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Feature Article, February 2005
Gulf States Retail: Beach Bound
Much of the new retail development occurring in the Gulf States is focused on coastal areas. As more and more people move toward the water, retail developers are following suit.
Lara Fuller
The coast has always held a certain appeal for many people in the United States. It often serves as a family vacation spot or retirement destination. But as metro areas continue to grow, some people are looking to the coast as not only a place to get away to, but as a place live, work and play.
The Gulf States — Alabama, Louisiana and Mississippi — are seeing large amounts of new growth, especially along the coast. Retail developers aren’t far behind, hoping to capitalize on the growing market. In recent years, lifestyle centers have become a popular type of development all across the United States, but are well suited to the coastal area for a multitude of reasons. The moderate climate of the Gulf States supports an outdoor shopping area, as does the lifestyle. The easy in, easy out promise of an outdoor shopping center fits well with the laid-back lifestyle of the people. Aesthetically, an open-air center, as opposed to an enclosed mall, blends more easily into a seaside community. As people move from urban areas to the coast, there will always be a market for new retail development, as people look for the comforts and conveniences they are used to.
The Coastal Migration
Coastal areas, especially in the Gulf States region, are booming. Some people are migrating to the beach to escape the grind of the cities, while others are looking for warmer weather. Either way, there has been a marked increase in the coastal populations of Alabama, Louisiana and Mississippi over the past several years.
“With more than 50 million Americans planning retirement within the next several years, and with a significant percentage of them within driving distance to the coast, lifestyle projects will be here to meet their residential, dining, shopping and recreational needs,” says Beason Wilkes, director of development for the Gulf Coast area with AIG Baker. Birmingham, Ala.-based AIG Baker is currently developing The Wharf, a 1.1 million-square-foot mixed-use project in Orange Beach, Alabama. The development will feature retail space, 741 condominiums, a more than 200-slip public and private marina and an amphitheater. The first phase of the project is expected to open in early 2006.
“The climate has to be a major attraction,” says Kay Yarbrough, director of marketing with Montgomery, Alabama-based Jim Wilson & Associates. “A favorable climate draws families, vacationers and retirees, so population levels are enhanced. There is tremendous growth along the Gulf Coast areas of Alabama, Louisiana and Mississippi.”
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Jim Wilson & Associates is renovating the 900,000-square-foot Edgewater Mall in Biloxi, Mississippi.
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The weather isn’t the only attraction. The Gulf States’ gaming industry is booming, especially in cities like Biloxi, Mississippi. Jim Wilson & Associates is taking advantage of the thriving gaming industry in Biloxi by revitalizing an existing shopping center. The company will soon begin renovations on the 900,000-square-foot Edgewater Mall, which will be anchored by Dillard’s, JC Penney, McRae’s and Sears.
The coastal migration isn’t limited just to people — companies are also beginning to notice what the beach areas have to offer. In addition to larger developers, many smaller retailers are hoping to tap in to the flourishing market by moving their stores to the area. Retailers with existing locations across Alabama, Louisiana and Mississippi are opening stores in the coastal areas.
“The Gulf Coast remains attractive to retailers because some currently do not have stores and the market opens the door for new stores,” says Christie Amezquita, commercial associate with Mobile, Alabama-based Saad & Vallas Realty Group. “A number of retailers currently located in Mobile and Pensacola, Florida, now have other opportunities to locate stores with the growth of Daphne and Foley, Alabama, and Fort Walton Beach and Destin, Florida.”
The Gulf States also hold an appeal for investors and developers from all across the country. “Population, economic growth, a capable labor market and changing and evolving consumer dynamics are a primary reason developers find the Gulf States an attractive retail opportunity,” says Wilkes. In addition, “The lower cap rates that West Coast buyers are paying for properties in the area have also made projects very attractive,” says Amezquita.
Fitting In With The Lifestyle
In an outdoor-oriented environment like the coastal area, developments that take advantage of the mild climate are destined to be successful. “Lifestyle centers seem to be much better suited to this type of market than malls for several reasons, including diversity, convenience and weather,” says Wilkes.
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Saad & Vallas Realty Group’s Shoppes of Midtown in Mobile, Alabama.
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As cities located on the coast are bound by the water, there is often less space to build the traditional mall. “In terms of barriers to entry, site locations are not plentiful,” says Wilkes. In addition, many residents don’t want to drive far from home just to do their shopping. A lifestyle center often emulates the feel of small town, boutique-style shopping.
According to Yarbrough, the popularity of lifestyle centers is still flourishing. “Retail will reflect the population trends and the lifestyles of the consumer,” she says. “Enclosed malls will continue to be built, but finding a location that allows traffic to flow and grow and infrastructure to be built and expand is getting harder to find.”
“The trend today is lifestyle centers and now more than ever we are seeing traditional mall-oriented department stores jumping into these types of developments,” says Gary Safady, managing partner with Los Angeles-based O&S Holdings. “It’s no secret that today’s shopper is bored with traditional enclosed malls because they offer just the same old thing seen for 40 years. What the consumer is looking for is an experience when they go out.”
The new lifestyle centers are truly developments that revolve around a lifestyle, offering more than just traditional stores. Many include unique shops, restaurants and entertainment options. “We are seeing an increase in open-air centers anchored by specialty tenants,” says Amezquita. “These developments have created opportunities for tenants such as Williams-Sonoma and Pottery Barn to enter new markets.”
Regarding traditional malls already located in the area, there has been a trend to renovate and add more power center tenants, such as Best Buy and Linens ‘N Things to the store lineup, says Amezquita. Shadow-anchored centers are also popular when developing a more traditional center. “Our company [Saad & Vallas Realty Group] is currently developing a number of Wal-Mart shadow anchored centers ranging in size from 6,000 square feet to 30,000 square feet,” says Amezquita. In Shreveport, Louisiana, Saad & Vallas is developing the 30,000-square-foot Mansfield Marketplace located opposite a Wal-Mart Supercenter.
Outside The Coastal Areas
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At final buildout, Perkins Rowe will span 1.7 million square feet in Baton Rouge, Louisiana.
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While the coastal areas of the Gulf States are receiving lots of attention, there is also a steady growth of retail projects throughout land-bound cities in Alabama, Louisiana and Mississippi. Jim Wilson & Associates is currently developing EastChase in Montgomery, Alabama. The first phase of the center includes 500,000 square feet of retail anchored by Target, Kohl’s, PetsMart and Pier 1 Imports. The next phase of the project will feature an additional 500,000 square feet of retail. “Montgomery has been a very successful market for new retail,” says Yarbrough. “Over half the stores at the EastChase development are new to the area and have been received very well. Big box retailers Target and Kohl’s have opened their first stores in central Alabama here and their numbers are excellent.” The company is also underway on a renovation of the 2.4 million-square-foot Riverchase Galleria in Birmingham. The center, which first opened in 1986, is anchored by Rich’s, Sears, JC Penney, McRae’s, Parisian and Proffitt’s.
Huntsville, Alabama, is in need of a large-scale lifestyle center, according to Safady. The nearest centers are more than 100 miles away in Birmingham and Nashville. O&S Holdings hopes to solve that problem by building Bridge Street, a 2 million-square-foot development. The project will feature 475,000 square feet of retail, 500,000 square feet of office space, 400 luxury apartments and a Westin Hotel — the first in Alabama — with 40 luxury condominiums located atop the structure. Bass Pro Shops and a 16-screen Regal Theaters are just a few of the tenants. The project is expected to open in fall 2006.
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JTS Interests is developing Perkins Rowe, a lifestyle center in Baton Rouge, Louisiana.
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In Baton Rouge, Louisiana, JTS Interests is developing a 1.7 million-square-foot mixed-use project known as Perkins Rowe. The development will feature 400,000 square feet of cinema-anchored retail, 400,000 square feet of office space and 800 residential units. “Lifestyle centers are taking hold in Baton Rouge and Perkins Rowe is ‘lifestyle’ in the truest sense,” says Clay Peterson, director of acquisitions and development with Baton Rouge-based JTS Interests. “The ability to live, work and play on the site and leave your car behind is truly what lifestyle developments should be about.” The center will be just that, with a health club, grocery store, condos, brownstones, apartments, pharmacy, movie theater, bookstore, restaurants and other retail.
“I think retailers are attracted to Baton Rouge because it has a diverse economy,” says Peterson. “We’re a strong secondary market and many retailers are putting Baton Rouge on their radar.”
The Next Big Thing
While, as a whole, the Gulf States are very hot right now, there are certain cities that outshine the rest. Mobile is one area that is ready to surge with new development. “There is a lot of potential in Mobile and the surrounding areas with people acquiring vacation homes and retirees flocking to the area,” says Yarbrough.
Saad & Vallas Realty has also seen the potential in Mobile. The company is currently developing multiple projects in the area, including Rangeline Plaza and Shoppes of Midtown in Mobile. Rangeline Plaza is a 16,500-square-foot development that is expected to open in March. Tenants include Boiling Pot, Rhino Video and Nextel. The 42,600-square-foot Shoppes of Midtown features tenants such as Office Depot, Dollar Tree and Tijuana Flats.
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A rendering of O&S Holdings’ Bridge Street development in Huntsville, Alabama. The mixed-use project will span 2 million square feet upon completion in fall 2006.
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Also in Alabama, the Huntsville market is doing very well. “Our research clearly shows that Huntsville is one of the most underserved, affluent markets in the United States,” says Safady. “Bridge Street is surrounded by the second largest research park in the United States, with a daytime population of more than 50,000 people employed by over 200 companies, including more than 36 Fortune 500 firms, NASA and Redstone Arsenal. And we’re talking about folks that are highly educated and have strong disposable incomes. On top of that, the housing market is growing by thousands of new homes.”
Developers are also closely watching the smaller beach towns up and down the Panhandle. “The surprise markets are Foley, Alabama; Fort Walton Beach, Florida; and Destin, Florida,” says Amezquita. “These areas are light on population but very heavy on tourist and seasonal traffic. A few years ago it was difficult to get retailers to consider such markets, and now it’s just the opposite, with retailers in Destin now considering adding stores in nearby Sandestin.” Saad & Vallas is developing the Shoppes of Foley on Highway 59 in Foley to take advantage of the area’s growth. The 15,000-square-foot center will be completed in October.
In Louisiana, Shreveport is a city that is often overlooked but has great potential. “O&S Holdings saw the big vision for this location that others did not see,” says Safady. “There is a big story here. A local population of 400,000, with very few shopping choices and 16 million annual tourist visits going to these very successful casinos — coming from Texas, Arkansas and Oklahoma — with nothing else to do but gamble.”
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O&S Holdings is developing the 500,000-square-foot Louisiana Boardwalk in Shreveport.
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There will definitely be more to do than just gamble when O&S Holdings completes Louisiana Boardwalk, a 500,000-square-foot project in Shreveport. The development will feature retail, restaurants, entertainment and two hotels. Bass Pro Shops, Regal Theaters, Joe’s Crab Shack, Hooters and Buffalo Wild Wings will be featured at the center.
The one thing that all of the Gulf States have in common is growth. As people continue to flock to the cities and coastal areas, developers will be right there with new retail concepts and developments.
©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
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