B.R. Trends 2012: Real estate pros predict better times ahead
For the most part, real estate markets in the Baton Rouge area have stabilized after a rough few years, with positive signs cropping up in several sectors, according to speakers at today's annual Baton Rouge Trends real estate seminar, hosted by the Commercial Investment Division of the Greater Baton Rouge Association of Realtors.
"The bleeding has stopped," says Don Stern, a realtor who spoke about residential trends.
State privatization is bringing major new tenants into the office market, while low natural gas prices are driving industrial expansions, creating cautious optimism for landlords in the industrial real estate sector.
Apartment rental rates are flat, although a slight uptick is possible in 2012.
"We are starting to see some money come back into the market," says Brian Andrews of Andrews Commercial Real Estate Services. "Right now, apartments are getting the most attention out there in the finance world."
Andrews says interest rates are "damn low," although some banks can't make any new real estate loans now, thanks to regulatory pressures. He says in 2011 banks were under pressure to get their credit quality under control but that in 2012 they will be under earnings pressure, meaning lenders are going to be hungry.
Here's a snapshot of real estate trends in the Greater Baton Rouge area, as presented today, by sector:
Single-family residential: The residential market appears to have stabilized. The number of home sales in East Baton Rouge Parish increased 3.73% from March 2011 to February 2012, the first year-over-year increase since Hurricane Katrina. However, the average sales price dropped 1.25%.
Ascension Parish experienced a similar phenomenon, as sales increased 9.55% while the average price slipped 1.52%. In Livingston Parish, sales increased 4.49% while the average price declined 5.23%.
Livingston continued to have the most affordable real estate among the three most populous parishes, with an average sales price of $151,283, compared to $201,664 in East Baton Rouge and $199,203 in Ascension. The number of condo and townhouse sales throughout the region continued to fall, but only by 3.18%, compared to declines of well over 20% in the three previous years.
Multifamily residential: Average rents were flat from 2010 to 2011 for the first time in recent memory, although a slight uptick is possible in 2012. Vacancy rates seem to be returning to pre-Katrina historical norms. A fall/winter 2011-2012 report by LSU and Cook, Moore & Associates found a 6.84% marketwide vacancy rate. Mortgage financing is harder to get than in years past, allowing apartment building owners to retain their tenants.
Industrial: The petrochemical sector continues to lead the region's recovery from the recession, and oil and natural gas exploration has been increasing around the state. But until there is sustained growth, businesses likely will remain reluctant to enter into long-term leases. The vacancy rate was essentially flat from 2010 to 2011, dropping to 14.36% from 15.03%, but at least vacancies didn't increase, as they had done the year before. Land sales were practically nonexistent, as some sellers still expect to maintain post-Katrina prices.
Office: The first quarter of 2011 seemed to be the beginning of a slowly improving market for office building owners, until leasing activity came to a halt late in the first quarter and throughout the second. Momentum picked up again in late 2011 and early 2012, as state privatization sent several new tenants into the market. But some area brokers remain skeptical; many people seem to be "shopping and not buying," and buyers and tenants alike are carefully weighing their options. There were a few more distressed sales than usual in 2011, as lenders have been more aggressive in taking back troubled properties and trying to rid themselves of bad debt. The occupancy rate was about 83% in March 2012, virtually unchanged from last year. Local engineering firms are no longer hemorrhaging jobs, which is good news for office landlords.
Retail: The approximate vacancy rate is 9.23%, the lowest it has been since 2007 and down from 12% in spring 2009. About 43% of the reported vacant space is in "community centers," which typically provide clothing, hardware, appliances, convenience goods, and personal services and are often anchored by a small department or discount store. Shopping centers built before 1985 tend to have the lowest rental rates and the most vacant space.
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