Looking to cash in on the real estate boom around the two impending downtown/Mid-City hospitals? Realtors and developers say those who haven’t made a move yet need to act fast or run the risk of missing the party.
According to Paul Richard, a commercial real estate agent with Latter & Blum, before work began on the new Veterans Administration hospital and University Medical Center, the city of New Orleans commissioned studies to analyze the economic effects of similar medical district projects in other cities. The results showed that projects of this magnitude fuel tremendous demand for housing, medical offices and some retail.
“We’ve already seen price appreciation,” Richard says. “Especially on Tulane Avenue and Canal Street.”
However, Richard points out that it won’t all be easy sailing for developers. He says demand for property will eventually outstrip supply, and developers have to work around constraints like height limitations that come with building or renovating in an area with historic codes.
Even before construction on the two hospitals began, some of the surrounding neighborhoods were already on the rise.
Apartment complexes on Tulane Avenue built after Hurricane Katrina have attracted young professionals choosing city life over suburbia, while Mid-City has been boosted by a streetcar line and historic properties that offer the charm of many Uptown houses without the higher price tags.
Cres Gardner, vice president of Beau Box Commercial Real Estate, says the more than 4,000 people expected to find work at the two hospitals will make an ideal market for many types of small businesses.
“We’re seeing a fair amount of interest,” he says. “Even when (the hospitals) were just a rumor, property values went up significantly.”
Gardner says good bets for the area include restaurants and small-format dollar stores, and adds that once the hospitals open, the demand for medical office space will jump.
Adrian Pappalardo, president of the Gulf South Real Estate Information Network, anticipates that the influx of health care workers will create a demand for small service businesses – places where workers can take care of chores on their lunch breaks. He says, however, that some property owners are sitting pat for a while, waiting to see what kind of zoning changes the City Council might make for the district.
Apartments, Condos Feel the Heat
Leasing agents at existing apartment and condo complexes report that their phones started ringing as soon as hospital construction began taking off.
Daphne Moore at the Falstaff Apartments on Gravier Street says she has definitely received calls from people considering a move to New Orleans to work at the medical centers. Occupancy already runs about 95 percent for the Falstaff’s 147 units.
The Domain Companies, a real estate investment and development firm with offices in New York and New Orleans, has done well with its entries into the multi-family housing market here to date and is betting big on the future.
The Preserve and Crescent Club, both on Tulane Avenue, have been very successful, says Domain spokesperson Megan McNeill. The hospital construction was one factor in the decision to build the complexes, she says, but the company also took into account the way Tulane Avenue connects the commercial activity of the CBD to Mid-City, along with the availability of developable sites.
The Paramount, the first building in Domain’s new venture, South Market District, will open with one- and two-bedroom apartments this fall, while the second, The Beacon, is breaking ground. Together they will comprise a five block footprint just off the intersection of Loyola and Poydras set to include over 700 luxury apartments and 1,300 garage parking spaces. A mixed-use, transit-oriented development, South Market District will also boast 200,000 square feet of retail space, including a 40,000-square-foot full-service gourmet grocer.
While many new offerings will fall under the “luxury” category, some developers near the medical center are taking advantage of the tax breaks that come with mixed-income complexes and restoring historic buildings.
HRI Properties is about 50 percent finished with its 225 Baronne development, a renovation of a building left vacant after Hurricane Katrina. Due to finish in the first-quarter of 2015, the building’s 192 apartments will be 80 percent market rate, with the remainder earmarked for moderate-income housing.
Josh Collen, vice president of development with HRI, says that while work on 225 Baronne didn’t begin until after the hospitals, his project may have been possible without the medical complex.
“Both the Central Business District and the Warehouse District have become busy, 24/7 neighborhoods,” Collen says, noting that projects like 225 Baronne will capture those who can’t find apartments in either the Warehouse District or French Quarter.
The complex will also feature a 188-room hotel and parking.
Mark Madderra, principal with Madderra & Cazelot commercial mortgage firm in Metairie, notes that since mixed-income developments have done well in other parts of the city, he expects them to be equally successful around the medical center, especially those with an affordable-housing component.
Single Homes
Real estate experts are predicting that single-family dwellings will also be in demand around the VA and UMC hospitals.
Lesley Poche, an agent with Keller Williams Realty New Orleans and a property developer, has already felt the bump. Four years ago, she bought and renovated a 1,000-square-foot house on Banks Street. She sold it in six months and then bought and renovated another, which sold quicker. Next, she built two new construction properties on vacant lots in the Mid-City area. Both sold on the first day they were listed, for full asking price.
Poche says buyers are opting for the Mid-City area because of its plentiful restaurant and retail offerings and the fact that it is viewed as an up-and-coming part of town. When the hospitals come online, growth is expected to ramp up even further.
“With the hospital jobs, there will be too many people to be handled by existing construction,” Poche says. “Our rental market is very tight and expensive, and choices are limited.”
Longtime Realtor Dorian Bennett agrees. A broker with Dorian Bennett Sotheby’s International Realty, he says he’s already talked with doctors coming to town that are taking short-term rentals while they look for suitable housing.
While some physicians with school age children will opt for the North Shore, Bennett says that improvement in New Orleans schools have been a factor in the increase in the interest he sees in property near the hospitals. He adds that for those with security concerns, English Turn will likely be appealing.
Mark Bolin, broker/owner of New Orleans Relocation, LLC, Realtors, says that even neighborhoods not directly surrounding the new medical complex are getting a boost. Last month Bolin sold the largest home in Treme to a “savvy investor” who he said knew that a project as big as the medical center would affect property values positively.
Bolin says that for those that experience sticker shock in areas like Uptown, Treme and other neighborhoods near the medical center will be alluring, but he warns that prices won’t stay low forever.
While several years ago a buyer could scoop up a foreclosure for as little as $20,000, last year one listed for $45,000 eventually sold at $90,000.
“The word is out,” Bolin says.
