Over the past decade, Louisiana has been on the receiving end of a growing list of accolades when it comes to its business environment. Notably, Forbes magazine rated the state as “America’s New Frontier for Business”, while others such as Area Development and Site Selection magazines have recognized the state for key features ranging from its labor force to low taxes.

Louisiana Business Continues to Grow

The thriving business climate has not occurred by chance. Louisiana has taken a very strategic approach to providing aggressive incentives to fuel business expansion statewide in both traditional and emerging industries. A strong presence in advanced manufacturing, automotive, aerospace and energy along with infrastructure for moving goods that includes access to the Panama Canal via the Port of South Louisiana have set up Louisiana as a strong industrial market with both light and heavy industrial users.

The state also has been very targeted in its efforts to grow white collar jobs with an emphasis on technology, financial services and entertainment. For example, the software development industry is thriving in Louisiana thanks to creative perks such as its Digital Interactive Media and Software Development Incentive along with investments the state has made in higher education to grow its talent base in those areas. According to the Louisiana Economic Development (LED) agency, those incentives have helped software and technology companies such as Century Link, IBM and GE among others to open new development centers, expand with new divisions and relocate central operations.

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Incentives are helping to fuel business expansion and job growth in key cities statewide. For example, DXC Technology announced in November that it had selected New Orleans as the site of its new 2,000-job Digital Transformation Center with roughly 170,000 sf of leased office space in the CBD. According to LED, New Orleans beat out 30 other cities that were competing for the project.

More Jobs, More Office Space

In New Orleans, business growth has helped bring more stability to the office sector. Generally, Class A buildings tend to perform well, with vacancies hovering at about 12%, while Class B and C buildings have struggled with higher vacancies. Another factor that has helped the office market is the conversion of underutilized office buildings to apartments, condos and hotels that are in high demand. In fact, the CBD has “shrunk” from a peak inventory of about 16.5 million sf in 1990 to its current size of about 11 million sf, according to New Orleans-based Corporate Realty Inc.

Downtown New Orleans is benefiting from the urbanization trend sweeping the country. More than 10 million people visit Downtown New Orleans every year to enjoy the arts, culture, food, music and nightlife the city offers, and those same reasons are attracting new investment and a growing residential population. According to the New Orleans Downtown Development District, New Orleans has seen over $7 billion in new investment since 2005. Currently, there are 6,775 apartments and condos in Downtown with 1,700 more units underway, planned or proposed.

One major project under construction is The Odeon, a 29-story apartment building in the South Market District that will add 271 apartments. The Domain Companies broke ground last year on what will be one of the tallest buildings in the CBD. According to Curbed, developer Kailas Companies also has announced plans to build a Hard Rock Hotel New Orleans and Residences in the CBD near the French Quarter. The 18-story building is expected to include 350 hotel rooms and 62 residential units.

Reonomy data shows that property sales have been steady over the past two years with about $1.5 billion in annual transactions occurring in both 2016 and 2017. Multifamily accounted for the most active sector last year with about $680 million in properties changing hands. Overall, sales have gotten off to a slower start this year with a combined total of about $300 million in assets trading in the first half.

Louisiana’s economic development efforts have helped to create a more stable economy with unemployment that is currently at 4.6% and a net gain of about 45,000 jobs over the past 12 months through May, according to the Bureau of Labor Statistics.

Louisiana Growth: Beyond New Orleans

Growth also has spread out to other cities around the state. In fact, property sales in the capital city of Baton Rouge outpaced that of New Orleans last year with $2.1 billion in total transactions, according to Reonomy. Vacant land sales accounted for the majority of that volume at $1.4 billion, which speaks to the development activity underway in that market. For example, Downtown Baton Rouge is seeing residential growth with projects such as the Lofts @6C, a 142-unit apartment complex that is scheduled for completion in summer 2019.  

Baton Rouge is known for key industries such as energy production and advanced manufacturing along with emerging sectors that include software development, film production and digital media. Forbes also named Baton Rouge as one of the top 10 mid-sized cities in the country for information jobs, and the city has succeeded in landing major financial services and tech employers such as IBM. The company opened its new IBM Technology Center in Downtown Baton Rouge in 2015, which brought 800 new jobs to the city.

Louisiana is a state that tends to fly under the radar for most national and institutional investors. Even New Orleans is considered by many to be a tertiary market. That can be good news for location and regional players that are looking for more favorable pricing and yields with less competition. Another hurdle for investors in Louisiana is getting comfortable with hurricane risk, especially after the devastating effects of Hurricane Katrina in 2005 that reportedly caused more than $100 billion in damage statewide. The severity of the natural disasters in the region stresses the importance of conducting thorough due diligence in assessing opportunities and carefully weighing the risk-adjusted returns.

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