Gulf Coast Rebound
New activity along the Gulf Coast has caught retailers’ eyes.
Nick Margiasso, IV

The Gulf States have seen a resurgence in retail since Hurricane Katrina hit the area in 2005. The area is seeing a lot of pent up demand satisfied by new centers and redevelopments taking place across the region.

Alabama

The football fortunes of the University of Alabama athletes and enthusiasts changed recently thanks to an accomplished coach that has brought new life to the once famed program for the foreseeable future. In the retail landscape, Alabama has seen a similar surge as retail developers have hit a successful stride in a once overlooked retail market that is serving as a key lynchpin in the resurgence of the Gulf states market.

For the past 2 years, the states surrounding the Gulf of Mexico — Louisiana, Mississippi, Alabama and Florida (especially the panhandle area) — have been in a perpetual rebuilding mode in the wake of the devastation brought on by Hurricanes Katrina, Rita and Dennis and even Ivan, which hit one year previous to that 2005 trio. But, as rebuilding efforts wore on and general development progresses during that period, one thing became abundantly clear to commercial real estate developers. As the population began to grow again in affected areas and return to normal, it became clear that the normalcy in these areas never included a sufficient amount of retail that the Gulf states (save the Sunshine State) had been thirsting for some time.

“Meeting pent up demand is the trend in the Gulf states,” says Aaron Solomon, broker and partner with Atlanta-based The Shopping Center Group in the company’s Mobile, Alabama, office. “From our end the trend is all new construction coming out of the ground, filling in where retail has not been in the past and keeping up with demand. The speculative side of retail really hasn’t occurred here because there has been such a demand for retail, and that demand is just now being met.”

Focusing on tenant representation and other retail real estate services, the folks at The Shopping Center Group have their collective fingers on the pulse of retail in the region through their constant associations with bringing new and increased retail presence into the Gulf states. Solomon and Hugo Isom, of the company’s Birmingham office, have their sites set on big things for the company and the region in the near future.

“It’s only going to get better for this retail market,” Solomon points out. “Particularly, there is a need for more grocery in the area, and upscale retail like the Pottery Barns of the world. But, really, this area is under-retailed across the board, especially for the amount of population.”

Solomon and Isom cited Target, Wal-Mart, Lowe’s, Kohl’s and multiple grocery chains as the leaders of the retail wave in the region.

Isom also pointed out that the lengthy run of road that is Interstate 10 is conducive to bringing in new consumers.

“I-10 facilitates travel laterally through all the Gulf Coast states, which is why the retailers need to concentrate on that area,” Isom says.

And with the retail trend growing all across the region, certain states and specific areas within them have become busier than others with new construction, expansion and, well, explosion.

Welcome to Alabama.

“Alabama is hot right now,” says David McClinton of McClinton & Co. “We’re trying to take care of the Montgomery trade area, bringing in all the retail it can handle. But I also see a lot in Mobile and Spanish Fort.”

McClinton & Co. completed Chantilly Station, a more than 150,000-square-foot Wal-Mart-anchored center in Montgomery to finish off 2007. They also completed another smaller Wal-Mart-anchored center with 30,000 square feet of additional retail in Millbrook. A 60,000-square-foot, third phase expansion of Festival Plaza (also in Montgomery) is in developmental stages now.

The company’s big project on the horizon, though, is High Point Town Center. At more than 1 million square feet of mixed-use property, the center is a testament to the popular all-in-one style of retail center that is taking the Gulf states by storm. It is scheduled for completion in October with a second phase slated for 2010.

“In the areas where we are doing business the trend is bigger shopping centers more hybrid in nature — an all in one retail offering,” says McClinton. “There’s a lot more of a consolidation of the lifestyle center and the power center, folks are taking all of that and putting it into one major development. We’re opening High Point Town Center in the northwest sector of Montgomery in Prattville in October. That’s a new hybrid lifestyle and power center that brings together those elements.”

The center is a microcosm of sorts of the retail landscape for the region. It includes Alabama’s first Bass Pro Shops, which, along with a neighboring Publix, exemplify two of the retailers that have made big splashes recently in the Gulf Coast states.

“Bass Pro Shops has made a significant commitment to Alabama,” says McClinton. “The first store in the state is in our High Point project. They are a new retailer to this area that has shown significant commitment not only with one store, but with multiple stores in the area of the Gulf Coast.”

The former Gayfer building in downtown Mobile, Alabama, is slated for a mixed-use redevelopment.

As for Mobile, Saad & Vallas Realty Group is involved in two new developments in the currently popular retail center locale. Portier Place will be a major mixed-use center in the Springhill area of Mobile, while the company is also involved in a redevelopment of the historic 82,800-square-foot Gayfer building for another mixed-use project.

“Downtown Mobile is starting to be noticed by national retailers,” says Christie Amezquita, CCIM, of Saad & Vallas. “We are representing a developer that is going to redevelop the former Gayfer building with retail, office and residential.” (For a demographic snapshot of Mobile, please turn to page 40.)

