Real estate report: The retail sector is stable, though costs are on the rise

The Baton Rouge metro’s retail real estate market remains relatively healthy despite the persistent challenges posed by what have come to be known as the “Three I’s”: inflation, insurance and interest rates.

That’s according to Charlie Colvin of Momentum Commercial Real Estate, who spoke at the annual Trends seminar sponsored by the Greater Baton Rouge Association of Realtors on Thursday.

According to a survey of 129 area shopping centers, the local retail vacancy rate has dropped from 8.02% in spring 2024 to 7.4% in spring 2025—near historic lows. Regional centers (defined as retail spaces over 250,000 square feet) boast the lowest vacancy rate at 3.76%, while convenience centers (under 30,000 square feet) have the highest vacancy rate at 12.92%.

The average rental rate for non-anchor space, meanwhile, rose modestly to $21.65 per square foot, up from $20.68 the previous year. Regional centers have the highest rental rate at $27.40 per square foot, while community centers (100,001 to 250,000 square feet) have the lowest at $19.92 per square foot.

New construction remains limited outside of a few outparcel deals like coffee shops and a handful of Aldi grocery stores. Developers are hesitant to move forward with speculative projects given rising borrowing costs and construction expenses, and some tenants are now choosing to renovate second-generation buildings in favor of costly ground-up development.

President Donald Trump’s tariffs are adding extra uncertainty.

“If last year was about the ‘Three I’s,” this year is about the ‘Three T’s’: tariffs, tariffs, tariffs,” Colvin said.

Leases and sales are taking longer to close, as all parties are spending more time on due diligence. Leasing demand remains strongest among grocery stores, quick-service restaurants and service-oriented businesses.

Looking forward, Colvin predicts that the local vacancy rate will increase slightly but remain in a “very healthy” 8% to 9% range.