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THE MARKETS REACT

THE MARKETS REACT

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THE MARKETS REACT

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  1. THE MARKETS REACT NEW ORLEANS / SOUTH LOUISIANA Charles H. Peterson , CRE

  2. THE MARKET

  3. 2009 MARKET NEW ORLEANS METROPOLITAN AREA 2009 MARKET NEW ORLEANS METROPOLITAN AREA Sources: The Sossaman Report Corporate Realty, Inc.

  4. ANALYSIS OF MAJOR TENANTS NEW ORLEANS CBD ENERGY/RESOURCES 35% LEGAL 29% BANKING/FINANCE 17% GOVERNMENT 12% OTHER 7% Source: Corporate Realty, Inc.

  5. 2009 MARKET BATON ROUGE METROPOLITAN AREA Source: Baton Rouge Trends

  6. 2009 MARKET NEW ORLEANS METROPOLITAN AREA PRE-KATRINA NEW ORLEANS METROPOLITAN AREA • Steady market… no growth • No significant new commercial office building since 1991 • Slight negative absorption of 175,000 SF between 2001 and mid-2005 • Occupancy stayed flat • High 80% range for CBD Class A • Low 90% range for Suburban Class A and Class B • 70% range for CBD Class B • Rates were generally flat for the same period (2001 to mid-2005) • $15.50 - $16.00/SF for CBD Class A buildings • $20.00 - $21.00/SF for Suburban Class A buildings • Slow loss of energy industry offset by slow local growth and building conversions

  7. PRE-KATRINA BATON ROUGE METROPOLITAN AREA • Modest but steady growth • Law Firms • State government related firms • Engineering firms serving petrochemical industry • Class A buildings • 94% occupancy • $18.75 - $19.00/SF rates • Class B buildings • 75% - 80% occupancy range • $13.00 - $14.00/SF rates

  8. HURRICANE KATRINA AUGUST 29, 2005 • NEW ORLEANS shut down • Most office properties were closed for at least a month • People could not return • Many people went to Baton Rouge • - Bought houses • - Set up offices • BATON ROUGE filled up • Almost overnight, office space in Baton Rouge went to virtually 100% occupancy

  9. 2009 MARKET NEW ORLEANS METROPOLITAN AREA POST-KATRINA NEW ORLEANS METROPOLITAN AREA • Rapid absorption of office space • 161,000 SF in 4th quarter of 2005 • Another 307,000 SF in first half of 2006 • Total absorption of 353,000 SF over first year • Rates jumped approximately $1.00/SF • Biggest occupancy jump was Class B CBD • Five buildings were removed from the market • One Class A (487,000 SF) • Four Class B (1,063,000 SF)

  10. POST-KATRINA BATON ROUGE METROPOLITAN AREA • Vacant space filled immediately • “Panic” leasing in some cases • Rates did not jump as notably • Class A Buildings / occupancy has lasted • Class B Buildings / occupancy has softened • Occupancy also declined because 720,000 SF of new Class A space has been brought to market

  11. MAJOR SALES NEW ORLEANS METROPOLITAN AREA

  12. SUMMARY SHORT-TERM EFFECTS • NEW ORLEANS • Market tightened with removal of five buildings(1,550,000 SF) • Loss of tenancy: • Dominion Resources to Houston (153,000 SF) • Chevron to North Shore (300,000 SF) • Gains of tenancy: • Recovery-related engineering, legal and financial firms • Government Agencies • BATON ROUGE • Filled market

  13. SUMMARY LONG-TERM EXPECTATIONS • NEW ORLEANS • Stable occupancy and rates • Former DominionTower to be put back into commerce (487,000 SF) • substantially leased • removes an eyesore • helps keep Saints in town for long-term • Continued development on North Shore of Lake Pontchartrain • BATON ROUGE • Continued modest growth • Government related firms • Engineering Firms • Recovery related • Petrochemical related • Best Economy in Louisiana • State Government • Petrochemical Industry • Education Center Both markets are returning to normal