New Orleans is considered to be one of the most unique cities in the world. From the French Quarter and the food to the history, there is no place quite like it. New Orleans is also one of the oldest cities in America, founded in the early 1700s due to its strategic location at the mouth of the Mississippi River. New Orleans was deemed so important that the Louisiana Purchase was made for the primary purpose of securing the city. Today, the city has more than 35,000 buildings on the National Register of Historic Places.
Over the past 15
years, the New Orleans MSA has been at the epicenter of two major crises:
Hurricane Katrina and the BP Oil Spill. Hurricane Katrina hit the Louisiana
coast as a Category 3 storm in late August 2005, and the New Orleans
metropolitan area was in its path. The storm surge and levee failure wreaked
havoc on the area. In turn, the MSA lost approximately 25 percent of the
population immediately thereafter due to related deaths and a housing shortage.
Only now, more than 10 years later, has the New Orleans MSA population
recovered to levels near the 1.3 million residents recorded in 2005.
As the MSA was
recovering from Hurricane Katrina, the BP oil spill occurred in April 2010. Considered
the largest accidental marine oil spill in the history of the petroleum
industry, the oil spill devastated marine and wildlife habitats, impacted the
fishing industry, and decreased demand for tourism along the entire Gulf Coast.
incidents had an adverse impact on the economy as a whole, the self-storage
industry was impacted in both positive and negative ways. After Hurricane
Katrina, damage reduced the supply of facilities; therefore, the occupancy of
the open facilities increased dramatically. In the years following the storm,
developers built new facilities to meet the ongoing demand for storage during
the rebuilding process. While the BP Oil Spill did not impact the supply of
storage, the overall decline in the economy impacted the demand for storage.
Today, the New
Orleans MSA continues on its path to recovery. The Port of New Orleans remains
an important facet of the economy, along with aerospace manufacturing. Lower oil
prices have, however, diminished the outlook for New Orleans’s energy-related
industries. Tourism has remained strong over the past few years. In fact,
tourism spending hit an all-time high in 2015.
According to the 2017 Self-Storage Almanac, the New
Orleans-Metairie, LA Metro Area has 155 self-storage facilities that total
approximately 8.1 million square feet of storage space. Based on a 2016
population of over 1.2 million, the New Orleans MSA has a supply of 6.43 square
feet of storage per person. This per-person supply figure is below the
Louisiana state figure of 9.28 square feet of storage per person.
The supply of
facilities in the New Orleans market varies from mom-and-pop facilities to converted
buildings to purpose-built facilities. Product also ranges from small single-story
structures with few amenities to multi-story projects located near the central
The majority of the
national brands are located in the market, including Public Storage, Extra
Space Storage, CubeSmart, Safeguard, and U-Haul. However, all the facilities
owned or managed by the national brands are located in or near New Orleans
proper, south of Lake Pontchartrain (also known as the East Bank and West Bank,
in relation to the Mississippi River). The supply of self-storage facilities on
the North Shore (north of Lake Pontchartrain) is dominated by regional brands
such as A Storage Inn, Liberty Storage, and Omni Storage. The supply of new
storage facilities in the market is limited; therefore, the risk of
overbuilding appears to be minimal.
Due to the long
history of the city and the lack of available land near the central business
district, New Orleans features some interesting storage conversions:
Extra Space Storage – 5330 Jefferson Highway, Harahan Stor-All – 4601 Chef Menteur Highway, New Orleans Stor-All – 4700 Tchoupitoulas St., New Orleans
Former Coca-Cola bottling plant Former department store Former cotton mill built in the 1850s
Demand for storage
in the New Orleans market comes from a variety of sources, including
residential, industrial, and commercial. Specific to this market, New Orleans
benefits from a number of colleges and universities in the area. Demand is
generated from Tulane University, Loyola University, University of New Orleans,
and Dillard University. These universities are all located in the East Bank,
which includes the City of New Orleans. Similarly, the percentage of renters
within the city limits is as high as 70 percent, which also contributes to the demand
above-average population growth figures, as compared to the state and country, the
New Orleans MSA is projected to have flat population growth over the next five
years. The MSA’s average household income is slightly greater than the average
of the state ($70,321 and $65,357, respectively). Therefore, we conclude that
demand for self-storage is expected to remain stable as there are no apparent
factors in the near future that would have a significant impact.
While it may be at
the top of people’s “Must Visit” list, New Orleans is viewed by investors as a
secondary investment market. In terms of its population, New Orleans is the 44th
largest metropolitan area in the United States. Therefore, sales and
development in the market are limited. CoStar reports less than 10 sales in
2016, of which some properties were part of a larger portfolio of properties.
In terms of
investing within the state of Louisiana, the New Orleans market certainly is at
the forefront, as rental rates are the highest in the state, according to the
third quarter 2016 figures from the 2017
Self-Storage Almanac. For instance, the average price of a 10-by-10
non-climate-controlled unit in the MSA is $135 versus the state average of $85.
Similarly, the average price of a 10-by-10 climate-controlled unit in the MSA
is $159 versus the state average of $123. While New Orleans remains the
strongest market in the State of Louisiana, it is not considered a national
primary investment market.
Just like the city
itself, the New Orleans self-storage market is unique. While it is primarily
viewed as a secondary market due to its smaller size, the supply of facilities
south of Lake Pontchartrain is dominated by national brands. New supply in the
market does not appear to be a major factor, and the demographics indicate
stable demand for storage in the near term.
Kate Spencer, MAI, is a managing director and practice group leader of self-storage valuation and advisory at Cushman & Wakefield.