2023 TRENDS: Retail Break Down
Vacancy Rates & Gross Rent
In the past year, the Greater Baton Rouge retail market saw vacancy rates drop from 8.81% to 7.17%.
Rental rates have remained stable since 2020 with a slight increase from about $19.60 per square foot in 2021 to $19.83 per square foot in 2023.
National average rent has risen to about $22.99 per square foot, while vacancy rates dropped to 5.7%, the lowest rate seen in a decade. Total retail square footage per capita experienced a steady decrease and is expected to come to a plateau in the near future.
Retail market conditions in the Capital Region, as well as nationally, can be partly accredited to the lack of new retail development built in the past year or so.
Retail Closures vs. Openings
Earlier this year Party City filed for bankruptcy and announced 22 store closures including one in Slidell, LA but none yet in the Baton Rouge Area. We also saw David’s Bridal file in April of 2023, so the future of their store at the Mall of Louisiana remains to be seen.
Retail Bankruptcies
Overall, retail bankruptcies are continuing the trend we saw in the previous year which were considerably light when comparing store openings and closures.
The off-price and discount sector account for many of the openings slated for 2023 — Dollar General, Five Below and Family Dollar are in the top five retailers for the most store openings in 2023.
We can expect to see a few more bankruptcies before the end of the year, but despite some national chain store closures, there are still more retailers opening in Baton Rouge than shutting down.
Drive-Thrus & Mobile Apps
Demand for convenience, combined with effects of the COVID-19 Pandemic, resulted in a spike of mobile app delivery and drive-thru utilization.
7 Brew on Essen Lane in Baton Rouge, LA
Notably, tenants are looking to either incorporate a full-service drive-thru or expand their drive-thru capacity with additional lanes and separate areas for mobile-only orders.
Like many other restaurants, Chick-Fil-A has moved a number of employees into the drive-thru stack to receive orders from customers in order to expedite service.
Currently, we are seeing entire brands built on the drive thru only concept:
7 Brew who recently opened a new location on Essen Lane in Baton Rouge, LA. The fast growing chain with 71 locations has been busy buying and leasing sites around the Capital City. This site has no interior seating and limited outdoor seating, but huge drive-thru capacity to serve customers quickly.
Smalls Sliders who opened their third Capital Region location in Denham Springs on S. Range Ave. – Replacing a former Whitney Bank branch that flooded in 2016.
With the rise of third party delivery services like Instacart, in addition to retailers offering a Buy Online/Pick Up option, we are seeing fewer store trips and shorter visits at many retail stores. This is creating a great opportunity for Retailers or Landlords to capitalize on valuable real estate that’s no longer being fully utilized as a parking lot.
E-commerce: “Buy Now, Pay Later”
Retailers are now adapting to meet inflation challenges and are increasingly offering “buy now, pay later” options such as Afterpay, Klarna, and Shopify which allow online shoppers to pay in increments instead of all at once.
In 2022 , e-commerce sales topped a trillion dollars for the first time ever and are expected to reach $110 Billion in 2023.
E-commerce currently accounts for 15% of total retail sales and is expected to grow to 20% by 2026.
Reportedly, we saw a 9% increase in overall retail sales.
Retail E-commerce Sales in the US (2020-2026)
‘US Ecommerce Forecast 2022’ eMarketer | insiderintelligence.com
Regional & National Banks
Banks and Credit Unions have shown a significant shift in the last 12 months. For the regional & Community banks, we’ve seen considerable investment in brick and mortar branch locations while larger Banks have dwindled their physical presence.
Cadence Bank (Corporate Blvd.) and Campus Federal Credit Union (Siegen Ln.) recently built new branches in Baton Rouge, LA.
Concordia Bank is nearing completion by Rouzan community and Bank of St. Francisville recently bought a site on Jefferson Hwy.
Larger banks have recently been shedding locations like Capital One who sold two branches on Bluebonnet Blvd. and a site near Highland Rd. to United Community Bank and another near the Mall of Louisiana to Fidelity Homestead Saving Bank.
