New Orleans City Business – The Central Business District office space market in New Orleans has faced stiff competition over the years from suburban areas, which tend to offer more parking space and better commute times for employees as well as lower lease rates.
But new residential development and a spate of startup firms setting up shop in the city have boosted projections for the downtown real estate market well into 2015.
“The strengthening residential, retail, hospitality, medical, specialty use and parking sectors will all bode well for the downtown office market,” said Bryan Burns, senior vice president at the local office of Transwestern.
The increasing number of apartment units in the CBD has helped to turn the area into a residential neighborhood, something Burns said is attractive to technology firms with younger employees seeking to “live, work and play exclusively in the CBD area.”
New business trends have also made the CBD an attractive option for firms that could not otherwise afford to be there.
“Technology has made it possible for employees to work from home or fromanywhere on a laptop,” said Ivan Miestchovich, who leads the Institute for Economic Development and Real Estate Research at the University of New Orleans. “Because firms don’t need to have as much permanent office space as before, they can simply rent space on an as-needed basis or have employees come in to the office when needed and even use computers and materials used by other employees who were there before them. We call that ‘hoteling’ space.”
An even simpler version of hoteling, Miestchovich said, is for a company to set up a virtual office. Through this setup, employees work remotely but have a prestigious downtown mailing address where someone answers the phone and routes calls. The virtual office can also provide access to a shared meetings space at well below the cost of leasing an office.
Hoteling and shared workspaces, such as The Dojo at The Exchange Centre, and Beta and the Maritime Building, are opening up the downtown market to a new segment of the business market.
“All of these are factors that are improving the real estate outlook in the CBD, along with the conversion of properties to mixed-use entities,” Miestchovich said.
Several development projects near the CBD are also contributing to the rebound of the downtown office market, Burns said. He expects demand on all fronts to steadily increase as the new Mid-City medical complex nears completion in 2014.
“Some of the recent investments in CBD office properties at attractive pricing levels will look very good in 2015 and beyond when occupancy levels and rental rates have each reached new plateaus,” he said.
Burns also says occupancy in the CBD market has been aided by the end of the loss of oil and gas firms to Houston. Superior Energy Services moved its headquarters out of New Orleans in February but kept an office with 500 local employees in the city.
Chevron stayed in the market when it moved its Gulf of Mexico region headquarters to Covington in 2008, but a number of major and independent energy firms have gravitated to Texas since 1990.
“Over the past couple of decades, there was a consolidation largely into the Houston market of major oil and gas companies, along with some of the companies who do a good deal of business with them,” Burns said. “This trend has pretty well played out, and we have experienced growth in the oil and gas and related sectors in New Orleans.”
By: Mason Harrison