Jefferson office market could strengthen in coming months – New Orleans CityBusiness (blog)

Though strong, the Jefferson Parish office market remained flat in the past year as the area continued to recover from slumping oil prices. But commercial realtors say there is possible growth on the horizon.

Courtesy jeffparish.net

A recent year-end report by Corporate Realty shows occupancy rates for the Metairie market slightly increased from 92 percent in 2015 to 92.3 percent last year. Rental rates for Class A buildings range from $21 to $26 per square foot, and space for Class B buildings rent from $18 to $22.

Corporate Realty leasing director and broker associate Bruce Sossaman said engineering and exploration companies tied to the oil and gas industry reduced and gave back leased space in 2015 and 2016 to cut costs due to plummeting prices. Sossamon said if the price of oil continues to rise, he expects these same companies to reacquire this space by the third or fourth quarter of this year.

Even if oil prices dont go back up, there shouldnt be any more of a negative impact on the office market, he said.

New leases in the market include an 18,000-square-foot space at One Lakeway Center for its IT department and another 14,000 square feet at the Galleria for Regus executive suites. This is the second Metairie location for Regus, a provider of ready-to-go office spaces. The firm also leases half a floor at the Lakeway Center.

The largest new lease in the past year is Crescent Bank & Trust, which relocated from Elmwood to 2121 Airline Drive, renting 33,000 square feet for back office space. Formerly known as the Cox Communications building, the six-story, 123,000-square-foot property sold to the parent company of insurance firm Burns & Wilcox last year for the firms New Orleans office.

This new tenant pushes the buildings occupancy to more than 90 percent.

Sossamon said there will be no new construction of office buildings with more than 100,000 square feet until rents are high enough to justify it. He added the scarcity of land and rising construction costs make this endeavor unfeasible for developers.

Maria McLellan, an independent commercial broker who represents tenants, said because the Metairie market is so expensive, many companies are moving their operations to St. Charles Parish, particularly St. Rose, where there is more available office and warehouse space.

This is the highest rents have ever been, she said. Its definitely a landlords market.

McLellan said there has been a spillover effect into Elmwood, making real estate more valuable in the area. This in turn has made it impractical for developers to buy land and to build new warehouses and offices.

McLellans clients are now building out this space and leasing it as flex space, which is a conversion from warehouse to office space.

Parking is free, and single-story building rents are much lower, she said. You can also finish out the open space how you want it.

Commercial broker Robert Hand, president of Louisiana Commercial Realty, said the strong Metairie office market is due in large part to the high prices in downtown New Orleans. Rental rates for Class A buildings in the Central Business District range from $16 to $20 per square foot.

These prices do not include parking and operating costs; whereas, leases for Class A space in Metairie typically include these amenities. Hand said there is approximately 1 million square feet of vacant office space in the CBD, and 80 percent of that is full-floor space. Hand said this trend has not affected Metairie yet.

You just dont have those kind of companies that require that much space coming into the city, he said.

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Jefferson office market could strengthen in coming months - New Orleans CityBusiness (blog)