The New Orleans-Metairie MSA experienced a 14.7% year-over-year increase from 2022 to 2023 in office property tax increases. The increase ranks No. 1 in the nation in the 2024 Office Property Expense Series – “Real Estate Taxes” report by TreppCRE. The New Orleans-Metairie MSA also ranks No. 1 in TreppCRE’s “Insurance Costs” report as the local area experienced a 37% increase in office property insurance costs. The New York-based real estate data and technology firm tracks income and expense data on 200,000 commercial real estate properties. The report highlights the top 10 markets with the largest increases and provides case studies of notable properties, examining factors such as post-pandemic economic recovery efforts, property value reassessments, and budget pressures. On the office property real estate taxes side, New Orleans is followed by next-door neighbor, No. 2 San Antonio-New Braunfels with a 14.4% increase; and then No. 3 Boston-Cambridge-Newton at 14%; No. 4 Detroit-Warren-Dearborn at 12.9%; and No. 5 Birmingham-Hoover at 12.9%. In the top 10 office market list by largest Y-o-Y increase in insurance costs, New Orleans-Metairie’s 37% increase is followed by No. 2 Louisville/Jefferson County at 34.2%; No. 3 Miami-Fort Lauderdale-West Palm Beach at 30.6%; No. 4 Baltimore-Columbia-Towson at 27.3%; and No. 5 Virginia Beach-Norfolk-Newsport at 26.6%. Poydras St. Office Buildings Show Highest Property Tax Increases The TreppCRE report says that many of the loans contributing to the New Orleans-Metairie MSA increase in tax expenses for office buildings were backed by Poydras St. office buildings. The First Bank & Trust Tower at 909 Poydras St. experienced a 28% increase in real estate taxes, jumping to $1.55 per square foot in 2023, compared to $1.21 per square foot in 2022. Hancock Whitney Center at 701 Poydras St. experienced a 23% increase in real estate taxes, posting a $1.38 per square foot in taxes in 2022, compared to $1.70 per square foot in taxes in 2023. In total, the real estate taxes assessed on the property increased to $2.1 million from the prior year’s $1.7 million. Pan-American Life Center at 601 Poydras St. experienced a 22% increase from $1.37 per square foot in 2022 to $1.67 per square foot in 2023, meaning the real estate taxes assessed on the property was $1,118,900 last year, compared to $917,900 in 2022. The TreppCRE report adds that ongoing infrastructure improvements and construction activity around Poydras St. have had a direct impact on commercial real estate tax expenses. The 2023 reassessment of properties in New Orleans, which occurs every four years, revealed significant increases in property values, which often directly translates into higher assessments and thus property tax bills for property owners. Publicly funded improvements to infrastructure surrounding office properties present a double-edged sword for investors, says the TreppCRE report. “On one hand, enhanced infrastructure typically makes commercial properties more attractive and accessible, likely leading to increased property values in the area. However, higher property values often lead to higher property tax assessments, which, in turn, increase the tax burden on commercial real estate owners,” the report says. “While owners may benefit from higher property values when selling or refinancing at a higher appraised value, the immediate increase in property taxes can be detrimental to their bottom line.” One Canal Place Experiences Highest Insurance Increase One Canal Place at 365 Canal St. saw the largest Y-o-Y increase in property insurance costs, rising 113% to $2.69 per square foot in 2023 from $1.26 per square foot in 2022, and from $0.99 per square foot in 2021. 2400 Veterans Memorial Blvd. in Kenner saw an 80% increase in insurance costs from 2022 to 2023. The costs at the property have increased to $3.27 per square foot in 2023 from $1.81 per square foot in 2022, and $0.91 per square foot in 2021. “Office property insurance costs in New Orleans have skyrocketed due to several interrelated factors,” says the TreppCRE report. “One of the primary drivers is the region’s high vulnerability to damage from natural disasters, particularly hurricanes, floods, and storm surges. … The catastrophic damage from events such as Hurricane Katrina in 2005 and Hurricane Ida in 2021 have resulted in substantial insurance claims by property owners, prompting insurers to reassess their risk models and increase premiums to manage future projected liabilities.” The report continues that the costs of rebuilding, repairing, and replacing buildings, combined with widespread cumulative inflation, supply chain disruptions, increases in construction materials and labor prices, have all led to higher insurance and appraisal valuations, leading insurers to adjust their pricing to cover these higher potential payout liabilities. “The general risk environment in New Orleans, including its extensive flood zones, coastal erosion, and land subsidence necessitates more comprehensive and expensive insurance coverage,” says the TreppCRE report. “Insurers factor in these risks as they model future returns and potential liabilities, often resulting in higher premiums for property owners.”