Richard Traina recently attended the 2021 Economic & Real Estate Symposium. The theme was “Rethinking Real Estate: Adapting to the Changing Dynamic in New Orleans and Louisiana.” One of the topics that was discussed is how the pandemic has impacted commercial real estate, especially the office market. Below, Richard shares some of the insights he gleaned from the presentations and how it might affect New Orleans.
How the Pandemic has Impacted Commercial Real Estate
Conventional wisdom has it that urban commercial real estate is an excellent investment. First, the supply (urban centers) is finite, but the demand (more people and capital moving to some cities) keeps rising. Additionally, tax laws can be advantageous for real estate development.
Then came COVID-19 and the extensive abandonment of office space in much of the country, bringing with it significant effects on how much of America will live and work in a post-virus world. The general consensus is that commercial real estate in the U.S. is a sector that will likely stand to register a huge reallocation of stakeholder value.
Will this be the case in New Orleans?
Data from reports issued by the New Orleans firm Corporate Realty shows the following for Class A office space in the New Orleans Central Business District:
Vacancy rates are rising and rent is dropping, but not dramatically. Will capital flow away from commercial real estate in New Orleans? Most New Orleans businesses won’t go 100 percent remote although indications are that they will want less space that’s more flexible. Companies will also look for space that appeals to the premier asset of any business: its ability to attract young, skilled human capital (a lagging metric for New Orleans).
At this point, it’s probably too early to tell if commercial real estate in New Orleans, and the office market in particular, will remain a solid investment as the pandemic plays out, but it bears watching.