Whether you are a landlord or a tenant, lessor or lessee, you need to take action now to keep your business alive in the future and stop events from affecting your lease. First, read your lease. Lock yourself in your bathroom for an hour and don't come out until you finish reading your lease. Twice. No need to call your attorney. Keep them out of it. Tenants, call your landlord. Landlords, call your tenant. Communicate what you want and work out a plan of action.

5 Things To Do Now To Prevent The Virus From Affecting Your Lease, New Orleans LA

Self-Isolate With Your Lease

All leases include language that describes what happens if there is a fire and the time period the landlord has to make repairs. Typically the lease will state " If the Premises or the Building is damaged by fire or other casualty and rendered unsuitable for use...." then goes on to state the landlord makes repairs, usually allowing a 180-day period, and if the landlord cannot make the building inhabitable, the Landlord or Tenant may cancel the lease. Tenants might have a reasonable position that a state-mandated self-isolation renders the space unsuitable. Nobody is going to end up in court over this because it will take years to decide, so the landlord and tenant have to work something out.

The language used, especially if a force majeure is mentioned, could go a long way in affecting your lease. This usually takes effect when there is an unpredictable disaster or Act of God. We saw it during Hurricane Katrina in 2005. This usually allows the landlord to cancel the lease. Big deal. Why cancel a lease when the market doesn't have anyone else lining up to lease your space? Maybe for years.

If You Are A Landlord


If your tenant can't pay the rent, your risk is that they will go out of business. Realize you won't have anyone else to rent to, and it may take you several years to get the space leased back up.  Reduce the tenant's rent for a portion or all of the term left on the lease. The usual forms of rent reduction are to reduce the base rent, operating expenses, or both.


In this case, the landlord can defer a portion of the tenant's rent but would require them to repay the rent deferred at a later time, either in a lump sum or by increasing subsequent payments. A variation of rent deferral could be to cap or set a base year to operating expenses for a short or extended period of time. Landlords with large retail tenants are asking for a March and April financial statement to show revenues were reduced.


If a tenant is significantly past due on rent payments, a landlord may agree to forgive a certain amount of the past due rent if the tenant remains current thereafter. Rather than abating past due rent, a landlord may agree to convert the past due rent into a loan payable over time. The tenant would, however, continue to pay the current rent.


If the landlord holds a deposit, this amount could be credited against the tenant's current obligations.


Bringing in a new tenant (for part of or all of the rented space) could reduce or eliminate the rent obligations while replacing revenue for the landlord.

If You Are A Tenant


What are the basics of your lease? Is the language used affecting your lease? Review your lease to see if your rent is simply base rent or it includes pass-through expenses. How much are these expenses and are they set to increase?
When does your lease end? What constitutes a default of the lease? What tools are available to the landlord in such a case (penalties, eviction, interest, etc.)?


Does your landlord hold a security deposit? Speak to your insurance agent to see what coverages you have.


Arrange a meeting with your landlord and be prepared with data to have an open conversation to identify a solution or combination of solutions.

Different Strokes For Different Folks


Retail will see a bifurcated reaction to this economic downturn. Storefronts selling consumer staples - like Walmart, CVS, and grocery stores-will thrive, while dine-in restaurants, for example, could remain closed for the foreseeable future.


Unsurprisingly, hospitality has been decimated by the national response to the pandemic. CCIM Institute Chief Economist K.C. Conway recommends those in the sector ask themselves some basic questions. “For those that own hospitality assets and invest in that space, you need to step back and reflect on what brought you to that property type. Why? Where were you going into this particular period? The market had near record revenues per available room, average daily occupancy, and rental rates. … Whether I'm a hospitality REIT, hotel owner, or I've got properties, I want to negotiate with my lenders for some debt restructuring.”


The office leasing market is likely to suffer in the short-term due to COVID-19 as layoffs diminish tenants' overall need for space and, in many cases, set aside expansion plans they may have had. In addition, tenants who remain in the market for additional space will have a difficult time touring properties. Office workers' pushback against the open office environment is likely to accelerate, as illness is more easily transmitted in an open environment. Many employers already had recognized that in a competition to attract and retain top talent, squeezing workers into increasingly tight spaces was not a sustainable strategy. Now, an emphasis on social distancing and good health practices - continuing in some fashion even after the crisis has passed - may help reverse the densification trend, with less shared space and fewer workers per leased square foot.


Similarly, the multifamily sector could see significant upheavals as unemployment rises. Businesses that are closed employ people who now will struggle to pay rent. It's a similar situation to retail, only in this case the tenant is an individual or family who lost its source of income. Tellingly, Freddie Mac announced a nationwide relief plan for current multifamily borrowers and residents.


Industrial, meanwhile, is in a two-pronged situation similar to the retail sector. Grocery and medical items, for instance, are flying off the shelves, so properties in this supply chain are humming along. But other industrial sectors could be in store for tough times, depending on what areas of the national economy slow or stop.

