Annual Office Market Report Corporate Realty, Inc
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2017 Greater New Orleans Annual Office Market Report Corporate Realty, Inc . is proud to present our Sixth Annual Greater New Orleans Office Market Report. We publish this report to give the reader a broad understanding of the Greater New Orleans office market as well as specific information about occupancy and rental rates of each office building that are at least 20,000 square feet (sf). With data from 2012 - 2017, this report offers a snapshot of the current market and analyzes market trends. In addition to this annual report, Corporate Realty publishes quarterly reports of the office market compiled by Bruce Sossaman . These reports can be found alongside previous annual reports at corp-realty .com . Corporate Realty, Inc. is a full-service commercial real estate company headquartered in New Orleans. We have been in existence for more than 25 years, and our predecessor company was in the commercial real estate business in New Orleans since the 1950s. Corporate Realty has approximately 75 employees, 17 of which are active, full-time commercial real estate agents. We have agents that specialize in: Additionally, we offer our clients support services including: • Office Leasing and Brokerage (Landlord and enantT Representation) • Construction Consulting and Supervision • Retail Leasing and Brokerage (Landlord and Tenant Representation) • Engineering Support • Investment Brokerage (Buyer and Seller Representation) • Lease Administration • Land Acquisition, Assemblage and Disposition • Accounting • Development Services We provide property management services to: • Office Building Owners • Retail Property Owners • Special Purpose Property Owners Corporate Realty agents are consistently involved in the largest, most complex and most demanding real estate transactions and management assignments in this region, and we pride ourselves on having the top real estate professionals in the market. Table of Contents Greater New Orleans East Metairie . 10 West Bank . 18 Market Overview . 1 West Metairie/Kenner . 14 St . Charles Parish . 19 Central Business District . 4 Elmwood . 15 Corporate Realty’s Orleans Parish, Non-CBD . 8 Office Specialists . 20 North Shore . 16 Greater New Orleans Market Overview The largest submarket in the Greater Metairie market is approximately 89% leased New Orleans market remains the Central and these five buildings are 88% leased. Business District (CBD) with approximately Rental rates in these Class A buildings are 11.25 million square feet (sf) in a total of 27 in the $22.00 - $25.00 psf (gross) range. The buildings. Within the CBD, approximately non-Class A buildings are in the $18.50 - 80% of the total CBD square footage $20.00 psf gross rate range. is located in 15 Class A buildings. The Over the past several years, the New Orleans balance of approximately 2.2 million sf office market has shown a great deal of is in small, generally non-competitive or stability but very little growth. The Greater single tenant non-Class A buildings. The New Orleans office market continues MIKE SIEGEL, PRESIDENT CBD office market has “shrunk” from a to be the beneficiary of a steady stream CORPORATE REALTY, INC . high of approximately 16.5 million sf in of entrepreneurial start-ups and small 1990 to its present level. This is a result of companies’ expansions along with a handful relatively low demand for office space and, COVINGTON of new “major” tenants moving into New more importantly, significant demand for Orleans – most notably GE in 2013 and DXC new apartments, condos, and hotels. Most Technology in 2017. Technology, medical of the office product that has been taken and small entrepreneurial companies are off the market has been converted to these gradually replacing the historic oil and alternative uses. Asking rates in the 15 MANDEVILLE gas based office59 sector. On the other hand, Class A office buildings in the CBD are in 12 New Orleans remains a small tertiary office the $17.00 per rentable square foot (prsf) - market that tends to be adversely impacted $21.00 prsf (gross rent) range. Occupancy by corporate mergers and acquisitions. For in the ClassLAKE A market is approximately 88% the last several years, the New Orleans office with a much lower occupancy percentage in 10 51 PONTCHARTRAIN marketSLIDELL has taken one step forward and one the non-Class A buildings in the CBD. step back, resulting in the aforementioned The other substantial submarket is the stability, but also not allowing for any Metairie market, which is separated in this meaningful10 increase in rental rates or report as East