Can Opportunity Arise From Tragedy?

Unless you go back to the 1970's, New Orleans East has never been an economic driver for the area. Even though it is the largest land area in New Orleans, if you ranked all the cities over 50,000 population by income per capita, the East would rank not in the bottom 10 percent but in the bottom ten. The closest city comparable to its economy is Flint, Michigan.

There is opportunity; however, especially if you follow the investment philosophy of buying straw hats in winter, and Louisiana Commercial Realty has completed a detailed research report which discovers there is a real need for grocery stores, sporting goods stores and restaurants in the East.

Using the latest technology to determine consumer spending which measures demand, then matching demand with supply, measured by sales figures from the 1,300 businesses already in the East, we find what is called the Marketplace Gap. This is the amount of money flowing out of the area because there are not enough businesses to satisfy demand.

Retail Marketplace Profile

For example, businesses in New Orleans East sell $53 million of groceries annually; however, residents of the East spend $82 million annually, with $29 million leaving the area. That means there is a real need for a grocery store in the East, and forecasted sales would be at least $29 million. Businesses just have to find a way to fill the void and offer products that consumers are already buying elsewhere.

75,000 Residents In The East Buy Lots Of Things

The East has a population of 75,969 with 56,089 adults in 27,142 households with a median annual income of $33,431. Where they spend their money can now be measured scientifically, by an calculation called the Market Potential Index. If the number exceeds 100, it means that a good or service is purchased more than average. The Retail Market Potential Analysis shows the number of adults purchasing specific products; for example, the index of 122 for buying cigarettes at a convenience store the last 30 days means that behavior occurs 22% more than normal, which means there is more demand, but there are only 7,488 adults making that purchase. Businesses coming into the area need a higher number of buyers, such as these purchases:

Retail Market Potential Analysis

Residents of the East are 32% more likely to buy an Android smartphone and 37% less likely to buy an iPhone. They are big into fast food, with 23,000 visiting a fast food restaurant more than 9 times per month.

75,000 Residents In The East Spend Hundreds Of Millions

The Retail Goods and Services Expenditures Analysis shows how much money was spent, which can be used to determine  market size for new businesses moving to the East.

Retail Goods Expenditure Analysis

What Businesses Are In New Orleans East

Retail, Scientific & Government Are Almost 40% Of Businesses In The East

There are approximately 1,300 businesses employing 17,000 people in New Orleans East, and the largest sector is retail where 2,488 people are employed. Professional and scientific occupations are the next highest category with 2,351 employees (14% of total), followed by 1,989 government jobs (11%), and hotel, warehousing and health care the remaining employment sectors.

Over 50% of businesses located in New Orleans East have revenues under $1,000,000, with 34% having revenues under $500,000. This creates an opportunity for government assistance to educate small business owners on skills to improve their operations, such as marketing, social media, accounting, banking and human resources. There are 36 businesses with revenues exceeding $5,000,000 so an opportunity exists for the 256 businesses with revenues under $1,000,000 to provide services to these larger businesses, offering reduced transportation costs and a higher level of service.

Over Half Of Businesses In The East Have Revenues Under $1,000,000

60% of businesses have under 9 employees, with the largest size of less than 4 employees amounting to 29% of all businesses.

Most Businesses In The East Are Family Owned

Nearby Universities Are A Competitive Advantage

New Orleans East is close to three Universities and Lakefront Airport. This offers an opportunity to partner with universities on housing and student activities. Enrollment at University of New Orleans has fallen 30% in the last 8 years, and Southern University enrollment has dropped 20% in the last 4 years.

Over 100,000 People Drive Through New Orleans East Every Day

The Louisiana Department of Transportation shows the I-10 traffic at the Crowder Boulevard interchange in New Orleans East averages 125,000 cars per day. This equals the traffic at the CBD Poydras Street interchange, and is 80% of the traffic at Causeway Boulevard and Clearview Parkway.

What Do New Orleans East Residents Believe?

