The University of New Orleans Institute for Economic Development & Real Estate Research hosted the 32nd annual Dr. Ivan Miestchovich Economic Outlook & Real Estate Forecast for New Orleans on April 4. The presenters discussed challenges facing the economy, business, and the real estate market in New Orleans. Below are the highlights of the discussions on commercial and residential real estate.
Commercial Real Estate
Andrea Huseman of Corporate Realty, Stephanie Hilferty of SRSA Commercial Real Estate, and Leon Audibert of Property One discussed Commercial Real Estate in New Orleans.
- Ms. Huseman discussed the office market in New Orleans, noting that people want amenities in order to be enticed back to the office after working from home during the pandemic. Older office buildings are being reworked to allow for more hybrid work and coworking spaces. Certain industries such as law firms are even increasing office space. She noted that office occupancy has declined some, but rates have not declined.
- Ms. Hilferty discussed the retail market in the New Orleans metropolitan area, which is also beginning to mix with other markets such as office, in new developments like the Clearview Center. Retail tenants are limiting the number of stores they open, but they will pay good rates for high quality locations, such as Veterans Memorial Boulevard, Causeway and Clearview. Tenants are looking to minimize the risks of increasing net charges while landlords are refusing to cap uncontrollable expenses such as insurance.
- Mr. Audibert discussed the industrial market, describing major new developments such as the Michoud facility with Textron as the major initial tenant. The warehouse market has been booming since COVID because companies needed more storage to mitigate supply chain distribution. Parking and zoning can be barriers to new industrial development, but governments are generally supportive due to high demand by industry players. Construction and insurance costs are increasing rental rates in this market.
Residential Real Estate
Melissa Simeon of Fontenelle & Goudreau Insurance, LLC, Larry Schedler of Schedler & Associates, and Marcus Campo of Nola Build Contracting Services, LLC discussed Residential Real Estate in New Orleans.
- Ms. Simeon discussed the insurance industry, which has been in flux due to Risk Rating 2.0 and Hurricane Ida. She suggested homeowners get a flood elevation certificate, which may reduce their premium under Risk Rating 2.0 for flood insurance. She expressed optimism that insurers will return to the market after an exodus after Hurricane Ida due to new incentive programs. She also noted that new roofing standards may help to reduce premiums.
- Mr. Schedler discussed challenges in multifamily including rising interests rates and rising insurance costs, which both impact cash flow. He noted the difficulty in predicting insurance costs in the future and the fact that it is difficult to find a good return when factoring in current insurance costs. Larger owners can benefit from spreading their risk across properties in different locations across the country.
- Mr. Campo discussed single family and new construction, noting that homeowners can offset insurance costs by better constructing the roof (e.g. sealing the plywood decking) and documenting the construction process for the insurer. Homeowners can also get a third party certification for a fortified roof for a significant insurance discount. Building above base flood elevation also helps to reduce flood insurance costs.