Metairie, West Metairie/ occupancy. The key to real improvement Kenner and Elmwood. The Metairie in the overall New Orleans office market submarket contains approximately 5.2 will be in the region’s ability to attract more million sf in 46 office buildings. There are companies to move to, or open offices, in only five true Class A office buildings in this New Orleans with the desired result being submarket yet they contain 2,040,000 rsf the growth of white collar jobs, office (39% of total Metairie market). The entire demand, and rental rates. GREATER NEW ORLEANS REGIONAL MAP LAKE PONTCHARTRAIN WEST METAIRIE/ 10 10 KENNER 610 310 EAST METAIRIE 10 NORTH SHORE ELMWOOD CENTRAL ST. CHARLES BUSINESS DISTRICT COVINGTON 90 MANDEVILLE 59 12 90 WEST BANK LAKE 10 51 PONTCHARTRAIN SLIDELL 10 LAKE PONTCHARTRAIN WEST METAIRIE/ 10 10 KENNER 610 310 EAST METAIRIE 10 ELMWOOD CENTRAL ST. CHARLES BUSINESS DISTRICT 90 90 WEST BANK Greater New Orleans Office Market Trends Total Rentable Square Footage 19,497,434 19,607,462 20,000,000 sq ft 19,113,796 19,091,353 18,795,446 18,000,000 sq ft 16,724,527 16,000,000 sq ft 14,000,000 sq ft Total 12,000,000s sq ft 2012 2013* 2014 2015 2016 2017 Average Rental Rates $22 $20.57 $19.76 $20.14 $20 $20.06 $19.83 $19.19 $19.35 $19.15 $18.96 $18.73 $18.77 $18 $18.07 $17.74 $17.51 $17.71 $17.78 $16.97 $17.14 $16 Total $14 Class A Non-Class A 2012 2013* 2014 2015 2016 2017 Average Occupancy Rates 100% 90.45% 91.09% 88.01% 90.72% 89.90% 90% 88.14% 88.51% 87.93% 86.79% 84.52% 85.64% 85.54% 84.53% 83.61% 80% 81.96% 79.19% 79.22% 78.91% 70% Total 60% Class A Non-Class A 2012 2013* 2014 2015 2016 2017 * The data was first collected for all submarkets in 2013 2 2017 Corporate Realty Office Market Report 2013 2013 2016 2016 100% 20% 40% 60% 80% $10 $14 $18 $22 $6 2017 Total Inventory/Total Leased Inventory/Total 2017 Total 2017 Average RentalRatesForSubmarkets (ClassAandNon-ClassCombined) 2017 Average 1 6,571,539 sf 3,035,923 sf (84.52%) Av Leased a 83.75% $18.17 ilable 85.81% $18.38 $18.61 83.16% Total Average Average Total Class A Non-ClassA $18.96 CBD CBD 2017 2017 Orleans Parish, Orleans Parish, T otal Inventory:19,607,462sf 84.54% CombinedOccupancyRatesforSubmarkets 2017 Total $18.29 85.74% $18.76 $18.70 1,384,046 sf Av (88.14%) 1 Leased 85.65% 0,286,342 sf Non-CBD Non-CBD a ilable 2017 2017 (Class AandNon-ClassCombined) East Metairie 93.68% East Metairie $20.86 92.02% $21.56 1,651,877 sf Av (79.19%) 6,285,197 sf Leased a $21.55 ilable 89.15% 2017 2017 West Metairie/ West Metairie/ 86.21% $17.33 87.18% $18.08 $18.38 88.36% 2017 Kenner Kenner 2017 2017 2013 71.11% $18.09 Elmwood 71.29% Elmwood $18.84 2016 $18.54 75.33% 2017 $10 $14 $18 $22 2017 2017 $6 2017 Total Average RentalRate Average 2017 Total 93.45% $20.10 Total Average Average Total Class A Non-ClassA $17.74 North Shore 91.37% North Shore $21.49 2017 $18.96 $21.99 $19.35 87.81% 2017 Corporate Realty OfficeMarketReport 2017 2017 2017 84.20% $17.12 $20.57 West Bank 2017 87.13% West Bank $16.61 $20.06 $20.14 $16.72 86.71% 2017 2017 2017 St. Charles Parish St. Charles Parish 81.86% $16.20 2017 $16.97 71.44% $17.78 $18.87 $18.07 $17.62 64.35% 2017 2017 2017 3 2017 2017 2017 2017 2017 Central Business District While the absorption needle barely Building will likely absorb space in Class moved in the downtown New Orleans A buildings, the direct result of the lack of office market in 2017, there were two non-Class A alternatives. substantial events that point to a more The CBD Class A Office Market stands at stabilized office market in the years ahead. approximately 88% leased as of the end of Hancock Whitney Bank agreed to relocate 2017. Absorption remained flat over- ONE CANAL PLACE its offices of approximately 170,000 sf from all. Quoted rental rates remained stable the Whitney Bank Building into between $17.50 per square foot to $21.00 One Shell Square. Although the space per square foot. Looking forward, rates Significant Leases of 2017: Hancock Whitney is leasing was previously should have a modest upward momentum, leased to Shell Oil, the new lease extends especially regarding renewing tenants. 1615 Poydras St . beyond the Shell term and reduces the New tenants in the market will be the ben- DXC Technology - New Lease of market’s exposure to the largest tenant in eficiary of rental concessions, particularly the CBD, Shell Oil. Whitney’s building, at 170,000± sf modest amounts of free rent and very com- 228 St. Charles Ave., will be sold and likely petitive tenant improvement allowances. KNOC USA - Lease Renewal of converted into a hotel, further reducing The non-Class A market is improving as 37,000± sf the supply of non-Class A office space.