New Orleans 2009
More than four years since Hurricane Katrina and the ensuing levee failures devastated New Orleans, federal dollars and rebuilding has helped cushion the local economy against the national recession. The metro area has lost .9% of its jobs since June, compared to 4.1% lost nationally. The New Orleans area unemployment rose to 7.3% compared to 9.5% nationally.
New Orleans is not, however, immune from the current economic crisis. The housing market has stalled with home sales down 39% and new construction off by 48%. Infrastructure projects have helped offset the drop in new construction. The office market has remained relatively stable in terms of occupancy and rental rates in the CBD and suburbs. No speculative inventory has been added in either market. The adaptive re-use of older, Class B and C buildings has actually reduced available supply.
The more than 1.5 million square feet of industrial space that was absorbed in the months following Katrina by contractor’s utility crews and relief workers has been returned. By the third quarter of 2009, the inventory of industrial space in the metropolitan area had climbed to more than 6.9 million square feet, producing a vacancy rate of more than 13%. The first softening in rental rates and pricing is evident.
The New Orleans economy is heavily dependent on the tourist and hospitality industries. Not surprisingly, the cut back in corporate travel, fewer and smaller meetings and the drop in consumer spending has reduced visitation to the City. The loss of service sector population post-Katrina and higher local labor costs have reduced the profitability of area hotels and restaurants in the face of decreasing revenues. Most industry observers do not expect recovery in this sector until 2012.
The lodging sector has produced unprecedented transaction volume. Since 2006, hospitality investment in the CBD involved 2,894 CBD-FQ hotel rooms, with an aggregate value of $405,000,000. An additional $74,000,000 has been invested in the acquisition of 1,994 storm-damaged rooms resulting in a total post-storm investment of $479,200,000 in the sector.
