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LouisianaMarket ReportsOfficeSoutheastSoutheast Market Reports

New Orleans CBD Continues to Transition from Office-Centric to 24/7 Destination

by John Nelson

One cannot talk about, analyze, nor understand the New Orleans Central Business District (CBD) office market without a corresponding discussion of the entire CBD, not just the office building submarket. This is especially true when we look at the evolution of the New Orleans CBD since the late 1980s, and, more specifically to this article, since Hurricane Katrina.  The New Orleans CBD office market is still the largest office submarket in this region. The submarket contains approximately 10.3 million rentable square feet. The balance of our submarkets (East Metairie, West Metairie, Kenner, Elmwood, West Bank, New Orleans East and the Northshore) contain a total of 8.6 million rentable square feet.  More importantly, the CBD remains home for most of New Orleans’ “corporate” tenants, virtually all the region’s major law firms and financial institutions. That is the good news.  However, the CBD has been transformed over the past 30+ years — and especially for the past two decades after Hurricane Katrina — from a traditional office-centric CBD to a mixed-use downtown area. The supply of office space in the CBD has shrunk from 70 buildings and 16.5 million rentable square feet in 1991, to 50 buildings and 13.8 million rentable square …

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LouisianaMarket ReportsMultifamilySoutheastSoutheast Market Reports

Metro New Orleans Multifamily Market Remains Balanced 20 Years Post-Katrina

by John Nelson

August 29, 2005 — a day no New Orleanian will forget: Hurricane Katrina. It has been two decades since the levees were breached and flood waters took over the city’s streets, homes and businesses. It was an event that changed the trajectory of the city of New Orleans. Twenty years later and the resiliency of New Orleans to always push on is evidenced by the stability of our multifamily market. Through a period of demolition, renovation and rebuilding, the overall market remains stable. The barriers to entry in the Metro New Orleans multifamily market are significant, and today as in the past, the equilibrium between supply and demand remains in sync. Like other Sun Belt markets, insurance premiums, interest rates and affordability are factors. However, they have not been a deterrent to the viability of the market or interest from investors and the capital markets. Our inventory of more than 55,000 units (professionally managed) spread out over seven parishes, remains strong. Overall metro occupancy is being reported between 92 to 94 percent with average rents of $1,300 per month.  Parish by parish Eastern New Orleans and Algiers, which each have an inventory of approximately 4,000 units, offers the most affordable …

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LouisianaMarket ReportsMultifamilySoutheastSoutheast Market Reports

New Orleans’ Multifamily Markets Sees Diminishing Impact From ‘Three I’s’

by John Nelson

In our state of the market overview  article in Southeast Real Estate Business October 2023, we defined three challenges in the metro New Orleans multifamily market. These are interest rates, inflation and insurance — or as we dubbed them “the three I’s.” Not to be redundant; however, a year later these elements are still very much factors in the current market and continue to define how multifamily assets are acquired, sold, financed and developed. There is, however, reason for optimism as each of these defining elements has diminished, albeit not completely, from where they were 12 months ago. Interest rates — On Sept. 18, the Federal Reserve reduced short-term rates by 50 basis points — the first reduction in four years. More importantly was the decline in the rate of the 10-year Treasury yield, which is what most multifamily loans are priced from. As of this writing, the 10-year Treasury yield was at 3.76 percent, the lowest it has been in the past 16 months.  A further reason for optimism is the fact that the Fed has indicated the potential for four rate cuts next year. There is also the anticipation of further clarity in the capital markets once the …

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IndustrialLouisianaMarket ReportsSoutheastSoutheast Market Reports

