The Certified Commercial Investment Member (CCIM) designation is the premier recognition earned by the top 10 % of commercial real estate agents. With 13,000 members in 55 chapters, both in the United States and in 30 countries, the organization provides training in the most complex strategies of commercial real estate. The organization is the PhD of real estate, taking several years to complete and culminating in a 6 hour final exam on every aspect of commercial real estate.
CCIM recently interviewed Louisiana Commercial Realty on the state of the New Orleans commercial market in 2023:
Actually, the New Orleans commercial real estate market has been evolving since the 1970’s. When the oil economy was strong back in the 60’s and 70’s, there were lots of new jobs in the oil industry which created demand for office space over the next decade. In the 1980's, downtown New Orleans saw vibrant new construction of Class A office towers and towns near the Gulf of Mexico witnessed the explosion of industrial space. Our biggest building was One Shell Square, a 51 story, 700 foot tall, office tower.
Then the oil industry started regionalizing and New Orleans downsized while Houston upsized. There hasn’t been a large office tower built since then in New Orleans and even today we have high vacancy rates in Class A office towers. The smart thing city leaders did in the 1980’s was build a large convention center so we were able to compete with tourism based economies like Las Vegas. Basically, we swapped $150,000 petroleum engineers for $35,000 waiters and waitresses, but today we are one of the smaller markets that can feed, board and entertain 25,000 dentists having a national convention. Even though the tourism market has ebbed and flowed, we have the nation’s best restaurants and the perfect work force for tourism, so the hotel and restaurant market has been vibrant despite the Covid hiccup.
You have to be an expert at what drives each market and know what your clients want. You have to be creative. We negotiated one of the largest office leases a while back but the tenant wasn’t an office user. They were a hotel. We figured out how to market 3 floors of vacant office space in a soft market to a hotel franchisee. And last year, one of my competitors, SRSA, figured out how to transition a boring shopping center’s vacant Sears store into a major hospital in a $50 million dollar investment.
Your firm emphasizes its use of new technology and data as a way to gain a competitive edge. How important is it for your business to stay on the cutting edge of tech?
It is vital and I wish we would have caught on to it earlier. There is lots of technology out there for the real estate industry. Wal-Mart, Target and Amazon have it but not mom and pop businesses in small towns. That’s where CCIM can help. We can bring well-thought out analysis to small and mid-sized businesses so they make smarter real estate decisions, using the same technology that the big businesses have.
We heard about a property you handle in New Orleans. How did you leverage technology to help you in this transaction and what insights did you and your clients gain?
Every marketing plan and marketing presentation I do now has CCIM's demographic data jam-packed in it, and clients love the technology because it gives them valuable information they cannot find anywhere else. We can show them what businesses would be successful at any address. That is vital information and many property owners do not know that data exists and do not have access to it. But as a CCIM, we have access to the data that can help client sand tenants make smart real estate decisions.
We had one listing in New Orleans East, which is an unloved area of New Orleans, but there are 30,000 residents within 5 minutes and 60,000 residents within a 10 minute drive time. We used the CCIM database of consumer spending produced by research firm ESRI to show the property owner and also potential tenants that residents spend $20 million annually on food but food businesses only sell $14 million, so $6 million is purchased outside the area by residents. There's more: $5 million is spent on sporting goods by residents but there is no sporting goods store. There's more: $3.7 million is spent on jewelry but there is no jewelry store. From that demographic insight, we know what potential tenants to target and businesses know what the market share would be and can more accurately forecast sales.
With such a broad scope of work across property sectors and a long successful resume in the industry, what would be your advice to other CRE pros looking to grow their business this year?
Be an expert and help your clients by educating them on the market and how to make smart real estate decisions.
On a personal note, your bio mentions a gig you had selling dictionaries door-to-door to pay your way through college. What lessons did you learn back then that you still use today? What would you tell young folks curious about commercial real estate to prepare them for a career in this field?
