New Orleans Commercial Real Estate: Retail Lease Rate Is Discounted 13%

In New Orleans commercial real estate, the average listed lease rate is $13.98/sf but actual lease rate was $12.18/sf. That’s a discount of 13% from the list price. Sale prices were discounted 24% however, with the average list price of $85.60/sf but actual sale price of $56.60/sf.

The number of retail properties for sale and lease has been fairly steady over the last 12 months in the New Orleans, Louisiana, MSA, which covers New Orleans, Kenner and Metairie. There are currently 157 retail properties for sale totaling 1.7 million square feet, down from an average the last 12 months of 167 properties totaling 1.8 million square feet, and 351 properties for lease totaling 1.9 million square feet, compared to a 12 month average of 350 properties totaling 2 million square feet. The average property was on the market for 159 days, down from the 12 month average of 261 days, but the chart below comparing lease rates to days on the market shows no correlation in price and how quickly commercial retail space leases or sells. For the buyer or tenant, the price depends on the feasibility of the project and each one is different. For the seller or landlord, the price depends on the “opportunity cost” or the alternative use for the money which influences the willingness to accept a lower price. Since selling a property involves more money than leases, being able to use that money now makes it worth offering a larger discount.

Chart One-Days On The Market & Lease Rates For New Orleans MSA Retail Space

Retail Days On Market & Lease Rates

A new trend is the decline in the number of new listings and transactions, as shown in the chart below for the period ending February 2012. Last March, there were 450 new listings and transactions, but last month there were approximately 50. This lack of new supply and should keep prices firm at these levels.

Chart Two-New Listings & Completed Transactions For New Orleans MSA Retail Space

source: lacdb.com for New Orleans MSA, Retail Sector a/o 03/26/12

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