Location, Location, Location
A look at the current status of commercial affordability, and unaffordability, throughout Greater New Orleans.
In New Orleans, there’s no denying that business is booming. But with demand for space continuously outpacing supply in the city, each neighborhood offers its own set of benefits and challenges, perhaps most importantly for pricing.
Businesses will pay a premium to be situated in certain areas of the city, particularly those with the highest traffic counts. Other areas may be more affordable and still offer businesses benefits they didn’t realize were available.
The following is a look at how various retail corridors throughout Greater New Orleans compare in terms of average commercial rental rates.
The French Quarter may be a 14-square-block area, but most of its commercial real estate is still concentrated on a few streets, so the lack of “for rent” signs combined with high foot traffic has driven prices up considerably in this neighborhood.
“Everybody wants a taste of the French Quarter,” says Schaffer Mickal, commercial real estate agent and French Quarter specialist for Latter & Blum. “The French Quarter has a name and a draw, and it’s going to continue that way.”
Unsurprisingly, Bourbon Street commands the highest rents, which may be double that of other streets, starting around $100 per square foot. Royal Street carries some of the next-highest prices, starting around $50 per square foot, but since these rental prices increased after Katrina, several of the antiques and furniture stores have begun moving out and are slowly being replaced by other mixed retail.
Decatur Street, because it’s the only two-way street in the French Quarter is in high demand for retail, and that street is also almost at the $50-per-square-foot level. Chartres Street is on its way up as a popular commercial strip as well, and side-street commercial properties are running about $30 to $50 per square foot.
Prices can also vary considerably by street based on how close to Canal Street the property is, as well as physical aspects of the property itself. The neighborhood’s 150-to-200-year old buildings were not built for commercial spaces, but the ones with French doors and good exposure to the street tend to command more per square foot than others.
Downtown – Central Business District
Downtown New Orleans and the CBD also boast high commercial rental rates in the city, particularly for multifamily and retail developments. Commercial rental prices for retail tend to range from $30 to $45 per square foot depending on location.
The area around the South Market District, which stretches from Loyola Ave to Baronne St and Julia St to Lafayette St, for example, is a market unto itself, says Paul Richard, commercial and investment broker with NAI Latter & Blum. This area is essentially driving rates and setting the tone for the kind of development that’s going to be seen Downtown.
Higher rental prices have been a hindrance for smaller local businesses, which is one of the reasons the market has been moving toward national and luxury brands rather than local and mom-and-pop stores. This change toward a national and regional orientation, rather than local orientation, particularly since Katrina, feeds into the area’s higher prices.
“The question is, is this pricing level the new baseline or just top of market?” says Richard. “There’s a lot of discussion that this pricing could be the new baseline, and the market is going to have to integrate this pricing if it wants to develop. Or, if it is a market top, I don’t see any real decrease in pricing, but I do see a leveling as the marketplace digests what has been built, what’s being built, and what’s contemplated to be built.”
Photos Cheryl Gerber and RE/MAX Commercial Brokers, Inc
Perhaps unsurprisingly, Magazine Street is another one of the pricier areas for commercial real estate in New Orleans, as it is arguably the city’s most famous commercial strip, stretching from the Central Business District to Audubon Park.
“Retailers want to be by other retailers, so when you’ve got this really nice mix of shops, boutiques, restaurants, art galleries, and other stores along the street, it becomes cyclical,” says Jonathan Shaver, commercial real estate agent with RE/MAX Commercial. “And they all want to be on high-visibility corners, so all that comes into play [in pricing].”
Along Magazine Street, businesses could be looking at mid-$20s to mid-$30s to lease commercial real estate, except for some outlying hot areas, where pricing can reach $40 or $50 per square foot. A handful of sales have even gone for over $300 per square foot, such as one in the 5200 block of Magazine and another in the 6100 block of Magazine, according to Shaver, who was familiar with the transactions but unable to disclose confidential information. “Prices are rising for sure,” he says.
The three primary stretches of commercial Magazine Street are from St. Andrew Street to Jackson Avenue, from Washington Avenue to Louisiana Avenue, and from Jefferson Avenue to Nashville Avenue, and rents in those three core areas are higher than other parts of the thoroughfare. Because Magazine Street is one-way from Downtown into the Lower Garden District, the pedestrian traffic is not as strong, so rates tend to be lower.
Thanks to the recent resurgence of streets like Oak, Freret and Oretha Castle Haley, these streets offer more affordable options than Magazine Street while still being popular retail traffic areas for the Uptown area. Shaver believes that the availability of property on these streets is actually helping to slightly slow the rise of rents along Magazine St.
Even so, because Uptown in general has a more desirable set of demographics in terms of household income and other indicators that retailers are interested in, the neighborhood still tends to remain more expensive than some other parts of the city. At the same time, pockets do exist that can be just as affordable as other commercial areas, such as Central City, Broadmoor and parts of the Lower Garden District and Carrollton neighborhood.
Mid-City is starting to see price hikes for commercial real estate that rival other, more expensive areas in the city. Thanks to construction on the University and VA hospital systems, Mid-City now boasts two main commercial corridors, Carrollton Avenue and Tulane Avenue-Gravier Street, also known as the University Medical Center area.
The University Medical Center area has seen major price appreciation along with its development. Larger parcels of land are available around Tulane Avenue; fewer are available along Canal Street, so businesses have to adjust their building plans around the makeup of historical structures, which are located on and between both thoroughfares, says Richard.
The Carrollton corridor has seen significant retail development over the past few years, and prices for real estate now hover around the $35-to-$40-per-square-foot range, Richard says.
“The market is moving very far from affordability and moving more toward expensive and luxury, which makes it difficult to do affordable development in those areas,” says Richard. “There aren’t really any pockets of affordability left. Everything left is essentially expensive to acquire and develop.”