Free Lease Review

We can help. We are offering a free lease review and, if needed, help to negotiate your lease so that landlords keep their tenants and tenants keep their business going. Having a commercial real estate broker who is a trained professional negotiator can help you execute your plan and save time and money, while lifting a burden off your shoulders. Knowing what events—present and future— affecting your lease is critical.

For Additional Information On Leases, Read Our Articles:

Why Negotiating Is Like A Tennis Match

The Office Lease Market

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negotiating and leasing commercial real estate is like a good tennis matchBuying, selling and leasing commercial real estate requires lots of different skills, including knowledge of financing, zoning, supply and demand, income statements, and demographics but the most valuable skill is good negotiating. What makes a good negotiator? It is helping all parties involved, who bring to the table different and opposing objectives, agree on the one objective of buying, selling or leasing a property with terms that they may not like but to which they can agree. A good negotiator embraces conflict and works through it, discovering the motivations of each party and helping them achieve goals they may not have initially thought important.

Leasing Commercial Real Estate: Good Negotiating Is Always A Short Volley In A Tennis Match

Negotiating has an ebb and flow, a rhythm that is similar to a tennis match. If you make it too short, both parties didn't give their best, but if you make it too long, both parties tire out and make stupid mistakes. Negotiations always have several terms that both parties have to take into account. There is an offer, then a counter-offer and negotiations should never go past the counter-offer. There has to be some agreement at the 2nd change in terms, even if you have to reduce the number of issues under negotiation. This is where a good negotiator can add value to any transaction, by working with each party to identify issues that are minor and those that are deal-breakers. Negotiators need to understand why certain terms are important to people and help them understand the concept that if they can't get one thing they want, maybe they can get a different thing that will also help them.

Leasing Commercial Real Estate: The Hard Part Of Negotiating Is Not Walking Away

the hard part in negotiating leasing commercial real estate successfully

Any negotiation eventually has conflict, because there are always various interests involved, called stakeholders, that have their own objectives which can often oppose other stakeholder's interests:

The Buyer or Tenant-the buyer and tenant want the property as cheaply as possible and more. Sometimes the buyer wants a long inspection period or time to arrange financing. The tenant sometimes wants the landlord to build out the space and always wants several months of free rent.

The Seller or Landlord-both want as much money as possible with little initial investment. The seller doesn't want to make any repairs on the property being sold, and the landlord doesn't want to give free rent or spend money building out space that may be unusable should the tenant leave in the middle of the night, skipping on the rent.

The Government-whether the property falls under the jurisdiction of a city planning department, city council, mayor, or just the neighborhood association, each group wants to represent its constituents and get credit for any progress. The mayor wants a press conference, city planning wants all zoning laws complied with, and the neighborhood association wants services for their members even if it doesn't make good financial sense.

The 4 Strategies Good Negotiators Utilize

negotiating leasing commercial real estate sometimes depends on little things

The easy thing to do when a conflict of interest arises is to walk away. It is the most comfortable and normal reaction for many. But a good negotiator doesn't take conflict personally, stays calm and utilizes 4 strategies, especially when it involves leasing a commercial real estate property:

  1. Takes all stakeholder's interests into account and works behind the scene to address all concerns while reminding those with opposing goals of the benefit of achieving the main goal, which is to put the real estate back into commerce. Sellers and landlords need to understand what buyers and tenants are worried about. Buyers and tenants often have no idea of the complications sellers and landlords are up against. Good negotiators help all parties reach common ground.
  2. Identifies and separates the big issues and lets the other party have things that don't matter. In any commercial property negotiation, there are a wide variety of contingencies, including inspection and closing period, financing, deposit, occupancy and closing costs and price. The average person can only grasp 3 of these in any one situation, so a good negotiator will determine which 3 have the highest priority and methodically works to get an agreement on the big issues first.
  3. Solves problems with creativity. For example, if a tenant wants 3 months of free rent, the landlord could offer one month up front and 2 months at the end of the lease. That way if the tenant doesn't stay the entire term of the lease, the landlord has taken less risk. Or if a buyer is unable to obtain financing, the seller could increase the deposit and finance part of the transaction. What if the buyer wants an extraordinarily long inspection period? If the buyer eventually cancels, then the seller may have missed other buyers while the property was under contract. In economics, this is called opportunity cost, and this increased risk can be offset by a deposit that becomes non-refundable, or an additional non-refundable deposit to purchase more due diligence time.
  4. Keeps communications from getting personal. It is never a good idea for buyers and sellers, or landlords and tenants, to meet initially and conduct negotiations. Personalities always get in the way and people say things they shouldn't and statements get taken the wrong way. A good negotiator keeps all parties logical and rational, identifies the major issues and keeps all parties focused on the benefits to them of a successful transaction.

