The outlook for the retail sector of the local real estate market is so strong that broker Jonathan Walker of Maestri-Murrell characterizes it as being in the “unicorn zone”—that place so rare it’s hard to believe it exists.
“We’re seeing an increase in rental rates and a decrease in vacancy,” said Walker in a presentation today at the annual Trends in Real Estate seminar, presented by the Greater Baton Rouge Association of Realtors. “Things have not been this good since before 2008. We’re blessed to being doing business in Baton Rouge.”
Vacancy rates in the 117 shopping centers surveyed in East Baton Rouge, Ascension and Livingston parishes averaged 7.95% in the first quarter of this year, which is on par with the current 8% national vacancy rate. But that’s significantly less than the 10.6% and 9.9% rates reported in the Capital Region in the first quarter of 2014 and 2013, respectively. Average total collections for non-anchor space tenants were $17.73 per square foot, a slight increase in rental rates from $16.85 in 2014.
Several factors are driving the healthy market, Walker said. Banks are lending again. Developers are pushing new developments, though not without an anchor tenants. Also, retailers are expanding, with an eye on the lucrative generation of millennials, or those aged 18 to 34.
“Millennials are leprechauns in skinny jeans: All they think about are themselves, and they think they’re so cool,” Walker said. “They’re tech savvy and street stupid, and retailers are taking advantage of that.”
Demand is particularly high in the market for “A space,” which includes the Mall of Louisiana, Towne Center, Perkins Rowe and Acadian Village Shopping Center. The mall has an average occupancy rate of 97% and is one of the best performing malls in the portfolio of its owner, General Growth Properties, with average sales per square foot of $600. Towne Center is 97% occupied, while Perkins Rowe has seen its occupancy climb to 88% from 80% last year.
As in the past, shopping centers south of Interstate 10 and west of Airline Highway are enjoying the highest occupancy in the area, with an average of nearly 97%. Those north of Choctaw Drive and northeast of Airline are experiencing the lowest, with an average of about 84%.
—Stephanie Riegel
