Got office space in New Orleans? We researched all the office space leased last year in New Orleans and discovered some real surprises. Let's get started.
Office space for lease in New Orleans totals 2.8 million square feet in 482 listings, with prices ranging from $12/SF NNN to $19.50 Full Service. But are office spaces actually leased at the listed price? This article drills into the New Orleans office market to determine actual lease prices, and we discovered not that much office space has been leased.
In the first seven months of 2024, only 16 office spaces in New Orleans have been leased, totaling 53,866 square feet at an average rate of $18.59 per square foot on 3,367 square feet leased. At this rate, it will take 30 years to lease all the office space. Full Service leases account for 62% of the total and 87% were less than 5,000 square feet in size.
Only 90 office spaces were leased in all of 2023 in New Orleans at an average price of $19.13 per square foot, but that doesn’t tell the whole story. The surprise was that 28% of spaces were under 1,000 square feet and 68% were under 2,500 square feet.
The smaller spaces are usually leased by upstart companies, or those sole proprietors tired of working from home where they suffer leaf blowers, garbage trucks and barking dogs during their conference calls. New companies are a good sign, but are not the economic driver that New Orleans needs to recover from losing corporate headquarters with hundreds of employees.
Full Service leases accounted for 70% of the total, and prices ranged from $16.99 to $22.61, with the smaller spaces leasing over $20/SF but then the spaces from 2,500 to 10,000 square feet were negotiated down in price to a range between $16.99/SF to $17.80/SF. This reduction in rent is because landlords aways want the larger tenant which leads landlords to have less negotiating power and since there are lots of spaces this size to pick from, tenants were able to secure reduced rents.
The surprise is what happens to prices in the office sector over 10,000 square feet: prices increase. There were only 4 spaces leased in all of 2023 over 10,000 SF in size, and prices averaged $17.88/SF.
The larger spaces are always in high rise office towers, such as 1100 Poydras Street, and landlords all quote the same price which gives them negotiating power. All 10 of the office spaces over 5,000 SF leased last year were located in or near downtown New Orleans.
The office market in New Orleans is dead. For such a large city, having only 90 office spaces leased totaling 233,000 square feet in all of last year depicts a picture of doom and gloom. And 2024 is not much better with only 16 office spaces leased totaling 53,866 square feet in the first 7 months. Look for prices to fall as soon as landlords understand rented space at a lower price means a higher present value than a higher price after 2 years of vacancy. After prices reach equilibrium, tenants will come back to New Orleans office spaces and the momentum will shift. Meanwhile, the opportunity will be to buy depressed office property during this down cycle at prices you will never see again, get it leased, then sell at the next peak.
Source: LACDB/Moody’s/Commercial Exchange/Catylist
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Want to know more? Check out our recent article researching all of Louisiana Office Space:
