Las Vegas' transformation from remote gambling town to the fastest growing metropolis in the nation has caused a number of depressed communities across the country to consider gambling to revitalize their cities. However, adding casinos is not always a panacea. Atlantic City's continued struggles to spur growth beyond the boardwalk is proof of that.

But sleepy Southern cities like Shreveport, La. and Biloxi, Miss. have granted gambling licenses in the hope of spurring greater economic development. They definitely got the gambling part right. Mississippi currently has the third highest gambling revenues of any state in the country, amounting to $2.6 billion in 2004. Its casinos attract 50 million visitors a year. And Louisiana is not far behind. In 2003, the State government in Louisiana collected $449 million in commercial casino tax revenues.

Now they are seeing those bets pay off in broader ways, specifically in new retail development. Those cities have enjoyed increased employment and higher personal incomes for their residents since the advent of the casinos. Along with the boost in tourism, the region has become more attractive to developers — even national players.

“The whole Gulf Coast was kind of putting along until casinos got here [in the early '90s],” says Monte Luffey, regional director of commercial services for Stirling Enterprises, a commercial brokerage firm and developer with offices in Louisiana and Mississippi. “It really gave us an infusion of people and money into our market, as well as national exposure.”

There are now 12 casinos scattered around the Gulf Coast in cities like Gulfport, Biloxi and Bay St. Louis employing 35,000 employees. And retail has followed in its wake. Since 1996, the area has added 1.5 million square feet of major retail, in a market with a population of 370,000. While that may be a mere trickle in some major U.S. metropolitan areas, for southern Mississippi it was a deluge.

“That was a million and a half square feet of retail in a market that has never seen that much retail or that caliber of developer before,” says Brooks Holstein, managing partner with ComVest Properties, LLC., a Biloxi-based developer.

And things are just getting going. In Tunica, Miss., two open-air centers are slated to come on stream in the next two years adding 600,000 square feet of new retail. In Shreveport, more than 700,000 square feet of development is on the drawing boards.

Here we present a rundown of the successes in each city and what else to expect in the South's gambling meccas.

Gulfport-Biloxi

Gulfport-Biloxi brought in gambling in 1992 and a burst of retail development followed in the next few years. It seems to have leveled off recently, but won't stay quiet for long. Owners are gearing up for another wave of projects.

“We are finding more national retailers looking around here in the last three or four months than in the seven years that I've been here,” says Patrick Barber, president of Encore Enterprises, a real estate holding company based in Gulfport. “Retailers are starting to realize that there is a market here to support retail that has been underserved.”

Encore got active in 1999, building the 500,000-square-foot Lakeview project, which has a Wal-Mart, Lowe's and a 16-screen Grand Cineplex. Encore plans to add another 500,000 square feet of retail to Lakeview in the next two to three years, says Barber.

Target is rumored to be in negotiations with several developers to build its first store in the area.

“There's a lot of talk that when Target decides to locate here, that will be another center,” says Luffey. In addition, Barber says Encore is in the early stages of planning a 50-acre development that will bring in another new major retailer to the area (although he wouldn't say who as yet).

The population in Gulfport-Biloxi, is growing steadily thanks to gaming's success and will climb past 400,000 this year.

Many of the new residents will be retirees attracted to the warm climate. Currently, about 3,000 to 4,000 housing units are under development along the Gulf Coast, with an average selling price around $500,000, says Holstein.

“There's going to be a significant amount of discretionary income here and it's going to bring in a boutique market because of strong demand,” Holstein says.

The success of the post-gaming retail was illustrated by a recent sale. In 1999, a private developer built the 550,000-square-foot Crossroads Center along Interstate 10 bringing new retailers like T.J. Maxx, Old Navy, Circuit City and Belk. The project's success drew the attention of national REIT Developers Diversified Realty. They came into the market in 2003, buying Crossroads for $45.5 million with a cap rate of 9.5 percent. “This property had all the features of our core portfolio in that it dominated the retail market,” says Daniel Hurwitz, an executive vice president at DDR. “This property gave us the opportunity to capitalize on what we feel was a growing and stabilized market.”

The first post-gambling property was Prime Outlet's 420,0000-square-foot center in Gulfport, which brought in such high-end retailers as Banana Republic, Coach and Tommy Hilfiger, previously unknown to the region. Prime Outlet first looked at the locale before the casinos arrived but decided there was not enough tourism for a center. ”Then the casinos came in and brought the tourists we needed, so Prime Outlet broke ground in the next year,” says Pam Meinzinger, senior general manager at Prime Outlet Gulfport.

