Ever since he closed on the deal to purchase the Capital Heights shopping center in Mid City, developer Donnie Jarreau has averaged three phone calls a day from people who want to lease space.
Jarreau says much of the interest in the 53,000-square-foot shopping center, which is located on Government Street at Rebel Drive, is coming from value-oriented retailers, including a discount grocer.
That’s not surprising, given that discount and value-oriented retailers, which are turning healthier bottom lines from today’s cost-conscious consumers into expansion, are one of the few bright spots in the current recession.
“You’re not going to see a lot of major tenants come into the market, although some will come to the Mall of Louisiana or Perkins Rowe because those were already planned,” Jarreau says. “Many speculative deals were put on hold for the recession. But these second-generation guys … are expanding into the redevelopment centers and smaller markets in Louisiana.”
Dollar stores, value-oriented retailers like Tuesday Morning, parts stores and discount stores in clothing, clothing accessories and grocers are growing. As part of that growth process, these businesses are looking for space between $7 and $12 per square foot, which targets redeveloped centers in urban areas and new construction in rural areas.
“Discount retailers are looking for new locations while larger retailers have pulled back,” says Chad Brossett of Donnie Jarreau Real Estate, who represented the buyer, SW Properties [a firm that includes Jarreau], in the $1.9 million sale of the Capital Heights shopping center.
“I think everybody is going to be a little more cautious, but I think good properties at good locations are deals that will still get done.”
Austin Earhart, a sales and leasing agent with Beau Box Commercial Real Estate, brokered the Capital Heights sale. Earhart, who used a national online service, Dealmakers, to create interest in the property, recently closed on two AutoZone sites in the Capital Region and is working on 20 more around the state.
“There is a limited amount of good land available, especially in inner-city Baton Rouge, so naturally we’ll see redevelopment,” Earhart says. “If you need a particular demographic or traffic count, there isn’t a whole lot of land that isn’t encumbered with potential problems like zoning or servitudes or wetlands or elevations—a number of reasons that make sites cost prohibitive.”
Jonathan Walker, a commercial sales and leasing agent with Maestri-Murrell Real Estate, says more redeveloped space is becoming available in the Capital Region. He agrees location will remain a key factor in any leasing.
“Even discount retailers don’t want to take a huge risk,” Walker says. “They still want to cherry pick the best locations.”
One of the sites ripe for the picking is Capital Heights, which is part of Mid City’s highly desired growth density.
Reviving the 20-year-old center also will turn an eyesore into a new shopping place for the community while generating sales tax and improving property values. By February, Jarreau and Brossett expect to have the center leased—including the 45,000 square feet formerly occupied by anchor tenant Winn-Dixie.
“It’s a good thing for worn-out and tired shopping centers, and retailers can afford to expand as cost becomes more affordable,” says Dottie Tarleton, vice president of Stirling Properties. “The longer the economy stays in slowdown mode, the more opportunities there’ll be for redevelopment. We’re just now beginning to see these opportunities.”
Another shopping center, Plank Crossing in Baker, was vacant and rundown by the time developers Collier Thornton and Chris Dozier acquired the 138,000-square-foot location for $3.53 million last year.
By April, Thornton expects to have the 138,000-square-foot center 80% leased to discount and/or value-oriented retailers. He’s negotiating with two discount clothing stores that could anchor the center by February.
“They’re not glamorous projects, but at the end of the day we feel like they’re safer investments and, in the long haul, will stay leased up and continue to have the returns we’re looking for,” Thornton says. “You get into these redevelopment projects cheaper, which brings lease prices in a better range in a slower economy.”
Dozier and Collier also own redeveloped centers in Marksville and Gonzales. In May 2007, Eastbank JDT—represented by Jarreau, Dozier and Thornton—bought the 120,000-square-foot Eastbank Shopping Center on La. Highway 30 near La. 44 in Gonzales for $2.9 million, or less than $24 per square foot.
Eastbank JDT made the purchase with plans to rehabilitate and re-tenant the center to take advantage of Ascension Parish’s emerging retail corridor that includes Cabela’s and Home Depot.
“This is the market until we start seeing some growth,” Jarreau says. “But I’d rather be here than any place. Things are slowing down, but it’s a lot worse in other markets.”