Some 600 retail real estate professionals descended on New Orleans for the first time since last year’s crippling hurricanes as ICSC held its annual Gulf South show at the Hilton New Orleans Riverside. That’s down from 740, but organizers consider it a strong turnout given the questions hanging over the region.
A big question is how will FEMA’s updated flood maps of New Orleans, to be published in June, affect neighborhoods. Developers are also waiting to see just how juicy the incentives will be as Louisiana figures out how to dole out the more than $10 billion in federal money it has lined up through the Gulf Opportunity Zone (or GO Zone) and other programs. And then there are the questions about insurance.
As a result, the mood at the show was mixed, but largely positive. Executives from local companies were grateful that attendees from around the country came in to get a lay of the land. But it was not business as usual. The Hilton still bore the scars of the storm and repair crews were patching up holes. Meanwhile, the dealmaking portion was a taut two hours. Companies merely had tables rather than full-fledged booths and there wasn’t the normal flurry of deals getting signed.
Several retailers confirmed their commitment to the region. Wal-Mart Stores Inc., which still has seven stores closed, has firm dates for re-opening four with two others still still to be determined. Walgreen’s had 125 stores affected, but only 20 remain closed. Dillard’s has 77 department stores in the region and 26 were affected. It wants to re-open, but has been slower to react.
“When you’re looking at the list of needs, a place to find fashion is a low priority, unlike Walgreen’s or Wal-Mart,” said Wes Cherry, vice president of real estate for Dillard’s. “From a real estate perspective, I think right now we are adequately serving the population with the stores that are open and the stores that are going to re-open.”
A handful of developers were ready to jump into action. Lamar Cos., which does not own any real estate in Mississippi, Alabama, Texas or Louisiana, was one of the few developers with a table. The Morristown, N.J., company was also frank about its mission. It had come to do what it does best: find distressed assets it could profitably turn around.
Lamar, like Equity One Inc., seems eager to get their square feet on the ground in the areas most affected by Hurricanes Katrina and Rita. Both companies' presence at the show was in stark contrast to developers more well known for their portfolios in the region. Though professionals from General Growth Properties, Stirling Properties and Jim Wilson & Associates attended, none opted to set up tables. In fact, the bulk of the properties on display were those in the broader Gulf States, primarily in regions unaffected by the killer storms.
“Everyone wants to develop,” said Lewis Stirling III, executive vice president and partner with Stirling Properties. “But projects take 12 months, which means you have to go in and out of two hurricane seasons before you even open. … To come back, it requires answering the insurance questions first.”
Meanwhile, developers and retailers are adjusting to the new reality in New Orleans. The metropolitan area population dropped by between 300,000 and 400,000. Many of the residents that have returned to work don't live in Orleans parish any longer.
St. Tammany Parrish, to the north, has seen its population rise to 300,000 from 200,000 pre-Katrina. The 50 percent jump is what the parish had projected for its 10-year growth plan. The demographic shift has upped car counts on roads leading into New Orleans by 90,000 autos a day, creating traffic jams and long commutes where none existed before.
This has created problems for retailers. Walgreen’s divisional vice president Thomas Connelly said that stores in Baton Rouge have been dealing with three times their normal volume, which required the company to fly and bus in pharmacists from other parts of the country to help with staffing shortfalls and house them in 60 mobile homes it had to drive down from Montreal.
With this as the backdrop, developers are largely sitting on the fence. If people don't return as full-time residents, development will move outwards, along the interstates rather than return to the city's core.
For example, Colonial Properties is moving ahead with its planned 1.1 million-square-foot Pinnacle Nord Du Lac in Covington, La.—just north of New Orleans—which is scheduled to open in fall 2007.—David Bodamer