Selling dictionaries door-to-door paid for my college but required long hours and taught us to work smart. We all wanted to get that award for working 100 hours a week. I got the award but after a week, I wanted to work smarter so I tried using referrals. I would ask my prospect if they knew the neighbor across the street. They would always say yes but we don’t talk much. I would share the names of the families I had sold to. I would say, well the Smiths across the street bought the full dictionary set, the Thomases next door bought the educational set, the Joneses at the corner bought the book on new math, and soon they got the idea that they might be missing out. Today, you can target certain industries and use media like LinkedIn to connect with people you can help. You have to work smarter. (more…)
Whether you rent office space in a Class A office tower, warehouse space to store inventory or retail space for your coffee shop, your lease probably includes terms that are not good for you but that you agreed to anyway. This article exposes common lease mistakes and explains that unless your lease language is clear on every detail, even small mistakes can be very costly.
Here is an example of the lease language used by $2.6 billion market cap Regus PLC in 3,000 locations:
If this agreement is for a term of more than 12 months, the Provider will increase the monthly office fee on each anniversary of the start date. This increase will be by the local Consumer Price Index or such other broadly equivalent index where a consumer price index is not available locally.
This Regus lease language leaves lots of room for dispute because the consumer price index has several ways of being calculated. The CPI index is produced by the Bureau of Labor Statistics, under the United States Department of Labor and the four types of consumer price indices are:
All Urban Consumers (Current)-Consists of all urban households in Metropolitan Statistical Areas (MSAs) and in urban places of 2,500 inhabitants or more. Nonfarm consumers living in rural areas within MSAs are included, but the index excludes rural nonmetropolitan consumers and the military and the institutional population.
Urban Wage Earners and Clerical Workers (Current)-Consists of clerical workers, sales workers, protective and other service workers, laborers, or construction workers. More than one-half of the consumer income has to be earned from these occupations, and at least one of the members must be employed for 37 weeks or more in an eligible occupation.
All Urban Consumers (Chained)-The urban consumer population is deemed by many as a better measure of the general public because 90% of the country’s population lives in urban areas. Using chained CPI means the rate at which Social Security benefits tick up would be slower, because it reflects substitutions consumers would make in response to rising prices of certain items. It utilizes a basket of goods and services that are measured changes from month to month; much like a daisy chain. If the cost of a certain form of transportation goes up, people might switch to another kind and this kind of “substitution” is part of what is factored into chained CPI.
Average Price Data– Calculated for specific items such as, household fuel, motor fuel, and food items. Average prices are best used to measure the price level in a particular month, not to measure price change over time.
The most common CPI Index is the All Urban Consumers Index, but it has two methods used to calculate the numbers: one uses a base period 1982-1984 as 100, and the other method uses a base period of 1967 as 100. Most leases make the mistake of not being clear about which index is used. In addition, the data can be seasonally adjusted or not seasonally adjusted (which is released faster).
Here is another example; this language for a medical property that makes the CPI data source very clear:
Consumer Price Index: It is further understood and agreed by and between Lessor and Lessee that, commencing with the first day of the second year of lease, the monthly rental as set forth above will be adjusted upwards at the beginning of the second lease year, and every year thereafter until expiration or termination of the lease using the all urban consumers (CPl-U) United States City Average, All Items, (1967=100) published by the Bureau of Labor Statistics, United States Department of Labor (referred to as "Consumer Price Index").
| Year | CPI | Rent Annually |
| 0 | 3.00% | $100,000 |
| 1 | 3.00% | $103,000 |
| 2 | 3.00% | $106,090 |
| 3 | 3.00% | $109,273 |
| 4 | 3.00% | $112,551 |
| 5 | 3.00% | $115,927 |
Always compound if you are the landlord and never compound if you are the tenant. When adjusting for the CPI, it makes a difference if you add the inflation rate for each year rather than multiply the rate by the previous year. Assume a 5 year lease renewal where the CPI was 3% each year for the previous 5 years. Some landlords multiply 5 years times 3% to get 15% for the increase. For a large property with rent income of $100,000 annually, the adjusted rent would be $115,000; however, if the lease is written so the CPI is compounded, meaning each new year is applied toward the previous year’s CPI, the result is rent of $115,927 in year 5. Your lease renewal should spell out how the CPI is calculated.
