New Orleans real estate outlook: signs of stress emerging | Business News

Marcus Campo, president and CEO of Nola Build Construction and Design, which does residential construction, said insurance premiums have more than doubled for some homeowners, which is pricing them out of the market.

“In some income brackets, when their costs increase from $200 to $500 per month, that could be catastrophic,” he said.

To an extent, the problem is bigger than New Orleans, according to Melissa Simeon of Fontenelle and Goodreau Insurance, who noted that the cost of reinsurance — the coverage insurance companies buy to protect themselves — continues to rise. That is then passed on to rate payers at the local level.

“There have been 112 separate $1 billion-plus disasters in the US since 2015,” she said. “So this is making things even more difficult.”

Population decline

In the commercial real estate sector, inflation and supply chain disruptions are driving up costs, according to Leon Audibert, a broker with Property One. The cost of building a new warehouse, for example, has increased to more than $100 per square foot, compared to around $70 per square foot before the pandemic. As a result, lease rates have more than doubled to $12 per square foot versus $6 per square foot in 2020.

“Local and regional tenants are feeling that,” Audibert said. “But we haven’t had a lot of pushback from national tenants.”

As for the office market, occupancy is averaging around 80{b5e4caabb46945dac267f6fa1789e0b2b1831cce91f79b27f72a0de22e4bb018} for class A office towers downtown and in Metairie, and lease rates remain strong, according to Andera Huseman, a broker with Corporate Realty.

People gathered in downtown New Orleans

People gather in downtown New Orleans near the Superdome on Monday, Nov. 13, 2017.

But that’s in part because no new office towers have been built in New Orleans in 30 years. And more recently, many older buildings have been converted to apartments or hotels.

“Other big cities have an oversupply,” Huseman said. “We have the same old building we’ve had for 30 years plus we’ve done a lot of adaptive reuse.”

Huseman and others said the area has suffered from a drop in its population relative to other cities and states, which directly and negatively affected the real estate sector.