In his 16 years with Covington-based Stirling Real Estate, Townsend Underhill helped grow the company — known as Stirling Properties until late last year — from brokerage and commercial real estate development to property management and project financing for clients.
Today, Stirling is one of the region’s largest full-service commercial real estate companies, with seven offices, 180 employees and 22 million square feet of assets under management from Lake Charles to Pensacola, Florida.
Later this year, Underhill will take over as president and CEO from Marty Mayer, who is retiring after more than 20 years at the helm.
Underhill, 42, said he sees many possibilities for St. Tammany, which continues to be one of the most desirable areas for retail, industrial and healthcare tenants in the New Orleans area.
But the Kentucky resident also worries about the mentality he sees among some on the North Shore who don’t want growth and don’t want to invest in much-needed infrastructure. This, he says, could ultimately threaten the competitiveness of the area. He shared his concerns on this week’s Talking Business.
This interview has been edited for clarity and length.
What is your assessment of the South Louisiana commercial real estate market? Forces? Weaknesses?
This area is extremely resilient. There are millions of reasons why this market should crash and fail. We have poor tax systems, inefficient local governments compared to other markets, an undereducated workforce. We have geographical problems — terrible soil (for building), high wind zones, low altitude. All these things work against us, but the market is extremely resilient and seems to understand that. I think that is our greatest strength.
Economically, in the entire region, we are one of the most important gateways to the US from the port system. It drives our economy more than anything else. We also have a lot of places with natural beauty and the possibility of creating a unique environment. We don’t have to go vertical in our markets. We have a lot of land compared to other places, so we have the ability to go horizontally and create space.
What’s the most happening on the North Shore right now?
In St. There’s a big effort in Tammany to slow housing growth. It is the wrong political leadership and the wrong thinking of people who have been here for a long time and do not like change.
The cliché that you either grow or you die is true. You can’t really stop growth. But you can slow it down, and when you do, you end up underfunding the things you need like infrastructure, water and sewer. So that’s what’s going on here – political and neighborhood forces trying to slow housing growth. They think they will protect what they have, but end up hurting it.
Instead of thinking about how we’re going to stop growth, we need to think about how we’re going to build what we need to thrive.
You are out of state and Stirling now operates in other states on the Gulf Coast. What do they do differently in other places?
I went home to Louisville in September, where they had recently built two new bridges over the river. Tolls are $7.50. This is a market the same size as New Orleans. People here would never agree to pay such tolls. They don’t want to pay for public services. But that’s why other places don’t have bottlenecks. That’s why they have what we don’t have and that’s why they have a better quality of life.
How serious is such a mentality from the perspective of business and investors?
We have to change. We need basic infrastructure, clean drinking water and sewage. We operate independent water treatment plants in Slidell that were built as package systems in the 1960s for individual subdivisions. That is no longer adequate. But there is no plan.
There is no road plan in the parish. There is no water plan. There is no sewerage plan. There is a small part of the drainage plan and they have a master land use plan. But it has nothing to do with infrastructure. All this can be solved with money. But there has to be a change in mindset. The North Shore still has tons of potential. The population is highly educated and in some ways advanced. But politically, it’s regressive and it becomes very protective and it falls into that Southeast Louisiana cultural mentality – we have to keep things close and we only need so much.
How is the North Shore market performing?
On the commercial side, it is very strong. On average, the office market is about 90% occupied, and our properties are 100% occupied. People don’t break down doors, but there is a demand for space out there. Retail is very strong. Climate controlled storage is huge. There is also high demand for industrial logistics and warehouse space due to the higher, drier terrain and I-12, which provides excellent connectivity to the region.
How strong is retail sales when you hear that some big box office chains are filing for Chapter 11 restructuring or closure?
During 2021 and 2022, every high-quality retail space across the country that was vacated during the COVID pandemic was ravaged. They no longer exist.
We see that here. Check out the Fremaux Center in Slidell. It is a shopping center of 600,000 square meters. We lost 80,000 square feet of tenants due to the COVID bankruptcy. Today it is 100% re-let to stronger tenants with better credit and paying higher rent. Stein Mart in Mandeville closed. We came back, expanded it, and now it’s Target. The point is that well located boxes were returned.
How do you define ‘well located’?
Places where there are consumers with disposable income and that have good visibility, available parking and the surrounding amenities needed to function. That’s the difference between Lakeside (mall in Metairie) and Esplanade (mall in Kenner).
Tell me more about Stirling’s rebrand.
We gently advertised that we had rebranded the company, that we had a new logo and that we had dropped “properties” from the name. We will be rolling this out in a big way over the next year and it will have a lot of implications.
Most people don’t know what we have evolved into. Ten years ago, 85% of our business was offices and retail. Today it is less than half. The rest is industrial, healthcare, multi-family construction and rental communities, and we provide many third-party advisory, financing and management services.
We’ve continued to grow in product types, product lines and as a true service company, and that’s what I’d like us to expand on.
Do you have plans to expand beyond the Gulf South?
We purposely did not move outside of our region, which is Lake Charles to Pensacola along the Gulf, all of Louisiana and Mississippi, and Alabama south of Birmingham.
Basically, we define our region as anywhere there are Saints fans, anywhere New Orleans is a cultural and economic driver. We don’t go to Texas or Florida because we think real estate is local. Also, there is no CRE or JLL in our region so we have become a big fish in a small pond and this gives us a competitive advantage.
Our new platform and rebranding will allow us to expand this.