the up-and-down price of a barrel of crude have battered the local economy since the 1980s. The demand for office space remains uncertain.

"There's another side of the oil spectrum that's extremely healthy, and that's the service sector," says Kirschman. "Because of the closeness of the oil rigs to New Orleans, we still have a lot of that service industry. That includes the service boats, the fabrication, and so forth. That's still extremely healthy."

While New Orleans has slowed, the rest of the state is booming. Baton Rouge, with its strong base of engineering and chemical firms coupled with higher education and government, continues to show substantial growth, according to Kirschman.

"Lake Charles and Shreveport are two markets that are doing very well in gambling and taking a lot of that Texas money," says Kirschman. "Shreveport also has manufacturing with General Motors expanding there."

Alabama Alabama is another state that is seeing an increasing movement to second-tier and even third-tier markets as retailers seek to fill in areas that have been traditionally under-served.

"One of the knocks people have on secondary markets in states like Alabama is whether retailers should be pursuing that kind of strategy," says Larry Pantlin, managing director for retail development, Atlanta region, for Dallas-based Trammell Crow Co.

But retailers know that such strategies can be profitable. Pantlin recalls that retailers were eager to have Trammell Crow commit to a retail project in Dothan, Ala., called Shops on the Circle. "The retailers in this instance were very aggressive in getting us to get out there and try to put this deal together," he says. "Every one of the larger retailers are doing extremely well."

Alabama has proved to be fertile ground for retailers such as Target, which is opening centers in Birmingham and Huntsville.

"I think it speaks to the strength of what they're looking at when a retailer as astute as Target is coming in, but certainly let's not limit it just to them," says Pantlin. "T.J. Maxx, Old Navy, Office Max, and PetsMart certainly saw something in Alabama as well."

Michael Lebovitz, senior vice president for mall properties at Chattanooga, Tenn. -based CBL & Associates Properties, also is upbeat about the state. "We think that if you have well-located, good-performing properties you're going to be able to continue to grow," Lebovitz says. "We think our properties are in those locations that won't be hurt by any kind of an economic slowdown."

CBL, in partnership with Colonial Properties, has undertaken a massive redevelopment of the Parkway City Mall in Huntsville that will include the construction of a 165,000-sq.-ft. Parisian store. The companies then plan to raze the remainder of the mall to make way for a two-story development that will be anchored on the other end by Dillard's.

The state has been helped by the fact that it is powered by more than just one economically strong area. "There are different microcosms around the state as far as economic engines," says Colonial's Glascock. He cited Birmingham with its major medical, banking, and service-oriented economy, and Huntsville with its research and development activities.

Mississippi "The Mississippi market is still very strong," says Marty Mayers, executive vice president for Covington, La.-based Stirling Properties. "The Gulf Coast and Jackson are still very strong."

Other developers echo that sentiment. Lebovitz says that CBL's malls in Vicksburg, Meridian, and Hattiesburg, Miss., are performing extremely well. CBL also is working on a proposed development of a 1 million-sq.-ft. regional mall just across the border from Memphis in Southaven.

Throughout the past decade, Mississippi has enjoyed the same prosperity that has powered the economies in other states.

According to a study by the Long Beach, Miss.-based Gulf South Economic Research Center, average annual growth in retail sales during the '90s was a full percentage point higher in Mississippi (6.56%) than in the nation as a whole (5.54%). For both the state and the nation, retail sales growth accelerated toward the end of the decade, with rates for 1998 and 1999 of 8.85% and 8.99%, respectively.

While there were roughly 6,500 fewer manufacturing jobs in 1999 than there were in 1990, non-manufacturing employment increased by almost 204,000 jobs during the same period, an increase of almost 3% per year. Service sector and construction jobs led the way with growth rates of 5.67% and 4.92% per year respectively. Job growth exceeded 2% per year in wholesale and retail trade and transportation and public utilities categories, and there was no decline in employment in any of the non-manufacturing sectors.

According to forecasts by Economic Information Systems, Inc. (EIS), the outlook for Mississippi's economy is positive for the foreseeable future. EIS forecasters predict that employment will grow by 2.9% in 2000, and that employment growth will average 2.5% per year during the next twenty years. Real per capita income is projected to grow by 2.5% in 2000, with a long-range forecast of 2.8% per year for the period through 2019. EIS is equally positive about its forecast for growth in GSP for Mississippi, projecting a 3.8% growth rate for 2000, and an average yearly rate of 3.9% over the next two decades.

Throughout the region, the good times seem to be rolling along. How long it will last is anyone's guess, but for now developers, retailers, and the communities they serve are making the most of a good thing.

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