Economic Headwinds, Rising Costs Affect Industrial Market in Greater New Orleans

by John Nelson

Despite healthy local market dynamics, the greater New Orleans industrial market did not perform as strongly as insiders expected it to perform over the past 12 months, which is indicative of wider economic factors suppressing a market with pent-up demand.  The Port of New Orleans and its access to major shipping routes along the Mississippi River has long been the principal component for industrial real estate in the area. The recent 2024 regular session of the Louisiana Legislature committed $230.5 million to Port of New Orleans infrastructure projects, including allocations to the Louisiana International Terminal, a $1.8 billion project in Violet, La., scheduled to be operational in 2028, which will be the Gulf South’s premier container shipping gateway able to accommodate New Panamax- and Post New Panamax-sized vessels.  A bit further up the Mississippi River but still in the greater New Orleans region, Canadian company Woodland Biofuels announced a $1.35 billion investment at the Port of South Louisiana in Reserve, La., to establish the largest renewable natural gas plant in the world. The facility will take waste wood and sugar cane and turn it into natural gas. The process will be carbon-negative, leaving less carbon in the atmosphere than before …

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LouisianaMarket ReportsOfficeSoutheastSoutheast Market Reports

Challenges Unfortunately Outweigh Opportunities for New Orleans Office Market

by John Nelson

A combination of short sales, declining occupancy rates, loan concerns and migration to suburban offices contribute to uncertainty in the New Orleans office market. As we approach the fourth quarter of this year and begin to reflect back on the market in 2024, the challenges unfortunately outweigh the opportunities. Two notable cases include The DXC Technology Center and The Energy Centre.  The DXC Technology Center, located at 1615 Poydras St. in the Central Business District (CBD), a once-prized office tower anchored by Freeport McMoRan, sold for less than $37 per square foot. The building, over 500,000 square feet, traded for $18.5 million, significantly below the remaining debt on the property. The New Orleans Police Department recently signed a lease to occupy approximately 45,000 square feet in the building, which lessens the steep decline in the building’s value. The Energy Centre, located at 1100 Poydras St., is one of the most desirable and best-performing Class A towers in the CBD. It entered receivership, but the building is back on track and is rumored to be nearing a sale. The building owner, The Hertz Group, controls four additional Class A office towers on Poydras St. (400, 650, 701 & 909 Poydras St.), …

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IndustrialLouisianaMarket ReportsSoutheastSoutheast Market Reports

New Orleans Industrial Market Remains Subdued, But Two Projects Are Breaking the Ice

by John Nelson

For the past decade, the inventory of industrial space in the Greater New Orleans market has not been large enough to meet demand. Comprising mostly older product that would be considered Class B or C in more populous markets, New Orleans-area warehouses have an overall vacancy rate of less than 2 percent. The demand has resulted in rising rental rates.  Development of new product is warranted, but a combination of factors has prevented new projects from being built. Finally, in 2023, despite increased construction costs, high insurance costs and rising interest rates, projects are underway that will accommodate the demand in a market that is long overdue for new, modern warehouse product. Despite having all the ingredients to be a major industrial market, including one of the country’s largest port systems, warehouse infrastructure in New Orleans is dated, mostly due to a lack of suitable land for development. Institutional ownership and investment here is limited to select groups that, while chasing higher yields, took the time to learn the market’s dynamics and build local relationships.  Historically, as brokers and tenants bemoaned a lack of product, national developers were reluctant to deploy capital to speculate in an unfamiliar and unproven locale. …

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LouisianaMarket ReportsRestaurantRetailSoutheastSoutheast Market Reports

Retailers in New Orleans Leverage Unique Experiences, Both In-Town and Suburbs

by John Nelson

The New Orleans retail market is in a state of flux like other markets across the country. The retail experience is changing for the end user, with an increase in online shopping, “try before you buy” customers and quicker walkthroughs. Retailers are left in an odd position, caught between experiential interactions with customers and trying to have them remember to purchase later at home.  While the retail market is changing, the Greater New Orleans area is different due to the scarcity of space available for new construction and a stable flow of stores closing or relocating. Our market creates a streamlined experience where consumers have “retail corners” they can visit to shop — such as downtown New Orleans, especially the iconic streets of Canal and Magazine — but also the suburbs that include Metairie, Elmwood and the Westbank.  With the concentrated shopping setup of the market, customers can shop more efficiently, and retail investors see the New Orleans market as a more demanding and creative place to build and open stores. Submarket by submarket The retail customer in New Orleans detests spending unneeded time in the car, so when customers can shop locally, get what they need and get it …

