If the U.S. recession should worsen, don't feel too sorry for the Gulf States. Alabama, Louisiana and Mississippi are stable markets where the highs are not extremely high and the lows are not terribly low.

The area's growth and its demographics are attracting retailers new to the Gulf States, notes Joe Talentino, vice president and general manager of development for EBSCO Properties, Birmingham, Ala. The population in Alabama increased 10.1% from 1990 to 2000, representing a gain of 406,513 people; Louisiana's gained 5.9%, or an increase of 249,003 residents; and Mississippi's increased 10.5%, or a gain of 271,442 people.

Compared to some states, the population gains of the Gulf States are good but modest. But that's more than okay with retailers who are looking for fresh opportunities after building out in other Southeastern locations. “As the larger markets become saturated, the surrounding markets begin to see the results of overflow,” says Talentino.

Wal-Mart and Target are the two market leaders, with Home Depot, Lowe's, Best Buy and Bed Bath & Beyond actively expanding into the three states.

Developers that specialize in building open-air lifestyle centers, power centers and community centers are busy completing projects and in some cases planning new ones. But those developers working on developments such as grocery-anchored and neighborhood shopping centers reportedly are experiencing a slowdown, particularly because of the shakeout in the retail grocery business.

“It's a cautious development climate, but still active,” says David Silverstein, principal of Birmingham, Ala.-based Bayer Properties Inc.

The economy and the events of Sept. 11 may slow other developers' plans, says John Hughey, executive vice president of Colonial Properties Trust in Birmingham, but not his company's. “Sales for November were more positive than they've been all year long,” Hughey says.

Colonial, which has about 25% of its 15 million sq. ft. of retail space in Alabama, developed 1 million sq. ft. last year and currently has 1.2 million sq. ft. under way, including the 750,000 sq. ft. renovation of Colonial Promenade Hoover in Birmingham. This 350,000 sq. ft. south metro center is due to open in spring 2002 with a Wal-Mart Superstore as anchor.

Alabama

As the biggest component of a 1 million population SMSA (Standard Metropolitan Statistical Area), Birmingham is considered an untapped market by many retailers, Silverstein says. Consequently, the city is still seeing activity, much of it as a focus of retailers' expansion plans.

The first Saks Fifth Avenue store in Alabama opened in October as part of the 160,000 sq. ft. third phase of The Summit, an 800,000 sq. ft. open-air regional center south of Birmingham, developed by Bayer Properties. “The Saks opening far exceeded their projections,” Silverstein says. Other third phase tenants include Tommy Bahama and Mimi Maternity.

“What we're doing is creating a special tenant mix,” he says. “We're bringing in new retail to complement what we already have and new retailers to contribute to the quality of life.”

A few miles down Highway 280, Bayer Properties opened River Ridge Plaza this past fall with the Birmingham area's first SuperTarget and first Best Buy store. The power center totals 352,000 sq. ft. “We wanted to provide the Birmingham consumer with a choice,” Silverstein says.

At highways 280 and 119, EBSCO Properties is developing a 78-acre mixed-use project called Tattersall Park that is slated to open by spring 2004. Tattersall Park's design mirrors that of a small town from the 1940s. Stores at street level will have office and residential space on the second and third floors.

An upscale grocery store new to the Birmingham market is to anchor the main street center, which will feature 700,000 sq. ft. of specialty shops, national retailers, restaurants, entertainment venues and recreation facilities; 210,000 sq. ft. of residential space in 120 units, including townhomes and loft apartments; and 340,000 sq. ft. of office space, including three 4-level office buildings.

In downtown Birmingham, Bayer Properties purchased the old Pizitz department store a year ago, and is planning 225,000 sq. ft. of office, residential and retail space to serve the growing demand for loft living and accompanying service retail. Construction should start by the end of 2002.

In Montgomery, Jim Wilson & Associates finds opportunities for development are now more diverse. “We are focusing on open-air centers with a more targeted audience, such as The Shoppes at EastChase,” says Carl J. Bartlett Jr., senior VP for the firm.