Larger banks previously restricted banking use for their former locations, but now they are counting on technology to service the customer and don’t have to rely on a big branch presence.
The Regions on Highland Rd. in Baton Rouge, LA sold to Raising Canes and the former Chase Branch on Siegen Ln. is being replaced by Blaze Pizza and Jersey Mike's Subs, further evidence that there is still plenty of demand for good real estate.
Retail Project Updates
Amazon Fulfillment Center
Amazon Fulfillment Center
The 3.4 Million square foot fulfillment center is near completion of construction. Once opened it will employ 1,000 people that will pick, pack and ship 1 Million small packages per day.
Acadian Village
Trader Joe's anchored shopping center
The 10,000 Square Foot space previously occupied by Pier 1, has been leased to 2nd & Charles, their 4th location in Louisiana. The retail chain is owned by Books A Million and sells new and used books, vinyl records, games and an assortment of pop culture items.
Florida Blvd. Corridor
Absence of retailers have contributed to the demise of Bon Marche and Cortana Malls, but this area still acts as an important thoroughfare that connects large parts of our city with Downtown Baton Rouge.
A 43,000 square foot Rouses grocery store is under construction – Scheduled to open November 1st. This development is located at Florida and Ardenwood with an outparcel still available for ground lease.
Central, LA
Aldi, a German grocery chain, has broken ground on their store on Sullivan Road - 3.5 Acre property purchased for $1.4 Million in 2021. Additional locations are also under construction on O’Neal Lane and Siegen Lane.
Shoe Creek in Central, LA
Bank of Zachary is under construction and nearby retail tenants that will be opening in June including CC’s Coffee, Five Guys, Jersey Mike's Subs, Sport Clips, and Tropical Smoothie Café.
Gonzales at Hwy 30 & Interstate 10
Cabela's anchored development
American Factory Direct bought a 2 acre site for $12.50 per square foot and is building a 34,000 Square Foot Furniture Store in Gonzales, LA.
Next door to American Factory Direct is a 2.2 acre site purchased by Olive Garden for just under $14 per square foot who has begun construction on an 8,000 square foot location.
Heritage Crossing in Gonzales
Heritage Crossing Shopping Center
Alexander's Market, The Price Leblanc Performing Arts, Conference and Events Center as well as other retail locations including secured leases with Louisiana Casual Living and a hair salon planned for Heritage Crossing commercial development – All vertical construction.
Further plans may include high end, full service restaurant and bar concepts.
Much progress has been made with this development and favorable retail development land still remains.
Mid-City
Former Fleur de Lis Pizza on Government St. in Baton Rouge, LA
10 years ago Model Block showed us what a reimagined Government Street could look like. Since then we have seen a number of modern coffee shops, bars and restaurants developed through renovations and new construction.
Major changes to the area include the conversion of Electric Depot as well as the Neil family acquisitions of the Garden District Nursery property, Barracuda Taco Stand, and The Parker Barber, an upscale men’s oriented salon, nearby the recently opened bar – Pelican to Mars.
YMCA announced that an agreement was in place to redevelop their site along S. Foster Dr. in Baton Rouge for a new 24,000 square foot fitness center. Redevelopment plans will also include a 100 unit apartment complex.
For Mid-City, we can expect to see additional sites and developments coming to the area in the next year or two.
Conclusion
Our prediction for the coming 12 months is a slight rise in vacancy rates but is expected to stay in that 8% to 9% range.
We expect to see small increases in rental rates as a few new projects come online.
We anticipate to see fewer large shopping centers changing ownership as investors and owners adapt to the new interest rate environment.
A possible uptick in retail bankruptcies for highly leveraged retailers may occur, but retailers that are able to evolve to changing consumer preferences will be in a great position to succeed.
Sources
Annual 2023 Seminar Commercial Investment Division TRENDS; Retail Executive Review
