by Robert Hand, CCIM, MBA, SIOR
Industrial Prices For Lease
Prices for industrial space for lease in the New Orleans/Metairie Metropolitan Statistical Area averaged $5.33 per square foot as of April 1, down 2% from last month and down 2.3% from one year ago. There are 286 industrial properties for sale or lease and, of those, 194 are for lease and 92 for sale. Last month 7 industrial spaces were leased, which is the monthly average for the last year; however, there has been a wide range in the number of transactions over the last 2 years, from 2 to 12 industrial properties leased each month. The average industrial property is on the market for 322 days.
Industrial Prices For Sale
There are 92 industrial properties for sale, exactly the same as one year ago, with a trend toward smaller industrial properties offered for sale, decreasing the average to 34,000 SF from 36,000 SF one year ago. Sale prices for industrial space in the New Orleans/Metairie MSA averaged $40 per square foot as of April 1, down 8.5% from last month, and the supply of industrial property for sale increased 6% or 183,000 square feet last month.
Over the last year, industrial sale prices increased 24% while supply decreased 217,000 square feet, but the chart above offers a more accurate depiction of the industrial market, showing how supply since 2014 increased 42,138 square feet each month ( see the equation of the trendline where slope is m, as in y=mx+b, and slope is the monthly change in SF). Supply of industrial property for sale increased from March 2014 to March 2015 by 2.2 million square feet, even though sale prices during this same period stayed at $36 per square foot. Then from April 2015 to March 2018, supply fell from 3.6 million SF to 3.1 million SF; however prices increased from $36 per SF to $40 per SF.
Supply Has No Effect On Price
As supply increased from 2014 to 2015, price also increased, then price fluctuated wildly from 2015 to 2018, ending up at approximately the same price per square foot. The price and supply relationship defies economic laws, and can be attributed to the unique characteristics of each commercial property, resulting in a wide range of prices despite the same square foot size. Commercial property is non-homogeneous. We find this in all sectors: industrial, retail, office, and this characteristic makes commercial property dramatically different from residential property. Commercial property is valued based on the business which operates from it and is more complex, but this creates opportunity for investors who know the market. Look for future articles on our blog that analyze the markets and give you the information you need to take advantage of opportunities in the commercial real estate market.
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