Annual Office Market Report
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2014 Greater New Orleans Annual Office Market Report Greater New Orleans Corporate Realty, Inc . is proud to present our third annual Greater New Orleans Office Market Report. The following report lists basic occupancy and Market Overview . 2 rental rate information for every non-medical office building greater than 20,000 square Central Business District . 4 feet in the Greater New Orleans region, along with summaries of submarkets and market changes over the last few years. Orleans Parish, Non-CBD . 8 This report is intended to give the reader a broad understanding of the market as well as specific East Metairie . 10 information about occupancy and rental rates of each building. It was created to be a resource for our agents as well as tenants, landlords, developers, lenders, fellow brokers and anyone else West Metairie/Kenner . 14 looking for information about the Greater New Orleans office market. Elmwood . 15 In the narratives of each submarket, we mention the changes in the inventory of office buildings, including the changes in building names, as well as additions and subtractions North Shore . 16 to the market that occur as buildings are developed or redeveloped for other uses, such as West Bank . 18 hotels or multi-family residential. St . Charles Parish . 19 In addition to this annual report, Corporate Realty Meet Our Office Specialists . 20 publishes quarterly reports of the office market compiled by Bruce Sossaman . These reports present an immediate snapshot of the market and can be found on our website alongside previous annual reports at corp-realty .com/reports/ . The information contained herein has been obtained from sources that we deem reliable. No representation or warranty is made as to the accuracy thereof, and it is submitted subject to errors, omissions and changes. The information in this 2014 report would not be possible without the cooperation of our staff and colleagues and we would like to thank all of those who contributed. This is the result of a collaborative effort. Please contact us if you have any questions or would like more information about the Greater New Orleans office market. Greater New Orleans Market Overview 2014 saw continued improvement • The CBD office submarket accounts and strengthening of the overall New for almost 60% of the total New Orleans office market. With the continued Orleans office market, approximately reduction of supply (conversion of office 11 million sf of the total 19 million buildings to alternative uses) in the sf in the market. The CBD is still the Central Business District (CBD) and heart and the soul of our business steady demand in most of the suburban community, and it is showing life over LOBBY - ONE CANAL PLACE submarkets, 2014 saw slightly increased the past several years with new tenants, rental rates and continued stability. The including GE, Gameloft, Search CBD should still be characterized as a Influence and Ryan LLC. very competitive market, while our major • We are predicting an increase in rental suburban submarket (East Metairie), with rates in the CBD not as a result of one or two exceptions, has clearly become a increasing demand but because of landlord’s market. increasingCOVINGTON operating expenses and • Hard to believe, but there has not capital costs. Several buildings in the been a new major multi-tenant office CBD are already achieving rates of building built in the New Orleans CBD $20.00 prsf or more with several others since 1989 (Benson Tower) and since doingMANDEVILLE their best to push rates whenever 1987 in Metairie (Three Lakeway). possible. 59 12 • The total supply of office space in • The East Metairie submarket continues the CBD has shrunk from over 16.5 to be our “superstar.” Top of the market million sf in the late 1980s to less than rates inLAKE Metairie are now in the $23.00 approximately 11 million sf now. The - $25.00 prsf range with lower Tenant 10 51 SLIDELL good news is that this reduction in PONTCHARTRAINImprovement Allowances and other supply has created some equilibrium in concessions than in the past. We believe the market and the CBD Class A office rates in all building classifications in 10 submarket is slightly less than 90% Metairie will continue to rise in 2015 ONE SHELL SQUARE leased. pulled upward by the top of the market Class A properties. GREATER NEW ORLEANS REGIONAL MAP LAKE PONTCHARTRAIN WEST METAIRIE/ 10 10 KENNER 610 310 EAST METAIRIE NORTH SHORE 10 ELMWOOD CENTRAL ST. CHARLES