"The increases in rental rates are due strictly to increasedoperating costs and haven't really flowed through to the bottomline," Richard P. Stone, vice president and director of commercialsales and leasing for locally based NAI/Latter & Blum Inc.,explains to GlobeSt.com. "Any increase in the next year will be dueto real market conditions." He is one of the featured speakers atthe University of New Orleans' annual real estate forecast, slatedfor April 3 in the Hilton New Orleans Riverside at Two Poydras St.in the Downtown.


Stone's researchshows rents are at their highest points since 1999. Downtown classA rents are $16.50 per sf to $19.50 per sf while Metairie's rentsare pushing $24 per sf. Class B office space is getting $15 per sfto $20 per sf, with few large blocks available to lease.
The Downtown's 9.2-million-sf class A inventory includes the492,000-sf Dominion Tower at 1450 Poydras St., which the state isnegotiating to acquire. It's uncertain if the shuttered high risewill be repaired and returned, in part, to the lease market or ifthe state will keep it all to itself. Pull out Dominion Tower andthe CBD's 8.5 million sf of class A office space is pushing 92%occupancy while its 1.2 million sf of class B space is 89% filled.In the suburbs, the story's much the same: two million sf in threeclass A complexes with 91.5% occupancy and three million sf ofclass B, with the East Bank's occupancy at 91% and the West Bank'sat more than 95%. "It's getting tight," Stone emphasizes.
There are three major class A buildings under construction, butthey're build-to-suits on St. Tammany Parish's North Shore: SanRamon, CA-based Chevron Corp., 300,000 sf; LLOG Exploration Co.'s100,000-sf headquarters building; and Baton Rouge, LA-headquarteredWink Cos. LLC's engineering and architectural divisions' 60,000-sfoffice. To be determined is the fate of Chevron's 351,920-sf officebuilding at 932 Gravier St. in the CBD.
Stone says Katrina had a negligible effect on the office marketalthough the aftermath did cause the Downtown to lose 1.7 millionsf of class B space to residential uses. "We didn't see the stormas an event to create addition demand. Our concern was we may losemajor tenants due to contraction," he says, "but there were nomajor defections because of the storm. In fact, we're seeing acontinued emergence of the North Shore market as a viable place todo business."
Stone says the steady gains in office fundamentals have actuallycreated a balanced market. "There are some deals floating aroundout there. We expect, barring some unforeseen event, that we willexperience a strengthening." He's projecting another 100,000 sf ofpositive absorption for the coming year, which would push class Aoccupancy above 92%.
The last large office lease was signed by the McGlinchey Staffordlaw firm, which is exiting an owned building in the warehousedistrict for 68,000 sf in Pan-American Life Center at 601 PoydrasSt. The 682,087-sf high rise was 75% when the San Diego-basedEquastone bought it in January 2007; today, it's 90%filled.

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