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Post-Katrina Market Analysis: New Orleans & Baton Rouge Metropolitan Areas

This report presents a comprehensive market analysis of the New Orleans and Baton Rouge metropolitan areas, focusing on trends before and after Hurricane Katrina in 2005. It highlights key factors impacting the commercial real estate market such as occupancy rates, rental price trends, and the movement of major tenants. The analysis reveals a shift in demand following the storm, with New Orleans experiencing significant absorption of office space, while Baton Rouge saw rapid filling of vacant spaces. The long-term outlook for both markets indicates stabilization and modest growth.

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Post-Katrina Market Analysis: New Orleans & Baton Rouge Metropolitan Areas

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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

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