A major makeover under way at an aging downtown high-rise is an important sign of the times, local real estate sources say. A conversion of the 16-story former office tower at 100 Elk Place is creating about 100 new apartments that will be decked out in high-demand amenities. The project includes retail and restaurant space on the ground floor and seven floors of parking.
Local real estate analysts say the apartments, by developer Mike Wampold, will fill a need. “Apartment occupancy in the area is running at 95 percent or higher right now,” says real estate consultant Wade Ragas.
He says the growing appeal of living downtown and in areas close to the Mississippi River in New Orleans has pushed the rental market and some other housing into record territory.
“People are voting with their money, and they’re voting on more than one property type,” he says, noting the surging demand for housing on the East Bank of the Mississippi River in New Orleans during the past 18 months.
Ragas says the trend is clear not only in apartments but also in the market for condominiums and single-family homes. Demand is coming from several sectors, ranging from young professionals to second-home shoppers to retirees looking for well-sized luxury digs, he says.
One factor that has made the apartment market tight is that financing terms for single-family home purchases have become more stringent in the years since the nation experienced a financial collapse.
Unable to manage the 20-percent down payments required on houses that appeal to them, many younger shoppers have turned to the rental market and snapped up much of the inventory that developers added during the rebuilding years after Hurricane Katrina.
The tightening supply of apartments has pushed rental rates upward, but even rising rents don’t appear to be squelching demand. And that seems to bode well for the new apartments at 100 Elk Place, where rental rates, with parking, will be in the vicinity of $2,000 a month.
Meanwhile, the market for single-family homes continues to heat up, from the Carrollton area all the way to the Marigny. “In some areas brokers say they’re getting four or five offers on a property and the bidding is above the asking price,” Ragas says.
One housing segment that has seen little expansion in recent years but may be poised for growth is condominiums. Shaun Talbot, of Talbot Realty Group, points out that the bulk of the residential development that’s occurred in New Orleans since Hurricane Katrina have been apartments, not just because of strong demand but also because rental properties are among the few projects that lenders have been willing to finance.
During the national recession, and particularly after the Wall Street implosion, lenders shied away from the risk they associated with condos. Several big projects planned in New Orleans, including one proposed by Donald Trump, died on the vine before reaching construction stage.
Talbot says the market may be at a turning point. “Last fall the condo inventory started to drop,” he says. “We were putting units under contract, and we weren’t seeing the normal level of new units coming on the market to take their place.”
The decreasing supply coupled with rising demand is energizing prices. Talbot cites as an example a Julia Street condo that recently went up for sale. Even though it was a small unit in need of updating, it drew five offers in two days and sold above the asking price.
“People are getting into bidding wars in the luxury home market, and we’re seeing it with condominiums,” Talbot says.
Many people with means, including those shopping for second homes and retirees looking to simplify their lifestyles while retaining plenty of amenities, have been waiting a long time for the right property to come along because so few new condos have been built.
Elie Khoury’s conversion of the old Krauss Department Store on Canal Street into condos is one of the few additions to local condo inventory since Katrina. These days, when a premium condo does become available, it may never be advertised to the public, Talbot says.
When word of an opening gets out among owners of high-end properties such as those at One River Place or 625 St. Charles Ave., buyers anxious to move up to a larger unit or one with a better view will jump at the opportunity.
Whereas local luxury condo prices in the past have topped out at a little above $500 per square foot, Talbot says some recent sales have pushed past $600, making the total price on a larger unit $2 million or higher. “That’s what we’re starting to see because of the lack of available properties,” he says.
In time, the action may renew investors’ faith in the future of condominiums and developers may tiptoe in to build more. Meanwhile, residential real estate watchers are focused on a single project taking shape in the Warehouse District, where developer Susan Brennan is creating the city’s first new luxury condominiums in years.
The midrise building at 425 Notre Dame St. will include close to 40 units ranging from one to four bedrooms, with a host of amenities including a 24-hour doorman, a backup generator system, concierge services, a conference room, work spaces and a rooftop dog park.
For luxury shoppers willing to pony up $500 to $600 per square foot for a new condo, 425 Notre Dame St. is “the only game in town,” Talbot says.