Our economy today is driven by a different wage/price spiral, due to Covid shortages because almost all of our goods are made in China so when they stopped manufacturing, the shortage caused inflation. Inflation hurts landlords and savers. Most leases build in a fixed rate adjustment in addition to a CPI adjustment because the challenge for landlords is that the CPI since 2000 has averaged 2.5% and 2.4% since 2010. Even 3.6% CPI increase the last 5 years doesn’t keep up with skyrocketing medical care increases.
One strategy that benefits landlords is to include lease language stating the rent adjusts based on the CPI or a fixed rate, whichever is higher. The 30 year table shows how a 4 percent increase versus a 3 percent increase in net rents annually can increase the value of property by 10 times the initial year lease income. Your lease should include language with adjustments based on the CPI but also compared to a fixed rate, whichever is higher. This example in the table shows, assuming current rent income of $100,000, if the higher CPI or a fixed rate difference was just 1 percent, that at an 8% cap rate adds $1,020,168 more market value to the property over a 30 year lifetime.
In conclusion, make sure your lease language details how your rent is adjusted. You can design your table data at the Bureau of Labor website and, if you need help, their phone number is shown on the data release. If you call the number on the press release, the analyst who produced the CPI report will answer any questions. If your property is in outlier data cities such as Detroit, Houston or New Orleans, you can even produce a local Consumer Price Index. Remember to make sure your lease is clear about what CPI is used, how it is calculated and whether you compound your rate, which is why many tenants and landlords hire an expert to advise them. Remember, lease mistakes can be costly.
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Using Technology To Make Better Real Estate DecisionsThe days are long gone when you can just put up a sign and wait for phone calls to sell or find tenants for commercial property in Louisiana. This article dives into LACDB, Loopnet and CREXI to determine the best database that agents utilize to find tenants and buyers, and why the database with the lowest Louisiana members has the most listings.
The pie chart above shows the 6 common ways, called marketing channels, that agents can sell or lease commercial property, and the highest estimate is that 55% of prospects are found using commercial databases. In Louisiana there are 3 commercial databases, each having its own reach and costs ranging from $1,000 to $30,000 annually. Here is a deep dive into each database and its strengths.
LACDB Database Provides Market Statistics
The Louisiana Commercial Database (LACDB.com) reaches 1,500 commercial agent members in Louisiana who post 8,539 listings, with 4,007 properties for sale and 4,532 for lease. The database also has 314 commercial listings in Mississippi, with 187 for sale and 127 for lease. There are free email blasts to promote properties to agents, limited to one daily but unlimited blasts to clients. LACDB uses Catylist as their software provider plus you have access to a national database called Commercial Exchange which gives you wider distribution. Costs for subscribing to the database are $720 annually and agents can add SiteLink to have their listings automatically populate their website for an additional $800 annually. Agents do not have to be a member of the National Association of Realtors before they can subscribe to the database which reaches mostly Louisiana and Mississippi agents and brokers because subscriptions are the least expensive. LACDB offers market statistics showing the average sale or lease price and days on the market in each of the major categories: office, industrial, retail, shopping centers, hospitality and multi-family.
MCREX Database Provides Market Statistics
Mississippi Commercial Real Estate Exchange has 106 members who are commercial real estate agents and brokers, with 1,284 listings divided into 680 for sale and 604 for lease. The cost is $720 annually, up from $600, to subscribe to the database which allows you to post listings but it is owned by the Mississippi Association of Realtors, so membership in the National Association of Realtors and Mississippi Association of Realtors is required, increasing the cost an additional $454 annually.
Loopnet Has 368 Spaces For Lease In Louisiana
Loopnet.com has 1,100,000 properties listed by 300,000 commercial agents nationwide. The marketplace gets 11,000,000 unique visitors monthly. For its massive size, Loopnet.com only has 656 listings for sale and 368 for lease in Louisiana, and in Mississippi has 788 for lease and 726 for lease.