Huntsville is another top location for developers in the state of Alabama, with the government relocating or creating thousands of defense jobs to the U.S. Army’s Redstone Arsenal site in Huntsville over the course of the next few years under the Base Realignment and Closure (BRAC) initiative.

“We’ve seen, through all of our developing partners, that there is a return of the resident to the Gulf Coast states,” says Kay Yarbrough, director of marketing and public relations for Jim Wilson & Associates. “It’s not back to pre-Katrina growth levels, but it’s on the way. With the new influx of people due to many reasons including the BRAC in Huntsville, the demand of retail which contributes to growth has effected bottom lines.”

The Montgomery-based company has a fourth phase expansion (called EastChase Market Center) scheduled for The Shoppes at EastChase in Montgomery. Upon completion this summer, the 513,688-square-foot East Chase Market Center will includes Costco, Dick’s, Circuit City, Bed, Bath & Beyond, ULTA and Michael’s.

Jim Wilson & Associates has also begun development on Gateway Towne Center in Moody, a 150-acre site that will house between 400,000 and 1 million square feet of retail when it is finished in 2009.

“Gateway Towne Center will be a lifestyle center that attests to the growth around Birmingham,” Yarbrough says.

Birmingham is also home to Bayer Properties and its impressive center, The Summit. Opened in 1997 the 846,403-square-foot center, which is anchored by Barnes & Noble, Belk and Saks Fifth Avenue, is undergoing an expansion in 2008. The work will be part of a busy year for the company.

“The Summit has been a great success, and a second phase is underway,” says Jeffrey Bayer, CEO of Bayer Properties. “And we’ve just bought some unused land in Birmingham for a mixed-use project in the works. We’re trying to bring new retailers into these secondary markets so people in our area don’t have to drive to Atlanta to get to them.”

Louisiana

Bayer Properties also has another large project underway in the other top growth state on the Gulf Coast. But Louisiana’s growth is for a different reason than Alabama’s. Where the Crimson state is building up where there was just dirt before, the state known for it’s Big Easy ways is building back towns. The Summit Fremeaux, a joint venture between Bayer Properties, Corporate Realty and Robert Levis, is a 1.4 million-square-foot mixed-use project in Slidell that will begin construction this year and cost upwards of $900 million upon completion. The project will include Belk, Barnes & Noble and Dillards among its tenants.

“The contracts were in place before the storms,” reveals Bayer. “Now it has become a post-Katrina project that will hopefully help provide a rebirth for the area. It’s a good feeling when you see things happening again in the area.”

Stirling Properties is adding more than 400,000 square feet of shopping in the redevelopment of Hammond Mall in Covington, Louisiana.

Stirling Properties, based in Covington, Louisiana, has been a true force in the retail resurrection in the area, with the 600,000-square-foot Stirling Bossier Shopping Center in Bossier City opening in October 2007 (including Target, Belk and Best Buy) and two other major developments in the pipeline. The company will complete the 450,000-square-foot Stirling Lafayette Shopping Center in Lafayette, which will be anchored by target and JC Penney, in the fall, and will begin work on a more than 400,000-square-foot open-air expansion for the Hammond Square Mall in Covington.

“Not only is it an opportunity to do our work in developing, but also to help the areas that were affected by the storm,” says Monty Luffy of Stirling’s Gulf regional branch.

Mississippi And The Florida Panhandle

For Mississippi and Florida, though, experts say that the areas have remained fairly quiet and might for the near future. Florida seems to be taking the brunt of the punishment for insurance and other rising costs that arose after the 2005 storms.

“Florida is cooling off, which is a product of taxes and insurance,” says David McClinton of McClinton & Co. “It’s relatively unbearable down there, where there’s not enough square footage to water down the pain. Obviously, the land prices in the panhandle are high, but construction costs are high, too. Somewhere you have to get a break, and if everything’s high it will cut back on the number of projects under development until something gets checked.”

The Howard Group’s Grand Boulevard at Sandestin is a major project in Florida’s panhandle, in which business has slowed due to high development costs in the area experts say.

One of the bright spots in the Florida panhandle is The Howard Group’s Grand Boulevard at Sandestin. The $250 million project is home to retailers like Fleming’s Prime Steakhouse, Mitchell’s Fish Market, Coldwater Creek, J.Jill, Brooks Brothers Country Club, P.F. Chang’s China Bistro, Victoria’s Secret, The Orvis Company and Tommy Bahama’s Tropical Café & Emporium.

But the Gulf states boom is charging on full speed ahead, and with the building back up of the casinos of Biloxi, Mississippi, and the beaches of the Florida panhandle not going anywhere, it’s only a matter of time before the retail surge fills up the blank space left in Alabama and Louisiana and evens things out throughout the booming Gulf region. Because, after all, that is the nature of retail.

“Retail likes new roofs,” reminds Aaron Solomon of The Shopping Center Group.