There is a buzz about New Orleans — no longer are only locals singing the virtues of this great American city. In fact, Forbes rated New Orleans the fastest-growing city since the recession in 2013, Bloomberg describes the Crescent City as “Boomtown,” CNN Money rated Louisiana as one of the most entrepreneurial states and Career Builder.com cited New Orleans as one of the fastest for wage growth in the United States. A spotlight has been shining on the dynamics of this market, and local, regional and national investors have taken notice.
According to our most recent survey, rental rates in metro New Orleans range from a low of $0.80 per square foot to as high as $2.25 per square foot. Average monthly rent is $1.02 per square foot, and overall occupancy is at 93 percent.
The geography of New Orleans is such that there are numerous barriers to entry, most notably the lack of available land to develop multifamily communities. As a result, the Downtown/ Warehouse District is experiencing a major renaissance whereby mid- and late-1920s office buildings are being converted to multifamily.
Notable developments downtown that are under construction or soon to commence include The South Market, which will transform several downtown parking lots into a large, mixed-use development. The property will be built in four phases, with the first phase consisting of 209 market-rate apartments and a parking garage. The developer, The Domain Cos. of New York, anticipates completion in October 2014.
Other downtown developments include Elk Place Lofts, which will consist of 96 upscale units being developed by Wampold Cos. of Baton Rouge; The Garage, a redevelopment of a downtown car dealership into 65 units by Wisznia Development; and 225 Baronne, which will convert a vacant office building into 192 apartments and 188 hotel rooms by HRI Properties of New Orleans.
Just as the downtown market is red hot for urban living, St. Tammany Parish located north of Lake Pontchartrain is equally as hot for garden-style apartment community development. The popular suburb has an abundance of land on which to develop and a relatively low existing inventory of multi-family units.
Total inventory in this growing submarket is approximately 4,500 units, and in spite of community resistance, there are 612 market-rate units currently under construction or in the planning stages. They include Phase II of Brookstone Park Apartments, 112 units built by PPQ Development of New Orleans, and Reagan Crossing, 288 units proposed for northern Covington by Reagan Crossing LLC. Additionally, the 244-unit Faubourg St. John Apartments is currently working its way through the city review and approval process.
The majority of development in St. Tammany Parish is market-rate, as the area boasts one of the highest per capita incomes in the state and commands rents in excess of $1 per square foot. Despite the construction activity, the market still enjoys occupancy levels in 90 percent range. Investors have taken note of the expanding employment base in St. Tammany and are bullish on the its ability to absorb inventory.
The Metairie/East Jefferson submarket continues to remain strong as always as there is virtually no land to build additional inventory. This trend should continue as the area is centrally located and a desirable place to live.
The investment community has been enthusiastically pursuing opportunities throughout the New Orleans metro area and the Gulf South. The demand for all type of multifamily assets exceeds the supply. Investors feel a heightened sense of security in placing equity in the city because the barriers of entry will always limit the inventory of units. These restraints on the market, along with our anticipated employment growth, should assure investors the ability to realize continued income growth.
— Larry Schedler, principal, and Cheryl Short, principal, with Larry G. Schedler & Associates Inc.