Despite facing pressures from the rise of e-commerce and the prolonged recovery from the August floods, the greater Baton Rouge real estate market appears to be heading in a positive direction this year, local experts told a packed house at the annual Trends in Baton Rouge real estate seminar on Wednesday.
Four of the region’s five market sectors—residential, office, industrial and retail—are poised to stabilize and grow stronger. And while the rise of online shopping has hastened the demise of traditional retailers across the country, the local retail sector remains relatively healthy, according to broker Jonathan Walker of Maestri-Murrell Commercial Real Estate.
“We’re a pretty good market,” he declared.
Shopping center vacancy rates in the Baton Rouge area are averaging 8.8%, below the national average of 10%. Still, Walker noted the local vacancy rate has inched up from 7.5% in 2015 as people increasingly turn to online shopping.
Retailers hoping to survive will have to adopt new ways to appeal to millennial shoppers, who grew up in the digital age and value experience and convenience. His suggestion: develop a “phygital” presence by doing business in both traditional brick-and-mortar stores and online.
As for the office sector, more than 200,000 square feet of inventory is already available and more is expected to come on line, said Ty Gose of NAI/Latter & Blum. The occupancy rate is relatively healthy at 85.6% and rental rates are averaging more than $22 per square foot— better than in most of Baton Rouge’s peer cities in the South.
The industrial sector is poised to see a potentially record-setting year, according to Ryan Greene of NAI/Latter & Blum. The vacancy rate fell below 6% in 2017—a 10-year low and the second-lowest rate ever recorded. He attributes the sector’s health to the low natural gas prices fueling petrochemical expansion projects.
And finally, the greater Baton Rouge housing market continues to show stability after being upended by the August 2016 flood. Kyle Petersen of RE/MAX noted residential sales increased 4.4% last year over 2016 figures, with nearly 12,000 homes sold.
“That’s the first time we’ve ever been anywhere near that,” he said.
The only sector with a sobering outlook is the market for multifamily developments, which started off strong in 2017 but has since seen the average vacancy rate climb to 8% while average rental rates have declined 4%, according to Craig Davenport with Cook, Moore, Davenport and Associates.
The slowdown comes as more than 3,800 new units have already been completed this year or will be by the end of 2018. Another 2,300 more units are scheduled for completion by 2020. With so much inventory, experts doubt all those developments will materialize, Davenport said.