For more information on negotiation, read our article The Insanity of Inspection Renegotiation and our reality article on Successfully Negotiating the Largest Class A Office Lease.

commercial investment, New Orleans LAYou can run the numbers to calculate gains or losses from various scenarios, but there is nothing like a visual depiction of risk/reward tradeoffs, especially when it comes to risk in commercial real estate. The hard part is transitioning numbers to something you can see that displays probability and the risk involved with adopting various strategies that may or may not result in a gain.

 Visualize commercial real estate risk, New Orleans LA

Making decisions in commercial real estate often involves more than just calculating a capitalization rate or net present value, because there is always a component of unknown risk. In the office leasing sector, risk is created by local market factors, such as supply and demand for space, asking and effective rents, and absorption rate. Other factors contributing to risk in commercial real estate are the specifics of the situation. Learning how to quantify and illustrate such risks to clients is a challenge, especially in small or mid-size markets where office demand can still be somewhat stagnant.

This article discusses how to quantify the risk of a real-life decision: Should an office tenant write a check for $1.5 million to accept a lease buyout offer, or continue to market a sublease for 56,542 square feet of class A downtown office tower space in New Orleans?

The Dilemma When There Is Risk In Commerical Real Estate

As a byproduct of a merger between two large oil companies, a decision was made to relocate 250 employees from New Orleans to Houston, leaving 75,000 sf -- four full floors of fully furnished class A office space -- vacant with an obligation to pay rent at $18.25 psf for 54 more months.

The situation is compounded by two issues: The space represents the largest contiguous class A office space in New Orleans, and with only 54 months left on the lease, it is not feasible for the lessee to offer any build-out allowance. This means the sublease space cannot compete with market-rate space.

The lessor has presented an offer to take back 56,000 sf -- three full floors -- for a lump sum payment of $1,500,000 rather than the current obligation of $1,022,000 per year. The decision for the tenant is whether to pay the $1.5 million and gain the difference or try to sublease the space to produce a greater income. The dilemma is how to analyze this risk in commercial real estate.

Market Factors

The New Orleans class A office tower market is approximately 9,000,000 sf, with 1,000,000 sf currently available for lease. Building occupancy rates range from 73 percent to 97 percent and 2013 absorption was 133,000 sf, or 13 percent of available lease space. Asking rents range from $16.50 to $21.00 psf, including build-out payments ranging from $10 to $30 psf. In competing buildings, 15,000 sf of sublease space is available at $15.00 psf and 90,000 sf was just renewed at $12.50 psf.

The Decision-Making Process When There Is Risk In Commercial Real Estate

At first glance, the answer appears to be a no-brainer: Accept the offer to pay a lump sum of $1,500,000 rather than pay $1,022,000 annually for 54 months, equal to $4,599,000. However, calculating the numbers on subleasing the space at the average asking rate of $18.50 psf produces a profit of $63,609 for the remaining period. (See Table 1.)

leasing profits commercial real estate, New Orleans LA


Such numbers are compelling to clients wishing to make the most of a difficult decision. However, just because the market rate is $18.50 psf, we can’t assume that we can immediately lease the entire space at that price. Instead, the analysis should focus on the risk of not paying the $1,500,000 and trying to sublease the space. What price do we need to sublease the space for and how long can we take before we are worse off than just paying the $1,500,000? How do we show a client that risk visually?

Thus, the critical data are how long will it take to sublease the space and at what price. If the current market lease rate is higher than the current obligation net of build-out allowance, the space would command a payment to the lessee rather than a $1,500,000 payment from the lessee. But, like many markets, the New Orleans market has a wide variance, with some class A office tower downtown space subleased at a low of $12.50 psf and listed space quoted up to $21.00 psf.


sublease rate scenarios, New Orleans LA

Analyze the Risk in Commercial Real Estate

The best way to analyze the decision is to first examine the worst, average, and best outcomes, as shown in Table 2, which compares the income from a range of lease prices psf compared to various periods remaining on the lease. The three price levels are the actual low, middle, and high rates for class A office tower space in downtown New Orleans.

Each combination of time remaining and assumed sublease price should be compared to the net savings from the buyout offer of $1,500,000. The current obligation is for a lease payment for 54 remaining months at $18.25 psf on 56,542 sf, for a total of $4,643,511. The buyout offer requires a one-time payment of $1,500,000, which is a savings of $3,143,511. ($4,643,511 minus $1,500,000 paid).

If the lessee could sublease the space for $12.50 psf, the space would have to be subleased almost immediately in order to reap more income than the proposed offer. At $15.00 psf, the space would have to be subleased within 12 months, or have 42 months remaining in which to earn enough income. At $18.25 per square foot, the space would have to be subleased within 18 months, in order to have 36 months remaining to produce the same savings.

The Boxing Decision

The information in the table can best aid the decision-making process by illustrating it in chart form, with the dotted line depicting the savings from the proposed offer to buy out the lease.

