Available sublease space spiking to a level not seen since pre-Hurricane Katrina indicates recessionary worries are softening the Baton Rouge office market. Branon Pesnell, an associate broker with Beau Box Commercial Real Estate who closely follows the Capital Region office space market, estimates nearly 100,000 square feet has become available in the past 30 days and there’s little to no demand for it. Some of the space was created by Raising Cane’s moving some of its operations to metro Dallas, Wink Companies moving workers from Corporate Boulevard to United Plaza and companies such as Regions Bank consolidating offices.
“I don’t think Baton Rouge has anything wrong with the market,” Pesnell says. “I think the national economy and news has everyone here scared to do anything. People are constricting what they have, trying to save money in a reaction to what they’re hearing in the news.”
More tenants also are asking to renegotiate lower rates and shorter leases, some as short as a year, because of market uncertainties.
Pesnell anticipates rising available space combined with sliding rental rates to cause a shift from a landlord’s market in favor of tenants later this year. He projects up to a 10% decline in rental rates or to pre-Katrina levels if the recession lingers. Pesnell says full market impact will depend on how long the recession lasts and what the federal government does to improve consumer confidence.—Anna Thibodeaux