Bywater – Marigny – St. Roch
The Bywater, Marigny and St. Roch neighborhoods, especially with the St. Claude commercial corridor, is feeling the pressure of being deemed one of the cool, up-and-coming areas of New Orleans, says Kendra Home, commercial real estate agent and urban planning consultant at Latter & Blum. With an influx of new residents has come commercial development, but businesses face many challenges in this area, which prevent it from being as commercially robust as some other New Orleans neighborhoods.
The area is relatively affordable depending on the size and state of the space and can range from $16 to $18 per square foot for office space, with the Healing Center on St. Claude Avenue being the main provider, to up to $30 per square foot for a smaller space in the neighborhood’s interior, such as the commercial strip on Burgundy Street, Home says.
However, setting up shop inside the neighborhood from St. Claude Avenue to the Mississippi River, can be difficult due to permitting issues, such as parking, zoning, liquor licenses, historical preservation, and pushback from residents who are resistant to new businesses in the area, Home says. Having to renovate and retrofit historic buildings, some of which date back to the 1880s, to meet modern-day building codes can be cost-prohibitive for owners without raising their rental rates, and that can make this neighborhood expensive for some business owners.
Photo Cheryl Gerber
Gentilly- Eastern New Orleans
Gentilly and eastern New Orleans have been slower than other neighborhoods to return to commercial growth since Katrina. According to Clarence Moret, commercial real estate with Hamilton Realty, they are mostly stable but with some developments, including a new Walmart and hospital in eastern New Orleans.
Rentals tend to be $16 to $18 per square foot for retail and office spaces. Gentilly Boulevard is slightly higher, particularly around Elysian Fields.
“These areas are going to grow,” says Moret. “Some of the other areas, like Mid-City, are growing so fast that they’re at capacity, so people are going to have to start looking at an alternative, and I think Gentilly and New Orleans East are going to be the choice.”
Metairie – Kenner
Metairie and Kenner, both just a quick drive outside the New Orleans city center, are also on the rise. As more new construction emerges on Veterans Memorial Boulevard, West Esplanade Avenue, and other parts of Jefferson Parish’s east bank, more local and national businesses are moving in, particularly when the location is desirable.
In certain areas, Veterans Memorial Boulevard can command higher commercial rental rates than Airline Drive or Williams Boulevard, two other highly commercialized areas of Jefferson Parish. According to Matt Eaton, senior sales executive for RE/MAX Commercial Brokers, rates can vary widely even on the same corridor, such as Veterans, where one building might rent for $26 per square foot, and a couple of blocks down, rent could be $45 per square foot.
Fat City in Metairie has also seen a push, and more commercial real estate has been snapped up in that area over the past few years. Eaton says that section of Metairie could end up being a more highly foot-trafficked, suburban-type commercial area if development continues.
Like anywhere else, businesses in Metairie and Kenner wish for more land, but otherwise, this area tends to not have some of the problems that other parts of New Orleans might see, Eaton says, such as parking or preserving historical structures. This makes the area attractive for both local and national businesses that cannot afford or do not want to be in Orleans Parish.
Photo NAI/Latter & Blum, Inc.
When it comes to the Westbank, the river acts as both a physical and psychological barrier for commercial real estate, particularly retail. It’s not often that many people venture to the Westbank to do their shopping, and many Westbank residents tend to stay within their communities rather than travel across the river, says Jon Ceruti, commercial real estate agent at Jack Stumpf & Associates. As a result of lower demand, commercial rental rates tend to be lower, save for some pockets like the Manhattan Boulevard or Barataria Boulevard corridors and parts of Gretna and Harvey.
When it comes to office space, however, it’s a different story. While some people may not want to cross the river to shop, they do seem willing to drive the extra few minutes for more affordable office space than what’s available in the city proper. Interestingly, Algiers is closest to the river, and thus the city, but because it is still Orleans Parish, some businesses choose to go deeper into the Westbank, particularly Gretna or Harvey, to open their offices, so as to not deal with Orleans Parish business politics, according to Ceruti.
Northshore – St. Tammany Parish
Since Hurricane Katrina populations in St. Tammany Parish and the Northshore have grown, and with them, the cost of commercial real estate, says Ryan Pearce, commercial sales and leasing agent for Latter & Blum. Judging by some closed real estate deals, average prices for office space averaged from $10 to $17 before Katrina, while retail averaged from $8 to $15 on some properties, according to Pearce. Today prices tend to range from $15 to $20 for office space and $10 to $18 for retail in West St. Tammany.
Some of the newer developments in this area have been on par with retail markets in New Orleans, particularly construction like the Fremaux Town Center in Slidell, which has attracted a number of larger retailers to the area and continues to expand, and Colonial Pinnacle Nord du Lac, the first phase of which opened a few years ago in Covington.
The proposed Port Marigny development on the Mandeville lakefront could be another such development in the future, as it is set to include 60,000 square feet of commercial space. Highway 21 has seen a great deal of newer development and is one of the priciest corridors in St. Tammany, says Pearce.
St. Tammany has seen steady interest from national retailers wanting to come there because the timing is right, says Pearce. Some of this area’s highest rents are still lower than other places in the South, such as Houston or Nashville, so the affordability combined with an influx in population are making this area more attractive.
New Orleans businesses as a whole are enjoying an influx of residents and tourists, creating what Richard calls “one of the best real estate markets we’ve have since Katrina.”
Commercial real estate will always see its challenges, such as availability of land and buildings, parking, licensure, and preservation of historic structures, but that hasn’t stopped local agents from seeing all of the positives coming the city’s way.
“It’s really exciting to see New Orleans really growing,” says Eaton. “It’s a great time to be in commercial real estate and to see what happens with the city.”