Chart 1 shows that any situation above the dotted line represents a better alternative than the proposed offer, and any situation below the dotted line represents a worse scenario.

lease rate comparisons, New Orleans LA risk in commercial real estate

Going one step further to incorporate risk into the analysis produces a more-reliable decision. We might have a higher confidence level that the space will sublease around the $15.00 psf level, but we still don't know how long it will take to get it subleased. Of the 133,000 sf leased last year in New Orleans, the subject space represents 42 percent of that supply. Of the 133,000 sf, only three leases were 17,000-sf full floors. So the decision compares a finite cost of $1,500,000 against several likely outcomes.

Risk In Commerical Real Estate

Risk in Commercial Real Estate—The Conclusion

Chart 2 further incorporates risk in commercial real estate by comparing the area in a blue box of all possible outcomes above the known savings (which is a better outcome) to a red box of all possible outcomes below the known savings (which is a worse outcome). Since the blue box is smaller than the red box, it is less risky to pay $1,500,000 to terminate the 56,542-sf lease than it is to try to lease the space for more income. By visualizing not only the numbers but the risk of all likely scenarios, you can make complicated decisions easier.

This article was written by broker Robert Hand and is a reprint from the August 2014 national publication Commercial Investment Real Estate, published by CCIM, an organization of the top commercial real estate brokers in the world with a membership of 13,000 in 30 countries.

Read the original publication at CCIM Archive CIRE magazine.

new orleans Commercial Real Estate Developments with government help

New Orleans commercial real estate developments don't happen without government help which ranges from New Market Tax Credits, Community Block Grants, Tax Exempt Financing, to Digital Media Tax Credit, Bonus Depreciation, and Tax Abatements.

For example, one of the largest developments in New Orleans was a $70 million, 550-unit apartment and retail complex near the Superdome. Here is how the project was financed: New Market Tax Credits provide $4.9 million and Enterprise Zone Rebates provide $806,000, leaving loans from Goldman Sachs providing $55 million and equity of $8.4 million from the developers.

New Orleans Commercial Real Estate Developments: New Market Tax Credits

The most common financing vehicle was New Market Tax Credits which was established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities. The New Market Tax Credits Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs). The credit totals 39 percent of the original investment amount and is claimed over a period of seven years (five percent for each of the first three years, and six percent for each of the remaining four years). The investment in the CDE cannot be redeemed before the end of the seven-year period.

Click HERE for the IRS Publication on New Market Tax Credits

Internal Revenue Service Advice

The Internal Revenue Service (IRS) published a Notice providing guidance with respect to how certain Targeted Populations of individuals may be treated as Low-Income Communities eligible for investments by Community Development Entities (CDEs) under the New Markets Tax Credit (NMTC) Program. As indicated in the Notice, certain individuals in the Hurricane Katrina Gulf Opportunity Zone, as such term is defined in the Gulf Opportunity (GO) Zone Act of 2005 (Pub. L. 109- 135), are deemed to be a Targeted Population provided that the individuals were displaced from their principal residences as a result of Hurricane Katrina and/or lost their principal sources of employment as a result of Hurricane Katrina. A business that serves these individuals may be a qualified active low-income community business to the extent that:

  1. The business is financed by a special set-aside of NMTC allocations that were made available to CDEs with a significant mission of recovery and redevelopment of the GO Zone, pursuant to the GO Zone Act of 2005.
  2. The business is located in a population census tract in the GO Zone that contains one or more areas designated by the Federal Emergency Management Agency as flooded, having sustained extensive damage, or having sustained catastrophic damage as a result of Hurricane Katrina.
  3. The business is located in a census tract with a median family income that does not exceed 200% of the applicable median family income.
New Orleans Commercial Real Estate in sanlin, new orleans LA

Since New Orleans is almost 300 years old, there is plenty of history behind almost every commercial real estate property, and 426 Canal Street is a prime example of this New Orleans Commercial Real Estate with such a fascinating history that locals refer to it by name rather than the address.

This property has been known by three names: the Friedricks Building in the late 1800's, and the Sanlin Building, or the Morris Cigali Building more recently.

The historic Sanlin Building has a footprint of approximately 49,661 square feet with 130,000 square feet of improvements. Zoning is CBD-3 which allows a height of 85 feet. The property is located adjacent to Harrah’s Casino and near Canal Place Shopping Center, which just announced that retailer tenant Tiffany is taking a large block of space.

The property dates back to the 1840s when African-American clothing merchants Julien Colvis and Joseph Dumas purchased lots and constructed buildings in the block with the expertise of architects Sidle and Stewart. Then in 1850, Colvis purchased 426 Canal from Louis Bararin. Architect James Freret added a 5th floor and the current façade after 1880. The façade has been thought of as historically significant and the building is considered an example of African-American entrepreneurism, which prevented any changes to the outside of the building over a decade ago.

