Wednesday, June 29, 2011
Written by Ryan Pecot
Retail occupancy across the parish's eight trade areas is a respectable 86 percent, with the College Drive/Johnston Street corridor 94 percent full.
After my March-April column highlighted a survey consisting of just over 5.1 million square feet of retail space within Lafayette Parish, several people commented that they didn't even realize Lafayette had that amount of square footage.
Wednesday, June 29, 2011
Written by Ryan Pecot
Retail occupancy across the parish's eight trade areas is a respectable 86 percent, with the College Drive/Johnston Street corridor 94 percent full.
After my March-April column highlighted a survey consisting of just over 5.1 million square feet of retail space within Lafayette Parish, several people commented that they didn't even realize Lafayette had that amount of square footage. Imagine their surprise when I told them that there is probably another 2 million square feet that wasn't included because it was either an enclosed mall, freestanding anchor or local small-shop - all of which have their own unique dynamics. While the basics were adequately covered in my previous column, I decided to dig a little deeper to see what further analysis might turn up.
Of the more surprising findings that came to light from the survey were the occupancy rates for the eight different trade areas that the market was broken down into. While these trade areas are not formally defined, and might not be agreed upon by everyone, most retailers (or their respective brokers) generally recognize that there are a handful of natural barriers in the parish that do break the market into different segments, each with its own personality.
At almost 94 percent occupancy, the southern Ambassador Caffery corridor is clearly the most desired area of most national and local tenants alike. This trade area has one of the best balances of daytime and nighttime/weekend populations, resulting in the consistent traffic retailers need to thrive. By year's end I anticipate this area to be approaching full occupancy with the relocation and introduction of a few new pending tenants to the corridor. In my opinion it is time to bring new in-line retail square footage to this particular trade area, but developers will have to make their pro formas work with extremely high land prices and lenders' heightened requirements of pre-leasing commitments and equity before any deal will be funded.
The northern Ambassador corridor and mid-block south Johnston has been treading water in recent years, which has lead to a lackluster occupancy percentage of 81.4 percent. These areas have become somewhat transient, or in-between areas, as consumers traveled from home to one anchor destination or another. Traffic congestion in these areas had actually become a hindrance to ingress/egress into retailers, but with the completion of the Camellia/Johnston intersection and other road projects, this should be less of an issue moving forward. Keep in mind that with the potential re-tenanting of the former Super Kmart and eventual redevelopment of Grand Marche, this area could quickly climb back up the rankings.
The strength of the very established College Drive/Johnston Street submarket, 94.2 percent, was not necessarily expected but made much sense in hindsight because of its centralized geographic location and shopping center owners' strong ability to compete with the more expensive, newer developments. The addition of the new Rouses, a new spark and anchor, combined with the proximity to UL's campus and student population base, increases the likelihood of this area remaining extremely healthy.
I was a bit taken aback at the north Lafayette numbers, 91.8 percent, as they were substantially higher than expected. This solid percentage reflects the fact that there is simply not sufficient supply to meet the demand. With the redevelopment of a few shopping centers and Academy Sports under way, it is apparent that there is some definite traction for continued growth.
The Pinhook/Kaliste Saloom area's small shop was fairly strong, but a few large vacancies kept this number the lowest, just under 80 percent. Since the survey though, the Golf Connection has leased space at Marketplace Shopping Center on the corner of James Comeaux, and there is another sizable deal pending there as well. While much of the big box space here has been converted to service providers or religious institutions, the small shop space and free-standers seem to be thriving.
Downtown retail is solid at 82.4 percent, but not strong. Yet. Simply because of the changes in the retail industry over the last century, this CBD zoned area will never be the powerhouse it once was. That said, with the recent shift toward more urban planned development and walkable communities, Lafayette's downtown is primed for residential components to be injected into the streetscape, and rest assured retailers will take notice.
The remaining two trade areas consist of south Lafayette/Broussard/Youngsville, 81.23 percent, and Scott/Carencro , 80.33 percent, and the remaining unincorporated portions of the parish. These regions barely had enough square footage to count only five years ago but are growing rapidly. The new space that has been introduced to the market has been consumed at a very solid rate, and the retailers that occupy it seem to be quite happy with their respective sales.
Once these trade areas were examined for their occupancy levels, the next point of research was to drill down into the average square foot pricing for each submarket. Of all of the data that was compiled during the project, this piece was likely the most predictable. Yes, pricing is heavily dictated by the laws of supply and demand you learned in economics class, but other variables play a role in this business. As expected, the most coveted area, the southern Ambassador corridor, led the way - and it did by almost $1.75 per square foot. That is simply the old school factors at play.
While the College Drive/Johnston and north Lafayette trade areas had high occupancies, they had the two lowest price points. This is more because of two opposing dynamics. For College Drive/Johnston, the physical land and buildings have been amortized over many years, which allows the owners of these properties to be very competitive price wise. That's very intriguing for tenants who can't afford new construction or simply can't find a space that fits their needs elsewhere. For north Lafayette, the low pricing is more a factor of historically low rates because of lower demand in the past. But with some of the newest development taking place in this trade area, I expect to see this price point adjust more rapidly than most over the coming years.
What's most reassuring is that the rest of the submarkets fall within a single dollar of each other - a real sign of stability in Lafayette's retail marketplace.
Ryan Pécot is a commercial broker with Stirling Properties. Since 2001 he has worked out of the firm's Lafayette and New Orleans offices. Contact him at [email protected].