Spring 2025 Retail Market Update: Navigating the "New Normal" in Baton Rouge
The five years following COVID-19 have been a rollercoaster for the real estate industry nationwide—and Baton Rouge has certainly felt the ups and downs. After surviving a complete shutdown, we saw an explosive rebound driven by government stimulus, private capital, and historically low interest rates. But that heat eventually cooled.
In the last two years, our market has slowed due to high inflation, rising interest rates, and now, increased tariffs. Though 2024 was relatively calm in the Gulf, the lingering effects of hurricanes Delta, Laura, and Ida continue to impact commercial insurance rates significantly.
Post-Election: A Stabilizing—But Challenging—Market
With the 2024 presidential election now behind us, the market has entered a period of stabilization. However, this isn’t the kind of stability many were hoping for. Today’s owners, developers, and lenders are operating within a "new normal" shaped by persistent pressure from the “Three I’s”: interest rates, inflation, and insurance—none of which have improved over the past year.
Still, it's not all bad news. Retail leasing remains strong, although speculative development is taking a backseat due to high costs and muted returns. As a result, existing retail centers—often offering more favorable rents—are enjoying increased demand.
Despite these headwinds, disruption often paves the way for transformation. While certain retailers may struggle, the evolving landscape is expected to generate significant opportunities for others.The Rise of AI in Retail Real Estate
As with many industries, artificial intelligence is beginning to reshape commercial real estate. From optimizing store layouts to predicting sales trends and refining property marketing strategies, AI is becoming a valuable tool for developers, brokers, and tenants alike.
Meanwhile, lease and sales transactions are taking longer to close and are undergoing greater scrutiny during due diligence—another reflection of today’s cautious business climate.
Construction & Investment Sales
New construction remains largely stagnant, with the exception of a few outparcel developments like coffee shops and select grocery stores (notably Aldi). Investment sales—particularly those involving income-producing properties—continue to be slow due to high borrowing costs.
2025 Survey Results: Baton Rouge Retail Snapshot
The annual market survey compiled data from 129 shopping centers totaling nearly 8.6 million square feet across East Baton Rouge, Ascension, and Livingston Parishes. Reported vacancy stands at 7.4%, 60 basis points lower than the previous year and approaching historic lows.
Average rental rates increased from $20.68 to $21.65 per square foot, marking a 4.7% gain. However, much of this increase is attributed to higher CAM charges, property taxes, and insurance premiums rather than base rent growth.
With minimal new supply, landlords have been able to negotiate stronger renewals. A graphical overview shows sub-10% vacancy—a hallmark of a healthy market—and steadily increasing rents surpassing the $20/SF threshold.
Market Breakdown by Area
Southeast East Baton Rouge continues to lead the market with a 6.16% vacancy and $27.37/SF in total collections. By contrast, Zachary shows an 18% vacancy, largely driven by Dirt Cheap's 22,000 SF closure.
Newly incorporated St. George remains a market to watch. Leadership has signaled a desire for commercial growth, positioning the area for long-term retail expansion aligned with population and employment growth.
National Trends & Store Closures
For the first time in several years, store closings have outpaced openings, with 2025 projections showing a 3-to-1 ratio. Major retailers such as Joann (800 stores), Party City (700), Walgreens (500), and CVS (900) are scaling back operations due to debt pressures and changing consumer behaviors.
This churn opens doors for well-located centers to backfill space with expanding tenants—often at lower costs than new development.
2025 Tariffs Challenges
Retailers now face new challenges driven by tariffs:
Increased acquisition costs for goods and construction materials
Lower consumer spending driven by price sensitivity
Market uncertainty affecting confidence and expansion plans
Rising capital expenditure costs due to higher building material prices
While reshoring manufacturing has strategic benefits, the near-term impact is a more constrained retail operating environment.
Inflation & the Grocery Sector
Food prices remain elevated—items like eggs, beef, coffee, and flour have seen sustained price growth. Waffle House notably introduced a $0.50 per egg surcharge, drawing coverage from Food & Wine.
On the M&A front, the proposed Kroger-Albertsons merger was terminated, while ALDI’s acquisition of 400 Winn-Dixie locations is proceeding. Two stores in the Baton Rouge area are currently undergoing conversion.
Retail Investment Trends
Retail is regaining favor among investors, particularly:
Grocery-anchored centers
Unanchored strip centers with service-based tenants
Strip centers, offering stable returns and strong tenant mixes, have been dubbed “the new king of retail real estate” by The Wall Street Journal. Viral influencer “The Strip Mall Guy” encapsulates the appeal: coffee shops, gyms, dentists, and donut stores—key ingredients for retail success.
AI in Retail: From Site Selection to Strategy
Artificial Intelligence is reshaping retail strategy:
Advanced site selection using demographics, psychographics, POS, and mobile data
Smarter forecasting for inventory and demand
Optimized pricing models that adjust dynamically
Enhanced personalization through AI-driven marketing and customer engagement
Retailers are now selecting sites based on national data sets—not just local competition.
Local Restaurant & Entertainment Trends
Hot Chicken is a rising segment: Blazin’ Hot, Chicken Wagon, Dave’s Hot Chicken, and Chicky Sandos are expanding.
Experiential retail is thriving:
Loft18 (golf simulator bar)
Swing Easy Golf Club and Court to Table (pickleball + dining)
Tiger Clawzzz, a claw machine arcade in Essen, targeting younger audiences
These venues combine moderate activity with food and beverage—a proven formula.
Key Retail Developments & Updates
Dick’s House of Sport opens May 16 in the former Sears box, offering experiential shopping
Tractor Supply breaks ground in Walker—first major non-grocery development in years
Juban Crossing adds Barnes & Noble, McDonald’s, and a future large national anchor
Lee & Burbank sees QSR boom with Starbucks, Dutch Bros, Panda Express, Dunkin’
Heritage Crossing in Gonzales adds Five Guys (with drive-thru), a nail salon, and Peach Cobbler Factory
Burnside & Airline redevelopment includes 45,000 SF of retail anchored by ALDI
2026 Predictions
Vacancy: Slight increase to 8–9%, still indicative of a healthy market
Rents: Modest growth as redevelopment of outdated centers continues
New Development: Primarily driven by mixed-use projects
Final Thoughts
While many challenges remain—from high interest rates to insurance complications and a slow investment market—retail leasing continues to shine as a bright spot in Baton Rouge's commercial real estate landscape. AI is gaining traction, existing centers are being rewarded, and vacancy rates are gradually improving.
As always, staying informed and adapting to current trends is key. We’ll continue to monitor the shifts in our regional market and share insights that help our clients make informed real estate decisions in this evolving environment.