This property is zoned CBD-3 which allows any use permitted in CBD-1 except hotels. Since the zoning does not allow a hotel as a permitted use but as a conditional use, any hotel development must have city council approval and a review by the city planning department in an official site plan review. This requires architectural drawings to be submitted which can easily cost $50,000 to $150,000-a hefty up front expense when no guarantee exist that a project can proceed. Current zoning only allows hotels as a conditional use in a certain area bounded by Canal, Crozat, Iberville and North Peters, as shown in the map below.

Source: www.louisianacommercialrealty.com, New Orleans Preservation Society Archives.

copyright 2013.

New Orleans East Hospital, New Orleans LA, Commerical Property Tax Incentives

New Orleans is attracting a new industry of media companies, including movie companies and software developers, mostly due to superior tax incentives offered to businesses to relocate to the Big Easy. For example, there is a 25% tax credit for digital media expenditures. That is a dollar-for-dollar tax credit. There is a 50% bonus depreciation and tax exempt financing at a 2% interest rate. There is a tax credit for live performances up to 25% of expenditures. There is a tax credit of 30% which can also be sold on movie expenditures. There is a 39% federal plus a 25% state New Market Tax Credit for development in low-income areas. There is a 25% tax credit for Sound Recording expenditures. Here are the 14 major incentives and a summary of benefits all in one list.

Louisiana Offers 14 Major Business Tax Incentives

  1.  The Digital Media Incentive provides a tax credit of 25% of qualified production expenditures for state-certified digital interactive productions in Louisiana and 35% tax credit for payroll expenditures for Louisiana residents.
    • 25% tax credit for digital interactive media expenditures made in Louisiana.
    • 35% tax credit on payroll expenditures for Louisiana residents. No annual cap on tax credits. The tax credit can be sold or applied against Louisiana income taxes.
  2. Economic Development Award Program assists publicly owned infrastructure for industrial or business development projects that promote targeted industry economic development and that require state assistance for basic infrastructure development.
    • Provides a minimum of $50,000 for publicly owned infrastructure for industrial or business development projects.
  3. The Enterprise Zone (EZ) program is a jobs incentive program that provides Louisiana income and franchise tax credits to a business hiring at least 35% of net new jobs from one of four targeted groups. EZs are areas with high unemployment, low income or a high percentage of residents receiving some form of public assistance. A business must create permanent net new jobs at the EZ site. A business is not required to be located in an EZ. A business does not have to invest money, only create additional jobs.
    • Provides a one-time $2,500 credit per new job.
    • Rebates 4% sales/use tax on materials, machinery, furniture or equipment....OR
    • 1.5% Refundable Investment Tax Credit can be earned.
  4. The Gulf Opportunity Zone Act of 2005 (GO Zone) provides federal and state tax incentives for business development in parishes most affected by hurricanes Katrina and Rita.
    • 50% Bonus Depreciation Qualified property in the Louisiana GO Zone is eligible for an additional one-time, up-front 50% bonus depreciation.
    • Tax Exempt Bonds In lieu of using bonus depreciation on investments, most developments in the Louisiana GO Zone qualify for tax exempt bond finance.(subject to availability of bond capacity). Interest rates on GO Zone bonds can be expected to save a borrower 1.5% to 2.5% a year.
  5. The Industrial Tax Exemption (ITE) Program provides property tax abatement for up to 10 years on a manufacturer's new investment and annual capitalized additions. This exemption applies to all improvements to the land, buildings, machinery, equipment and any other property that is part of the manufacturing process.
  6. The Live Performance Tax Credit program offers a fully transferable tax incentives credit that can be sold or applied against Louisiana tax liability. Tax credits received for infrastructure cannot exceed $10 million per project and are also subject to a $60 million annual cap. There is no annual cap on the production credits. The tax credit value increases with higher levels of certified expenditures, as outlined below:
    • 10% of the base investment for expenditures between $100,000 and $300,000.
    • 20% of the base investment for expenditures between $300,000 and $1 million.
    • 25% of the base investment for expenditures over $1 million. In addition to the baseline tax credits for live performance production and infrastructure, the producer may also qualify for additional incentives, including:
      • 10% additional tax credit for payroll of Louisiana residents.
      • Transportation tax credit offered for shipping of live performance-related property.
      • Opportunities for collaboration with Louisiana's top educational institutions.
  7. Mentor-Protégé Tax Credit program enhances Louisiana's business environment for new construction companies. This program provides technical and economic benefits to Louisiana-based contractors who will create and/or retain jobs for Louisiana citizens, expand the state's economy and increase available quality jobs. With the Mentor-Protégé Tax Credit program Act of 2007, mentor firms can receive Louisiana income or franchise tax credits of up to $50,000 per year by making technical assistance available to a protégé firm.
  8. The Modernization Tax Credit program provides a 5% refundable state tax credit for manufacturers making capital investments to modernize or upgrade existing facilities in Louisiana. Provides a one-time 5% refundable state tax credit on capital expenditures taken over a five-year period (1% per year for five years) for manufacturers making qualified capital investments of at least $5 million.
  9.  The Motion Picture Industry Development Tax Credit provides a 30% tax credit on qualified motion picture expenditures. Payroll expenditures for Louisiana residents qualify for an additional 5% tax incentives credit (35% effective total credit rate).
    • Production incentives fully transferable tax credit of 30% on in-state expenditures related to the production of a motion picture.
    • An additional 5% tax credit for Louisiana payroll expenditures.
    • A production company has several ways to use a tax credit:
    • Tax credits can be applied against any Louisiana income tax liabilities.
    • Production companies can also claim a direct refund for 85% of the face value of the tax credit from the Louisiana Department of Revenue.
    • Tax credits can be transferred or sold by a production company to a third party.
  10.  The New Markets Tax Credit program encourages investment in urban and rural low-income areas to help finance community development projects, stimulate economic growth and create jobs. Private-sector investors receive credit against federal income taxes. The program allows individual and corporate taxpayers to receive a credit against federal income taxes for making qualified equity investments in Community Development Entities, or CDEs. Credits can be obtained every year the investment is held, for up to seven years of the credit period. Equity investments in low- to moderate-income areas may qualify for a 39% federal tax credit available through a special federal allocation for the Louisiana Gulf Opportunity Zone.
    • Qualifying projects may leverage the federal program through an additional 25% state tax credit (64% total credit).
    • May be used as equity for debt financing.
  11. The Quality Jobs (QJ) program provides a cash rebate to companies that create well-paid jobs and promote economic development.
    • Provides 5% or 6% cash rebate of annual gross payroll for new direct jobs for up to 10 years. Allows for 4% sales/use tax rebate on capital expenditures. OR 1.5% investment tax credit for qualified expenses.
  12. The Research and Development Tax Credit encourages existing businesses with operating facilities in Louisiana to establish or continue research and development activities within the state.
    • Louisiana taxpayers who incur research and development expenses may be able to receive credits against state income and corporate franchise taxes.
    • Taxpayers who employ fewer than 50 Louisiana residents can receive a credit up to 40% of the apportioned amount of their expenditures.
    • Taxpayers who receive certain federal grants can receive a credit up to 40% of the receipts received.
    • Taxpayers who claim the federal income tax credit for research activities can receive a credit up to 20% of their apportioned increase in research activities or 25% of their apportioned federal credit, depending on the number of Louisiana resident employees.
  13. The Restoration Tax Abatement (RTA) program provides five-year property tax abatement for the expansion, restoration, improvement and development of existing commercial structures and owner-occupied residences.
    • Grants a five-year deferred assessment of the ad valorem property taxes assessed on renovations and improvements.
    • Taxes based on assessed valuation of property prior to beginning of improvements.
    • Equipment that becomes an integral part of that structure can qualify for this exemption.
    • The program does not exempt the acquisition cost of the structure.
  14. The Sound Recording Investor Tax Credit program rebates a 25% refundable tax credit for qualified production expenditures for state-certified sound recording projects.The program is subject to a cap of $3 million in tax credits each calendar year. Projects qualifying for the tax credits after the annual cap has been reached will automatically be placed in the queue to receive tax credits in the next calendar year.