This database brings in tenants and investors both locally and nationwide because Loopnet was purchased by CoStar recently, giving it national exposure; however, not everyone can see a listing on Loopnet. Agents can post listings without paying to be a Loopnet subscriber, but those listings are marked as Basic which are not shown to anyone except paid CoStar subscribers and very few agents subscribe to CoStar because they require everyone licensed under a Broker name to pay. It gets very expensive and just not feasible for most listings.
Loopnet offers 4 platforms: Basic (free), Silver ($5,000 annually for 4 listings and 10 listings for $8,400 annually), Gold ($8,400 annually for 4 listings), Platinum ($14,000 annually for 4 listings) and Diamond ($30,000 annually for 7 listings). The Diamond level offers:
CREXI Database Has Almost 10,000 Listings In Louisiana & Mississippi
CREXI.com has 1 million commercial real estate agent subscribers but an average 2 million buyers, brokers, and tenants each month exploring over $2 trillion of property value nationwide. Crexi has 2,367 properties in Mississippi for sale and 1,212 for lease, and 2,771 for sale in Louisiana and 3,587 for sale. Crexi Pro cost $4,800 annually for unlimited listings.
The Highest Number Of Listings Are Posted By The Database With The Fewest Agents
In utilizing a database to reach tenants and commercial agents directly, not all databases are the same. Most local agents who can bring tenants and buyers to a listing subscribe to LACDB.com since it is the most affordable. LACDB only reaches 1,500 agents so, in the chart above, their agent count column is barely visible when compared to the other databases; however, those are the local agents who often have qualified tenants and buyers as their clients and are seriously looking for property in Louisiana and Mississippi.
CREXI is a fairly new database but already has almost as many Louisiana and Mississippi listings as LACDB plus provides a national reach with 1,000,000 agents and investors as subscribers. Loopnet recently merged with CoStar and anything other than a Basic listing gets Louisiana and Mississippi property in front of prospective tenants and buyers nationally. If your property is above average in size, you may not find tenants or buyers easily because the Louisiana/Mississippi economy no longer drives large companies to the area. If you need to reach larger markets such as Houston, Dallas, Nashville or Miami, the Crexi database is for you.
There are 22,544 real estate agent stories in the naked city. This is one of them. We've virtually hired James Franciscus to narrate the story and give insight to the Louisiana real estate industry, ranging from what city has the most agents to how long have most agents been licensed and how was the industry affected by Covid.
The oldest living Louisiana real estate agent was licensed in 1950, and only 37 joined during the next 20 years. Licensing then took off, doubled in 1970, then tripled by 1971, just in time for the nastiest recession ever from 1973 to 1975 when OPEC made oil prices increase four-fold, unemployment rose from 4% to 9%, and mortgage rates rose from 7% to 18% the next 8 years.
The first case of Covid was January 20, 2020, in Washington state, but real estate licensing in Louisiana skyrocketed by 6700 people, or 30 percent, during the next two years. Covid was good to real estate agent licensing. The Louisiana Real Estate Commission received $1.7 million from license fees, plus if you wanted to post your listings you had to join the National Association of Realtors, which Louisiana agents paid $1.3 million, and if you wanted to post commercial listings, you had to pay $720 to LACDB or MLS listing fees of $1,270 which included $59 to lobby politicians.
Louisiana real estate agents live all over the U.S., with 50 real estate agents in California to 138 agents in Florida, totaling 1,403 Louisiana licensed agents that do not live in Louisiana.
The 16,185 Louisiana licensees the Real Estate Commission calls salespeople are managed by 2,815 brokers in 238 branches. There are still 81 time share developers with Louisiana real estate licenses.
Over 50 percent of Louisiana real estate licensees live in 3 cities: New Orleans, Baton Rouge and Metairie.
Latter & Blum is the biggest, of course. Real estate companies are called Supervisors by the Real Estate Commission, and Latter & Blum controls 7.8 percent of the market. The top 2 percent of real estate companies control 50 percent of the market.