The state's capitol city is currently home to 7.7 million sq. ft. of retail GLA, with two dominant enclosed regional malls — Aronov's 869,717-sq.-ft. Eastdale Mall and Glimcher's 725,742-sq.-ft. Montgomery Mall. Both malls are more than 25 years old, and Wilson and partner Alfa Real Estate Investments are banking on the city's affluent consumers' desire for a different shopping experience.

The 330-acre EastChase project will include retail, office and multifamily residential space. The retail portion is scheduled to open in November 2002. The Shoppes at EastChase will be a 350,000-sq.-ft. lifestyle center with a main-street theme featuring trees, fountains, plazas and streetlights. Its tenants include a who's who of upscale specialty stores new to the market, including Abercrombie & Fitch, abercrombie, Banana Republic, Williams-Sonoma and Chico's. Gap, Bath & Body Works, American Eagle Outfitters and Victoria's Secret have signed on as well.

In Mobile, Don Kelly, senior executive vice president and partner of The Mitchell Co., says about the retail market, “There's been a general slowdown in the last couple of years.” The Mitchell Co. develops a range of retail types, from freestanding drugstores to supermarket-anchored centers up to 150,000 sq. ft., but of late, has primarily been active in Florida and Georgia, Kelly says. The company has also been developing freestanding CVS drugstores in Alabama and Mississippi.

Louisiana

“There's very little traditional grocery store activity,” says Jimmy Maurin, CEO of Stirling Properties, Covington, La. “Due to the tremendous slowdown, the significant trend is that they are redeveloping their older stores.”

Stirling Properties develops open-air, traditional centers anchored by big-box national retailers, grocery-anchored centers, and lifestyle centers, Maurin says, but is shifting to more redevelopment work in the current economy.

In Louisiana, the developer is working on three Target-anchored centers in Slidell, Homa and Mandeville. In Mandeville, where Stirling will break ground next spring on a Target-anchored center, the developer completed work in November 2001 on a 286,000-sq.-ft. lifestyle center called Premier Centre 8. “Mandeville is the wealthiest submarket in Louisiana,” Maurin says, “with an average household income of $90,000.”

In the Greater Shreveport-Bossier City market, Los Angeles-based O&S Holdings LLC is developing Louisiana Riverwalk, a 50-acre, 700,000-sq.-ft. riverfront entertainment, retail, restaurant and office venue, with parking for 4,000 cars, on the Red River across from downtown Shreveport. “Two factors driving this development are a growing local population of about 400,000 and approximately 16 million visits to the five major riverboat casinos surrounding Louisiana Riverwalk,” says Gary Safady of O&S Holdings. “In addition, a new 300,000-sq.-ft. convention center is under construction, which should double convention visits to 750,000 annually. Tourist growth throughout Louisiana is outpacing that of most other states.”

“Louisiana Riverwalk will be an anomaly in this market,” Safady says. “We're the big fish in the small pond. Retailers are attracted to a development that won't be duplicated in the marketplace.”

Mississippi

With its close proximity to the capitol city and Jackson International Airport, fast-growing Flowood, a Jackson metro area city in Rankin County, Miss., is finally getting some national retailers. Developer Aronov Realty Management in Montgomery, Ala., broke ground on a 40-acre site in March 2001. The company says the area's average household income within a three-mile radius is $75,000.

The 304,000-sq.-ft. Dogwood Festival Market is scheduled to open in spring 2002. One of the center's anchors will include McRae's department store, a division of Saks Inc., which will open a 115,000-sq.-ft. store in April. Other retailers coming to the project include Old Navy, Borders Books & Café, AnnTaylor Loft and Gap/Gap Kids.

Currently, the closest mall shopping for Flowood residents is in Jackson's Metrocenter Mall and Ridgeland's Northpark, both about 20 miles away. Crawford McWilliams Hatcher of Birmingham, Ala., is designing the open-air, two-level center.

So despite the economic times, retailing is still a viable business throughout the Gulf States. As Bartlett of Jim Wilson & Associates Inc., notes, “Well-planned and sound developments with substantiated demographics remain appealing to retailers and remain an important part of retailer expansion plans.”

Paula Stephens is an Atlanta-based writer.