The Lifestyle Tapestry Analysis utilizes leading edge technology of data mining to look beyond typical demographics of age, income and education level and drill down to the socioeconomic quality of the neighborhood and what residents believe is important in their life. The Tapestry Analysis recognizes that our country is diversified and uses socioeconomic and geodemographic data to organize neighborhoods into 14 LifeMode Groups and then into 67 Market Segments, which help businesses determine optimum locations for success, more efficient advertising and fly-off-the-shelf inventory that appeals to what consumers in the neighborhood want.

Tapestry Analysis Shows What People Believe Is Important

New Orleans East Tapestry is called Family Foundations, which encompasses 27% of the population compared to 1% normally in the U.S. Members belonging to this Tapestry Segment believe family and faith are most important, and have these traits:

Summary and Recommendations

Taking into account the needs of the 75,000 people living in New Orleans East and the 1,300 businesses in the area, there is sufficient demand for these businesses to enter the market and be successful:

  1. Grocery Stores
  2. Sporting Goods Stores  
  3. Restaurants
  4. Furniture Stores

Government can help, and often is required for an area to rebound. A perfect example is the rejuvenation of Tulane Avenue since Katrina, and the same improvement can occur in New Orleans East with a little help. Federal, state and city officials can offer infrastructure improvement, tax breaks and promotion through economic development teams. New Orleans East offers more opportunity for economic growth than both Orleans and Jefferson Parishes.

Actionable Items

Here are a few actionable ideas that can bring about immediate improvement:

  1. Organize leaders that can bring resources to the area, including:
    • Hotels and restaurants in CBD.
    • Bankers.
    • Churches.
    • Mayor and Governor.
    • Senate, House and committee members.
  2. Bring rapid, frequent direct bus service from a staging area such as Walmart or Lowes to the CBD where residents work.
  3. Offer emergency day care so residents don’t miss work due to child care.
  4. Utilize existing railroad to provide transportation to/from work in CBD.
  5. Organize micro-finance startups for residents to open new businesses in the area.

By: Andrew Valenti, Reporter May 17, 2019

Specialty clinics and medical office buildings dot the landscape along Houma Boulevard near East Jefferson General Hospital in Metairie.

And along Interstate 10 around the Galleria office building, LCMC Health Ridgelake Health Center, Crescent City Surgical Care and Galleria Medical have opened within the last three years.

But while there has been construction related to multifamily housing, extended-stay hotels and retail near the $1 billion University Medical Center and $1.1 billion Veterans Affairs Hospital closer to downtown New Orleans, development of medical office buildings, which can include private practices or research labs, have been scarce.

Current numbers for the amount of square footage for these types of projects were not available. But a report in 2010 by engineering consulting firm AECOM anticipated 175,000 square feet of this secondary development within the five years of the institutions opening, 625,000 square feet in 10 years and 800,000 square feet of space in 20 years.

Commercial broker Robert Hand, president of Louisiana Commercial Realty, said there is no demand for this type of commercial space in that area. Hand said the lack of demand stems from the doctors at UMC and the VA being employees of the hospital rather than being affiliated with the institution and having their own practice and patient base. He noted the physicians at the VA Hospital are employees of the federal government and have no need for their own building and practice.

“I never got any interest from the medical community for my listings on (Tulane Avenue),” he said. “And this was before and after the Veterans Affairs Hospital was completed.”

Hand said the lack of financing in New Orleans also plays a role. In larger markets, speculators acquire the land, then develop a medical office building and wait for the physicians to come in and rent out space. That’s not the case in New Orleans, as banks in the area are very conservative and will not lend for that type of construction, Hand said. He believes this has to do with the Federal Reserve tightening restrictions after the 2008 recession as well as the 2017 collapse of New Orleans-based First NBC Bank, the largest bank failure in the last decade.

For more information, read the Louisiana Commercial Realty article "Why There Will Be No Medical Office Buildings On Tulane Avenue".

Louisiana Commercial Realty

Commercial Real Estate Experts
Robert Hand, MBA, CCIM, SIOR
Licensed in Louisiana & Mississippi
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