The Proof Is In The Pudding

Several leading technology companies have taken advantage of the tax incentives and have come to Louisiana, such as:



On August 15, 2011, Gameloft announced it would open a game development studio in New Orleans and deliver at least one new game title developed entirely at the studio in its first year. Employment will grow to nearly 150 jobs at the New Orleans studio in the next few years, with pay averaging more than $60,000, plus benefits. Electronic Arts ea In 2012, the Electronic Arts moved into the newly-constructed 94,000-square-foot Louisiana Digital Media Center on the LSU main campus. EA now employs nearly 500 workers during the school year. In addition to the LSU students who serve in part-time positions at the center, EA has had success recruiting others in the Baton Rouge area to test children's games and casual games more popular with adult women. Game testers at the center in Baton Rouge coordinate work on a daily basis with studios across the globe, including facilities in Stockholm, London and Bucharest.

Electronic Arts

electronic arts

In 2012, Electronic Arts moved into the newly-constructed 94,000-square-foot Louisiana Digital Media Center on the LSU main campus. EA now employs nearly 500 workers during the school year. In addition to the LSU students who serve in part-time positions at the center, EA has had success recruiting others in the Baton Rouge area to test children's games and casual games more popular with adult women. Game testers at the center in Baton Rouge coordinate work on a daily basis with studios across the globe, including facilities in Stockholm, London and Bucharest.