Tunica

Mississippi's cities are not the only places to capitalize on legalized gambling. About 350 miles north of Biloxi, rising from the cotton fields, is the state's mini Las Vegas. Once just an agricultural community, Tunica now has nine casinos generating gaming tax revenues of $50 million a year.

“When the casinos came it was just a dramatic change,” says Lyn Arnold, executive director of the Tunica County Chamber of Commerce. “Any of the retail, like the Casinos Factory Shoppes, is completely new to us.”

Unlike its rivals, Tunica is a small burgh, with its hotel rooms outnumbering its population of 10,000. Many of the casinos' 15,000 employees live in the surrounding areas such as DeSoto County, Miss. Sandwiched between Tunica and Memphis, DeSoto is one of the fastest growing counties in the country, with a population that has more than doubled since 1990, to about 135,000.

To accommodate newcomers, two open-air centers are slated to launch in the next few years bringing 600,000 square feet of retail. DeSoto Pointe in Southaven, Miss., being built by Memphis-based developers Utley Properties and Trezevant Realty Corp, will have a 120,000-square-foot McRae's for its spring 2006 opening.

Last year, CBL & Associates announced it would develop the 480,000-square-foot, open-air Southaven Towne Center, also in Southaven.

A planned 2,000 home subdivision called Indian Creek is also expected to bring additional retail. No details on how much retail will be built are available because final site plans have yet to be submitted, says Arnold. Groundbreaking is scheduled for this month.

Shreveport/Bossier City

Across the Mississippi River from Tunica is Louisiana, another Gulf State that has added casinos. Louisiana's gaming epicenter is Shreveport/Bossier City in the northeast with six casinos. Of all the cities that have added gambling, Shreveport faces the biggest challenge. Tunica and Biloxi are relatively remote, making them destinations for multi-day trips. But Shreveport sits about 200 miles west of Dallas. So, while its gaming has been successful — drawing 15 million visitors annually — there's no guarantee that it can siphon dollars into drawing retail. It will have to offer something unique, says Bill McFadden, property manager and leasing associate for Stirling.

“For them to shop here, they have to have something better than in the Dallas market,” McFadden says. “We are only starting to get now what they've had for the past 10 years.”

O&S Holdings is trying to change that by building the splashy 550,000-square-foot Louisiana Boardwalk, which will open this spring in Bossier City along the Red River. To pull gamblers away from the slot machines, the developer is creating what it calls “Disney on the river.” It will have water fountains, a carousel, riverside dining and Zodo's, a nightclub with bowling.

The Boardwalk also will house newcomers to that market such as Reebok, Hagar and Regal Cinemas. The center's Bass Pro Shop has already opened, attracting between 5,000 and 7,000 visitors a day, according to Kyle Rodriguez, director of marketing for the center. “We think we fill a niche that's going to attract people a two-hour drive away,” Rodriguez says. “This area is under-retailed.”

Currently, the only major shopping outlets for a population of 400,000 are two older malls, Pierre Bossier Mall and Mall St. Vincent, both owned by General Growth Properties.

Most of the new retail dollars are not from visitors, but from local residents who now have more money. Gaming employs 8,000 people directly. Average household incomes have risen to $46,000 in 2004 from $25,000 in 1990.

While the population in the area has leveled, higher incomes have added 600,000 square feet of retail, mostly in the form of strip centers, estimates McFadden. Rents also have jumped in the past several years with small shop space in the mid-$20 per square foot range, and mall space leasing in the mid-$20s to lower $30s. “It seems to be aggressive for a market this size,” says McFadden. “They've jumped dramatically in recent years and a lot of it is demand for new construction which demands those kind of dollars.”

A 50-acre lot in southeastern Shreveport on Youree Drive recently sold for $8.50 a square foot, or $17 million, setting a local record. A development called King's Crossing is planned for the site, and is set to bring new retailers such as Linen's N Things as well as PetSmart and Lowe's.

Across the street, the 233,000-square-foot East Gate Plaza strip center is knocking down 50,000 square feet and adding 150,000 square feet of new market entries such as Ross Dress For Less and Marshalls. The center also will turn a former Kmart into the area's first Belk Department Store.

When asked about any downside to the casinos, McFadden says the incidences of personal bankruptcy have increased in Shreveport. A study by the University of Nevada, Reno found that cities with gambling are likely to have three times more “problem gamblers.”

However, casinos have brought much needed revenue and employment to some of the nation's poorest areas, says McFadden. “The trade-off in terms of job creation and growth in the marketplace has been well worth it,” he says.