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LouisianaMarket ReportsOfficeSoutheastSoutheast Market Reports

Shell’s Move Exemplifies Flight to Quality Trend for Office Users in New Orleans

by John Nelson

Shell’s announcement in mid-September to relocate its home from the Central Business District (CBD) of New Orleans to the planned 50-plus acre River District rocked the office market. The oil and gas giant has been in the Hancock Whitney Center (formerly One Shell Square) since 1972, and will be rightsizing in a Class A mid-rise office building that will anchor the River District. The planned building will be approximately 142,000 square feet and home to 850 to 1,000 employees.  What a huge win for the planned River District and city of New Orleans. However, the void left in Hancock Whitney Center raises the question, what will building ownership group do with all of the space that Shell vacates? If the current occupancy rate stands, Hancock Whitney Center will have over 500,000 square feet of vacant space.  Elsewhere, Entergy is in the process of a major contraction in its building located at 639 Loyola Ave., and earlier this year, Freeport McMoRan vacated over 100,000 square feet of space at 1615 Poydras. Both buildings are also located in the CBD. A number of office towers have loans maturing within the next 24 months, and the logical assumption is that securing financing will …

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LouisianaMarket ReportsMultifamilySoutheastSoutheast Market Reports

New Orleans Multifamily Market Contends With Inflation, Interest Rates, Insurance

by John Nelson

The volatility in the capital markets over the past 12 to 18 months has wreaked havoc on many aspects of the economy, and real estate has not gone unscathed. Unlike the retail and office sectors whereby there is a fundamental shift in how people work and shop, housing is a basic need. The equilibrium between supply and demand in metro New Orleans’ multifamily market is still in sync. It would however be naïve to suggest there are no challenges that are affecting our real estate market. The “three dreaded Is” (i.e. inflation, interest rates, insurance) is not a Halloween mask but a euphemism that crystallizes the challenges multifamily owners are faced with both locally and nationally. Each of these factors singularly are powerful forces, yet the trifecta is playing a role in the current state of our metro market.  However, despite these challenges, the regional multifamily market has stable occupancy with most submarkets reporting levels in the 92 to 94 percent range. Overall monthly rental rates average $1,263 with rents ranging from a low of $1,000 in Eastern New Orleans and Algiers to rents in the Downtown market as high as $3,000.  Once again, the barriers to entry (lack of …

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LouisianaMarket ReportsMultifamilySoutheastSoutheast Market Reports

New Orleans Apartment Market is Performing Well Due to High Barriers to Entry

by John Nelson

Increased interest rates and challenging insurance costs would normally stifle a multifamily market. However, an inventory constrained by a lack of land, supply chain issues, labor shortages and the increased cost of homeownership have contributed to a further stabilization of the metro New Orleans multifamily market. The overall vacancy factor for our seven primary submarkets that make up metro New Orleans are in the 5 to 6 percent range. We anticipate occupancy rates to steadily increase going forward as new construction has stalled and rising interest rates have delayed many tenants from transitioning to homeownership. Overall rental rates in the metro average in the $1,250 to $1,350 per month range. The rents represent a 3.5 percent increase over the past 12 months. It should be noted that some submarkets have seen considerably higher increases. The highest rental rates reported in the metro for garden-style communities are in Eastern St. Tammany Parish, where the newest inventory exists. The highest rents in New Orleans are downtown in the CBD/Warehouse District. These communities comprise mid-rise and high-rise developments and command rents exceeding $2.50 per square foot. The downtown market experienced some softness during the COVID-19 pandemic but made a robust recovery once restrictions …

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