"This public-private partnership with LED, IBM and LSU is a powerful example of the triangulation between industry, government and academia that elevates the state's role as a national leader in economic development," said LSU College of Engineering Dean Richard Koubek. "LSU's College of Engineering is committed to developing a mutually beneficial partnership with IBM and LED that stimulates economic growth and helps to meet the workforce development needs of the state." In addition to long-term workforce solutions, LED offered the company a $17 million grant to reimburse relocation, recruitment and internal training costs; a $5.5 million incentive equivalent to the state's Quality Jobs program for a portion of the IBM center's employment over 10 years; a $5 million grant to offset facility operating costs over 10 years; and the recruitment, screening and training services of LED FastStart®. LED offered a $30.5 million performance-based grant consisting of state, local and federal funding to build an eight-floor office building as part of a new, mixed-use urban development on Baton Rouge's riverfront. In addition to new Class A office space and 600 dedicated parking spaces, the development would include an 11-floor residential tower and a private recreational terrace joining the buildings above a multilevel parking garage. Leveraging resources of the Baton Rouge Area Foundation, Louisiana secured BRAF’s commitment to build and manage the $55 million total project through its affiliates, the Wilbur Marvin Foundation and Commercial Properties Realty Trust.

General Electric

General Electric

In February of 2012, Brackett Denniston, GE senior vice president and general counsel, joined state and local leaders to announce the creation of the GE Capital IT Center of Excellence in New Orleans. “We took our time to select a location for this important center,” said Denniston. “We looked all over the country but, after much consideration, New Orleans rose to the top of our list.” The center will be home to 300 high-quality technology jobs and serve as a major resource for GE Capital employees across the nation. Executives announced GE Capital will occupy 60,000 square feet of office space in the New Orleans Central Business District.

DXC Technology

DXC Technology, Tax Incentives
DXC Technology leased 3 floors in the Freeport McMoran Class A office tower for their 300 software developers.

DXC hired 300 people during 2018, ramping up to 2,000 jobs over five years with an annual payroll exceeding $133 million by 2025. The LSU Economics & Policy Research Group estimates the DXC Technology project will translate to $64.3 million in new Louisiana taxes, $868.4 million in new Louisiana earnings and total economic output of $3.2 billion from 2018 through 2025.

If you rent space for your business, your lease probably has a clause that makes your rent increase as inflation increases, so be ready to automatically pay a lot more in rent. This article explains how inflation in your lease language is calculated and how to know ahead of time how your rent could increase.

CPI Annual Percentage Change 1913-2021 and rent inflation

The Terms To Know

Your lease should have a detailed explanation of how your rent increases with inflation, and lease language always includes these trigger words:

  1. Term-this is the initial length of time you have control of the space you rent. Usually, landlords want an initial term of 3 to 5 years. Some tenants choose to negotiate for a one year term initially, which is a bad idea because you should have a lease that gives you control of the space as long as you think your business will survive. Stable tenants such as Walgreens or CVS who expect to be in the space for a long time often lock in terms of 30 years.
  2. Option Periods-this is the length of time you have control of the space after your initial term ends. You can choose to exercise your option and renew your lease, or not.
  3. Rent Adjustments- this is how much your rent increases, and is usually tied to inflation as measured by the Consumer Price Index, which is calculated by the Bureau of Labor and is actually 8,000 different items tracked but condensed into one number.
  4. Rent Adjustment Period- here is where hiring an expert can save you money by negotiating your lease fine points. Your lease should be specific in how the base rent is adjusted for inflation, how that is calculated and when the adjustment starts. Common lease language might state, "Your rent adjusts for the CPI every year on the first day of the year, based on the change over the previous 12 months".

Annual Adjustments Are Costly

For example, let's say your initial lease term is 5 years and your rent for 10,000 square feet is $20 per square foot per year, adjusted annually for the CPI. Those annual rent adjustments total $45,000, even though the CPI the last 5 years only ranged from 1.2% to last year's high of 4.7%, as shown in the table and chart below. Had you negotiated for a 5 year initial term with a CPI adjustment at the end of the 5 years, rather than annual adjustments, you would have saved $45,000.

rent inflation Annually, Adjusted For CPI

How To Forecast The Consumer Price Index: The Producer Price Index

Producer Price Index, 12 Month Change, Not Seasonally Adjusted, From 2011-2022

The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services, and most leases should use the CPI All Urban Consumer group which represents about 93 percent of the total U.S. population. It is based on the expenditures of almost all residents of urban or metropolitan areas, including professionals, the self -employed, the poor, the unemployed, and retired people, as well as urban wage earners and clerical workers. Prices are collected each month in 75 urban areas across the country from about 6,000 homes and approximately 22,000 retail establishments (department stores, supermarkets, hospitals, filling stations, and other types of stores and service establishments).

Before these items are purchased by consumers, they are produced by manufacturers, and their change in price is tracked by the Producer Price Index, which includes over 100,000 items. The Producer Price Index (PPI) measures the average change over time in the selling prices received by domestic producers for their output, and you can use the PPI to forecast the CPI and your increase in rent.

The Latest News Is Alarming

The Bureau of Labor just announced the Producer Price Index increased 11.0 percent from April 2021 to April 2022. The Index is comprised of both goods and services, with producer prices for goods increasing more at 16.3 percent, while prices for services increased 8.1 percent, as shown in the chart below.

