by Sandra Corrigan, SIOR
We are excited to share our insights on the local New Orleans Office market, following the recent Office Occupancy and Absorption Survey for 4th Quarter 2018 (prepared by Bruce Sossaman, Corporate Realty). The year-end totals allow us to review the numbers from 2018 as a whole, which may provide some perspective looking forward into the months ahead.
Starting with Class A Office Space in the New Orleans Central Business District (CBD), this market has had 140,000 sf of negative absorption over the past two years (1.5% of overall market), with most coming in 2017. At year-end 2018, occupancy was 87%. With that being said, rental rates have stabilized and incentives are decreasing with rumors of even more Class A Office Space being absorbed by residential use and hotel options. If the market increases its path of size reduction, rental rates may increase in the near future. The winners of this development include but aren’t limited to: Entergy Building, 1250 Poydras and Benson Tower – all having occupancies above 96%.
Class B Office Space in the New Orleans CBD market continues to reduce in size with the Whitney Building being taken off the market. The remaining market consists of three and one-fourth buildings (1010 Common is only leasing floors 4-9 for office space) for a total of a little over 900,000 SF. These buildings reflect a total of 65% occupancy as rates remain competitive.
Next, the Class A Metairie market has lost 4% occupancy in the past two years with their year-end occupancy being 88%. Rental rates remain strong though, with all buildings consistently maintaining 83-95% occupancies.
The Class B Metairie market, which consists of 13 buildings – all distinct in quality, location and amenities – has dropped by 1.3% over the last two years with overall occupancy at 91%. The average building is between 85-90% and rents have increased within this market sector as there are few incentives.
Lastly, although the Elmwood Office market is small – totaling just 250,000 SF of multi-tenant opportunities – it’s worth noting because occupancy has moved from 58% to 75% in the last two years. The primary winner of this is 990 N. Corporate which was taken off the market with 0% occupancy and is now at 62%. It has the largest block of available space at 18,400 RSF.
Although there are a few buildings considered in the planning stage, no new construction will start without substantial pre-leasing, and at above current market rates. Therefore, the pipeline is empty – which results in a very stable market.
