Occupancy rates continue to soar in Lafayette’s retail scene, but a lack of new construction puts us at risk of halting progress.
By Ryan Pecot
July 26, 2012
Year over year same store sales comparisons are the standard barometer used by retailers and Wall Street to keep a handle on the health of a company. A similar assessment can be made of a particular real estate market’s condition by evaluating a yearly snapshot of the respective occupancy and pricing levels; both for the entire parish, but also in its sub-markets. The 5.2-plus million square feet of retail data gathered for the annual Acadiana Commercial Outlook provides a perfect opportunity to put Lafayette’s marketplace under a microscope.
Straight to the numbers. On a national scale, it was a record low year in new square footage construction brought to the market in 2011, but Lafayette was able to introduce just over 200,000 square feet. The better news is that we saw a more than half-point uptick in Lafayette’s overall occupancy numbers to 86 percent, which effectively means the 200,000 square feet that was added was also consumed, plus some. This is a very positive indicator indeed. Breaking down the occupancy level by sub-markets, the College Drive at Johnston Street area still leads the pack at more than 94 percent — this well established area doesn’t have capacity to easily add square footage and is coveted by local retailers because of the high traffic volumes. When comparing the southern Ambassador corridor year over year numbers, there was initial surprise to see a slight reduction in this sub-market.
After digging deeper though, it became apparent that the actual consumed square footage in this highly demanded area grew, but percentage wise there was a miniscule drop because of added footage. On the remaining six sub-markets, there were no substantial changes, outside of the Pinhook Road at Kaliste Saloom corridor, which jumped almost 10 percentage points to 88 percent.
As strong an indication as added square footage and occupancy numbers can be, pricing is that much better of a gauge since it truly tells the story of new transactions and the confidence retailers demonstrate. As a whole, Lafayette witnessed increases in all three categories, led by small shop with a jump of almost 25 cents per square foot in base rent to $15.70 per square foot. This is a strong number in these “tough” post recession times. Jumping over to sub-market pricing, the question would be do you recall that whole supply versus demand phenomenon that was harped on constantly during ECON 101? Well, it’s a reality. Easily at the top of the food chain is the highly demanded southern Ambassador Caffery trade area, with an average small shop number of $18.09 per square foot. This is a huge year-over-year jump of 50 cents per square foot for a large sub-market.
As a whole, we witnessed four increases, two remain the same, and two slight reductions in rent figures across the eight sub-markets. One quick side note is that the downtown trade area did see the second highest jump, which obviously bodes well for the demand of this ongoing resurrection of the oldest part of the city.
To predict the future can be difficult, but from time to time, it is easier than others, and now is one of those occasions. Simply put, there is a lot of demand for retail space in Lafayette. The lack of existing supply that suits the prototypes of today’s retailers has finally caught up with our marketplace. We are at a critical point of losing potential retailers that are interested in locating or expanding within Lafayette because we simply don’t have the supply.
By my rough estimations, there are likely 225,000-plus square feet worth of national and regional retailers that are interested and currently looking for retail space that fits their specific requirements. Sure, site specifics are tighter than ever before because retailers as a whole are still a bit wounded, but the deals are out there to be had and Lafayette is a big target on many retailers’ radar screens.
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