MARKET SNAPSHOT: Multifamily Construction Takes Off in New Orleans, Aided by Boosts in Tourism and Job Growth
By Philip Shea, Associate Editor
New Orleans—The Big Easy witnessed solid economic recovery and population growth in 2011, as 10,500 new jobs were added and the overall population grew by 2 percent. The local unemployment rate currently stands at 7 percent, 130 bps below the national level.
Unlike in many parts of the country, construction on new multifamily projects is picking up in New Orleans. According to Hendricks & Partners, over 3,300 new apartment units are underway, planned or proposed, and around 900 of these units are expected to enter their first lease periods in the next two years.
Yet even with this new capital, Hendricks & Partners projects overall vacancy levels to continue to decrease as demand maintains an edge over supply. The city has made considerably strides with regard to vacancy over the past few years, and the rate is expected to drop from 6.1 percent in 2012 to 4.9 percent in 2013.
Employment growth in the city is as strong as it was in the mid-1990s, forecasted at 3 percent for 2012 and 3.5 percent for 2013. This job expansion is due in large part to boosts in the tourism industry. Cruise ship passenger count is expected to top 1 million this year, placing the city among the top 10 cruise markets in the United States, according to Hendricks & Partners. Passenger count at Armstrong International Airport was also up 6 percent in 2011.
To further accommodate this increase in tourism, the city is proceeding with a planned three-phase streetcar expansion, with the first phase beginning service in 2012. The Superdome will also see significant renovation as $200 million is being allocated to prepare the historic stadium for Super Bowl XLVII in 2013.
Nucor, one of the country’s largest steel producers, is taking advantage of the region’s favorable financial climate and will be investing up to $3.4 billion in the city’s infrastructure, creating 1,250 new jobs in the process. Blade Dynamics, a wind turbine manufacturer, is doing similarly by opening a new operations facility that could create up to 1,600 jobs. In 2011, Forbes ranked New Orleans the nation’s No. 1 “Biggest Brain Magnet,” meaning that it is and will continue to be a highly attractive area for college graduates.
The average price per unit increased dramatically between 2010 and 2011, from $27,000 to $48,000. However, this is still nowhere near its pre-recession high of $78,000, indicating there is still significant room for increases in sales volume.
The overall market rent for 2011 was $880 a month and is projected to reach $929 a month by late 2013. The New Orleans Historic Area remains the area with the highest rent, coming in at $1,180 a month in 2011. The area east of downtown and near the I-10/I-610 junction saw the lowest rents, coming in at $724 a month. This area also had an exceptionally high vacancy rate of 15 percent, although this is down from 22.6 percent in 2010.
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