Two-and-a-half years after floodwaters surged through New Orleans in the wake of Hurricane Katrina, some 27,000 families are trying to leave government trailers and move into permanent housing. Despite soaring insurance andcosts and a dearth of contractors, progress is evident as developers convert historic office towers into apartments in the city of broken levees.
Of the 2,800 apartment units planned, under way or just completed downtown, most are office conversions, says Ted Featherstone, a DowntownDistrict coordinator. At least $200 million worth of conversions are underway.
New housing is essential to the city's recovery. Firms can't resettle or expand in the Big Easy without adequate housing for employees. Frustrated workers have been living in the government-issued trailers, or commuting from Baton Rouge 80 miles away. And thousands who fled the hurricane haven't returned because they have no place to live.
That's why developers like Marcel Wisznia are creating market-rate apartment units whose monthly rents range from $1,300 to $2,400, depending on unit size and location. Wisznia is converting upper floors of existing buildings to residential use, while securing commercial tenants for ground-floor shops, restaurants and banks.
“Part of the reason I focused on this business plan, building multifamily housing in downtown New Orleans, is that we can create an option where people live out of harm's way — off the ground,” he says. “And the next time there's flooding or a hurricane hits, they're not going to feel as vulnerable.”
After Hurricane Katrina struck in late summer 2006, Wisznia bought the 11-story Maritime Building, built in 1893, for $5.5 million. He plans to create 105 apartment units, with 12,000 sq. ft. of offices and 10,000 sq. ft. of ground-floor retail. Construction starts in April.
Wisznia also plans to start construction in April on the 15-story Saratoga Building, purchased for $2.5 million in 2006. Located in the city's medical district, its 155 apartments will house doctors, nurses and medical students. A small one-bedroom will rent for about $1,300 monthly upon completion in 2009.
Historic tax credits and a 40-year, fixed-rate loan from a private lender guaranteed by the FHA make the conversions financially feasible.
Even before the flood, Wisznia was buying offices. In 2003, he bought the four-story, 50,000 sq. ft. Western Union Telegraph Building for $1.5 million. Built in 1927, it has been converted to Union Lofts, with 33 apartments. A furnished one-bedroom rents for $1,850 per month, and a two-bedroom goes for $2,400.
Conversions make financial sense, since New Orleans has an undersupply of apartments and an oversupply of offices. Office vacancies rose in recent years as Fortune 500 companies deserted the city — a trend that actually preceded the hurricane — leaving only Entergy Corp., a utility that employs about 2,500 people.
In 2007, the apartment vacancy rate stood at 3.5%, compared with 10.4% for offices, according to real estate research firm Reis, offering further evidence of the strong demand for housing.
Wisznia has taken the conversion trend beyond offices, asking the city to let him convert a downtown parking garage that was built in 1950 to 65 apartments. Tenants' cars would be carried on an elevator to their floors, says Wisznia, architect and developer. “You can literally park your car on the floor you live on.”