BUSINESS COVINGTON DISTRICT 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 2014 Total Inventory/Total Leased for all 2014 Total Average Rental Rate for all of the Greater New Orleans Market of the Greater New Orleans Market Total Inventory: 19,113,796 sq.ft. Total Available Class A Leased Non-Class A Leased $19.76 2,195,617 sq.ft. 10,577,771 sq.ft. 6,340,408 sq.ft. (91.09%) (84.53%) $20 $18.77 $20.57 $17.51 Class A Available Non-Class A Available $19.83 1,034,946 sq.ft. 1,160,671 sq.ft. $16 $18.73 $17.74 $17.14 $16.97 Total Leased $12 16,918,179 sq.ft. (88.51%) $8 $4 2012 2013 2014 Total Average Class A Non-Class A 2014 Average Rental Rates For Submarkets Class A And Non-Class A Combined $22.47 $21.83 $19.51 $20 $18.12 $17.64 $18.31 $20.86 $16.49 $20.10 $16.23 $18.55 $18.17 $18.29 $16 $18.09 $17.83 $17.14 $17.12 $17.04 $17.33 $16.79 $16.20 $16.00 $12 $8 $4 2012 2013 2014 2014 2014 2014 2014 2014 2014 2014 e k CBD Non-CBD* Elmwood West Ban Orleans Parish, East Metairie West Metairi North Shore* St. Charles Parish 2014 Total Combined Occupancy Rates for Submarkets 100% 93.89% 93.24% 95.74% 95.89% 80% 86.32% 88.45% 93.45% 84.57% 92.56% 93.68% 81.18% 89.22% 80.03% 88.82% 83.28% 83.75% 84.97% 86.21% 84.54% 81.86% 84.20% 60% 71.11% 40% 20% 2012 2013 2014 2014 2014 2014 2014 2014 2014 2014 * CBD Non-CBD* Elmwood West Bank Orleans Parish, East Metairie West Metairie North Shore St. Charles Parish * Orleans Parish, Non-CBD and the North Shore submarkets were added in 2013 2014 Corporate Realty Office Market Report 3 Central Business District ‘Steady as she goes’ is the best way to The Non-Class A CBD office submarket describe the New Orleans Central Business is made up of a handful of buildings. This District (CBD) office submarket in 2014. market segment has been reduced over Overall occupancy rates of the Class A time by adaptive reuse, but peaked after office properties climbed just under .5% Hurricane Katrina when high demand for from the previous year leaving occupancy hospitality and apartments in the CBD at 89.60% by year’s end. The relatively large combined with insurance payments to tenant renewals of Freeport-McMoran and make conversions possible. While there are LOBBY - ENERGY CENTRE Pan-American Life in 2014 greatly assisted a few bright spots in this small sector such in stabilizing the market. as the Exchange Center and the IP Build- ing, two larger Non-Class A properties, As a result of this last round of large tenant 1010 Common and Orleans Tower, weighed renewals in the CBD and the reduction in Though the CBD office submarket down the sector’s occupancy as a whole, supply, tenants over 60,000 square feet are and thus this sector ended 2014 at approxi- “demand may not be deep, it finding fewer and fewer options of contigu- mately 70% leased. The slim disparity in remains very stable. ous vacant Class A office space without rental rates between Class A office rates and ” landlords having to incur the expense of Non-Class A properties make it difficult for BENNETT DAVIS, relocating tenants to assemble space. One Non-Class A properties to compete; 80% Director of Leasing, Place St . Charles such example was 1250 Poydras, which of the CBD submarket is made of Class A recaptured a space under lease to ENI Pe- office buildings, and 87% of all the office troleum and combined it with vacant space tenants in downtown New Orleans occupy for an approximately 135,597 square foot Class A buildings. Tenants are unlikely to Hyatt House hotel conversion. Once again, downgrade unless the savings are substan- Significant Leases of 2014: the office space recovery in New Orleans is tial, which they currently are not. Therefore aided by adaptive reuse of existing inven- Freeport-McMoran significant improvement in the Non-Class tory, hence shrinking the amount of CBD Renewal at Freeport-McMoran A submarket in the near term is not realistic office space and tightening the CBD office Building for 216,000 sf unless, of course, the submarket size is submarket, not so much by strong demand, reduced by further adaptive reuse. Pan-American Life but rather by diminishing supply. Fast Facts and Highlights: Renewal at Pan-American Life Center Not only is the CBD Class A office submar- • The Class A CBD submarket closed for 75,000 sf ket buoyed by a continued right sizing due to 2014 at 89.60% leased. redevelopment and a diversified tenant base, there are barriers to entry that make any • The Class A CBD office submarket new office development unlikely for years to represents 80% of the entire submarket.