Producer Price Index for Final demand components, 12-month percent change, not seasonally adjusted, April 2022

Not all categories increased prices the same, however. Producer prices of goods can be further subcategorized into Foods, Energy and Other, with each component incurring a wide range of price increases. Energy prices topped the list, with gasoline and auto prices increasing 50% over the last 12 months.

Producer Price Index for final demand components, 12-month percent change, not seasonally adjusted, April 2022

The food category can be further subcategorized: vegetables increased 45% but meats increased only 5%. Health and Beauty items only increased 1.4% while securities brokerage and portfolio management prices declined.

Producer Price Index for final demand components, 12-month percent change, not seasonally adjusted, April 2022

The energy category can also be subdivided, as in the chart below showing jet fuel prices increasing 127% and diesel prices increasing 86%, while electric power prices only increased 10%.

Producer Price Index for final demand components, 12-month percent change, not seasonally adjusted, April 2022

In the Other category, Goods Less Food and Energy, the largest price increase was in the Industrial Chemicals subcategory with price increases of 22% while pharmaceuticals only increased 1.6%.

Producer Price Index for final demand components, 12-month percent change, not seasonally adjusted, April 2022


In summary, follow these subcategories of the Producer Price Index to give you an idea of where the Consumer Price Index is going and use this information to negotiate better lease terms for your business. Remember, a lease is an agreement between you and your landlord and can always be amended if you have accurate information and facts to show how it is in the landlord's and tenant's best interest.

For more information on how inflation affects commercial leases, read our articles:

advertising on social media can burn money

OK, Boomer. If you advertise your business name to 845,000 people, would you think one or two people might call you? Not especially, and this article explores why. If you own a business, you have to leverage social media to promote your business and let people know how you can help them; however, not all businesses are helped by advertising on social media. Recently, Louisiana Commerical Realty spent $11,000 to test an advertising campaign using several media channels: Facebook, LinkedIn, Google and the business publication CityBusiness, and the results were surprising.

The Lingo of Advertising on Social Media

First, you will need to know the terminology of social media advertising:

  1. Impressions: how many times the ad was shown, no matter if it was 5 times in the same news story, or at the very bottom of the article.
  2. Unique Clicks: how many times the ad was clicked on for more information by a unique person. Remember, one person can click on ad several times, but that only counts as one unique person.
  3. Total Clicks: total number of times an ad was clicked, without regard to one person with multiple clicks.
  4. Cost Per Click: Total cost for that ad divided by the number of clicks, without regard to one person with multiple clicks.
  5. Click Thru Rate: Clicks divided by impressions. Determines popularity of ads when the click thru rate is compared to several ads in the same media.

The Results

advertising on social media comparison

The chart above compares four different media channels and two variables: the amount spent on an ad and how many unique people clicked on the ad for more information which takes them to a website where we can engage visitors and promote our business so they can call or email us. If the orange line in the chart crosses at the top of the blue column, that means for every $1 spent, we get one unique person that clicks on the ad and then visits the website. Results show Google was the most productive and CityBusiness was a bust, delivering only 178 unique clicks for $4,000 spent. What the numbers don't show is that 178 CityBusiness readers might be more valuable than 4,500 Googlers.

cost per click of advertising on social media

Since different ad campaigns had different budgets, we compared the 'Click Thru Rate' of each in order to reduce the bias of spending more on one media than the other. The chart below shows Google and LinkedIn were tops in visitors who were the most responsive to our ad. But notice even the highest ‘Click Thru Rate’ was Google's 1.07%. That means money spent to reach the other 98.93% was wasted. To be effective, advertising has to either reach lots of people, or a smaller number of very valuable people. The chart also compares the 'Cost Per Click' which was 90 cents for Facebook and Google but $22 for CityBusiness. If your business is trying to connect with local people interested in business, then $22 each may be a bargain.

keywords for advertising commercial property on social media

The most valuable test is the 'Keyword Search' which shows what words Googlers search for that causes them to click on the ad and drives traffic to your website. The surprise is that a small change in wording can drive almost 5 times more traffic to your website. For example, using 'commercial real estate for lease' rather than 'office space for lease' as the search keyword generates a 26% Click Thru Rate versus 5.78%. Of the 74 keywords we tested, only 2 had a Click Thru Rate over 10% and only 14 of 74 scored over 5%.

Does Advertising on Social Media Work?

After spending $11,000 on advertising that displayed 845,000 ads that got the attention of 1,762 people but generated zero emails and zero phone calls, the conclusion is that advertising in social media doesn't work for every type of business, but you don't know until you try it. Run a test first to find out what works best for your business.

Louisiana Commercial Realty

Commercial Real Estate Experts
Robert Hand, MBA, CCIM, SIOR
Licensed in Louisiana & Mississippi
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