MARKET HIGHLIGHT: FOLLOWING MASSIVE CONVERSIONS, NEW ORLEANS’ OFFICE MARKET IS TAKING SHAPE

square foot. Recently, notable long- Gaines Seaman term commitments to New Orleans Sales and Leasing include Shell Oil Co. and FM Services Executive, (Freeport McMoRan), both through Stirling Properties 2026. Shell Oil anchors One Shell Square, the largest office tower in New Orleans, and committed to oc- cupy half of the 1.3 million-square- foot building in 2015. FM Services occupies 210,000 square feet of the The New Orleans office market 510,000-square-foot Freeport McMo- remains dynamic. The city has obvi- Ran Building, also on . ously changed dramatically in the 10 Ochsner Health System recently fi- years since Hurricane Katrina and is nalized a deal to lease the entire Lord on a continued path of change going & Taylor Building, measuring 115,000 forward. Positive change. square feet. The building will be ret- In the past 12 to 18 months, more rofitted, against the current trend in than 1 million square feet of what the CBD, from former retail space to used to be considered office space office space for Ochsner’s occupancy. in downtown New Orleans has been The term is estimated to commence converted to retail, hotel, residential in late 2016. or multifamily use. Projects such as Sales activity has been on the , the 1100 block rise as well. , a of Tulane Avenue, 600 Carondelet 379,000-square-foot, Class B building Street, Factor’s Row redevelopment located at 1340 Poydras St., sold for and approximately 130,000 square approximately $14.5 million; Energy feet of space at 1250 Poydras Street (a Centre, measuring 761,500 square 423,000-square-foot, Class A tower) feet at 1100 Poydras St., sold for ap- are just a number of examples. More proximately $83.5 million; and One of this space was unoccupied than oc- Shell Square was sold from a portfolio cupied at the time of the conversions. of buildings owned by Equity Com- The most recent of these conver- monwealth. The building’s pro-rata sions, 600 Carondolet Street, resulted share of the portfolio would peg the in the largest absorption of Class A of- value at approximately $172 million. fice space in the market. Additionally, However, the value could be higher URS, now AECOM, leased approxi- as One Shell Square was perceived mately 70,000 square feet of space in to be one of the premier properties in , a 530,000-square-foot the portfolio. Freeport-McMoRan is the anchor tenant of the 510,000-square-foot Freeport McMoRan building located across from the Mer- The suburban office market of Me- Building in New Orleans. The company recently extended its lease through 2026. cedes-Benz Superdome. tairie boasts occupancy levels averag- In the central business district ing 93 percent in the Class A build- (CBD), Class A office occupancy is a ings and 92 percent in the Class B a few years since a tower has sold, the trend for young professionals healthy 90 percent and average rental buildings. Rental rates are typically but there are a few Class B buildings to move to urban environments is rates have increased in the past 12 to higher than the CBD, and run as high presently available. the catalyst for growth in the CBD 24 months to approximately $19 per as $24 per square foot. It has been Much like many other markets, and neighboring Warehouse Dis- trict. Low-rise office buildings are prime targets for residential rede- ® velopment, which has resulted in Redi-Dock Provides Instant the steady removal of Class B and C office product from consideration Drive-In Access to Your Facility downtown, especially in the Ware- house District. The unique culture • Modular of New Orleans has attracted young • Minimal site prep people to the market, and they have proven that they want to live in a • Low maintenance walkable environment. The conver- • Delivered & set sion of these buildings is creating a shortage of low-rise office space in • Easily relocated the submarket and will result in in- • Lengths to 50’ creased rental rates over time. New Orleans office users are fol- • In nite widths lowing the national trends of space utilization and designing more open, • Heavy duty rating collaborative work environments • No future demolition due to the changes in workflow and types of businesses locating to the • ADA ramps available city. The city has received a number of accolades for growth, as a place to Call: 800-724-4881 do business and, most importantly, a www.ReadingPrecast.com place to live. The office market should remain active in the near future, and [email protected] Call for an immediate consultation. the long-term outlook is bright.

30 • October 2015 • Southeast Real Estate Business www.REBusinessOnline.com

24_33_SREB_Snapshots_MH.indd 30 9/25/15 11:49 AM