THE MARKETS REACT

NEW ORLEANS / SOUTH LOUISIANA

Charles H. Peterson , CRE

THE MARKET

                    

2009 MARKETNEW ORLEANS METROPOLITAN AREA

2009 MARKETNEW ORLEANS METROPOLITAN AREA

CBD Suburban TOTAL

Class A 8,796,000 SF

2,046,000 SF

10,842,000 SF

Class B 852,000 SF 1,710,000 SF

2,562,000 SF

TOTAL 9,648,000 SF

3,756,000 SF

13,404,000 SF

Sources: The Sossaman Report Corporate Realty, Inc.

ANALYSIS OF MAJOR TENANTSNEW ORLEANS CBD

ENERGY/RESOURCES 35%LEGAL 29%BANKING/FINANCE 17%GOVERNMENT 12%OTHER 7%

Source: Corporate Realty, Inc.

CBD

Class A 3,840,000 SF

Class B 2,853,000 SF

TOTAL 6,693,000 SF

2009 MARKETBATON ROUGE METROPOLITAN AREA

Source: Baton Rouge Trends

2009 MARKETNEW ORLEANS METROPOLITAN AREA

PRE-KATRINANEW ORLEANS METROPOLITAN AREA

Steady market… no growth No significant new commercial office building since 1991 Slight negative absorption of 175,000 SF between 2001

and mid-2005 Occupancy stayed flat

High 80% range for CBD Class ALow 90% range for Suburban Class A and Class B70% range for CBD Class B

Rates were generally flat for the same period (2001 to mid-2005) $15.50 - $16.00/SF for CBD Class A buildings $20.00 - $21.00/SF for Suburban Class A buildings

Slow loss of energy industry offset by slow local

growth and building conversions

PRE-KATRINABATON ROUGE METROPOLITAN AREA

Modest but steady growth Law Firms State government related firms Engineering firms serving petrochemical industry

Class A buildings 94% occupancy $18.75 - $19.00/SF rates

Class B buildings 75% - 80% occupancy range $13.00 - $14.00/SF rates

NEW ORLEANS shut down Most office properties were closed for at least a month People could not return Many people went to Baton Rouge

- Bought houses

- Set up offices

BATON ROUGE filled up Almost overnight, office space in Baton Rouge went to

virtually 100% occupancy

HURRICANE KATRINAAUGUST 29, 2005

2009 MARKETNEW ORLEANS METROPOLITAN AREA

POST-KATRINANEW ORLEANS METROPOLITAN AREA

Rapid absorption of office space 161,000 SF in 4th quarter of 2005 Another 307,000 SF in first half of 2006 Total absorption of 353,000 SF over first year

Rates jumped approximately $1.00/SF Biggest occupancy jump was Class B CBD Five buildings were removed from the market

One Class A (487,000 SF) Four Class B (1,063,000 SF)

Vacant space filled immediately “Panic” leasing in some cases Rates did not jump as notably

Class A Buildings / occupancy has lasted Class B Buildings / occupancy has softened

Occupancy also declined because 720,000 SF of new Class A

space has been brought to market

POST-KATRINABATON ROUGE METROPOLITAN AREA

MAJOR SALES NEW ORLEANS METROPOLITAN AREA

$/S F

$56

$77

$60$65

$90

$75$85

$79 $82

$103

$70

Nov.2002

Dec.2002

S ep.2003

Nov.2003

Nov.2003

Dec.2004

May2005

J ul.2005

Aug .2005

Dec.2006

Nov.2008

S ep.2009

SUMMARYSHORT-TERM EFFECTS

NEW ORLEANS Market tightened with removal

of five buildings(1,550,000 SF) Loss of tenancy:

Dominion Resources

to Houston (153,000 SF) Chevron to North Shore

(300,000 SF) Gains of tenancy:

Recovery-related

engineering, legal and

financial firms Government Agencies

BATON ROUGE Filled market

SUMMARYLONG-TERM EXPECTATIONS

NEW ORLEANS Stable occupancy and rates Former DominionTower to be

put back into commerce

(487,000 SF) substantially leased removes an eyesore helps keep Saints in town

for long-term Continued development on

North Shore of Lake

Pontchartrain

BATON ROUGE Continued modest growth

Government related firms Engineering Firms

Recovery related Petrochemical related

Best Economy in Louisiana State Government Petrochemical Industry Education Center

Both markets are returning to normal