As of this week, the Water Campus has three buildings open and is soon beginning work on another multi-tenant office building—the first of several planned for the development.
Given the current Baton Rouge office market trends is toward suburban garden-style offices—rather than multi-tenant downtown towers—local real estate agents expect ongoing construction at the Water Campus to contribute to a softer market downtown.
“I think it’s really good to have all those industries and companies that are working on coastal restoration together. From that standpoint it’s fabulous,” says Brandon Pesnell, of Houston-based Transwestern Commercial Services. “It’s had a negative impact on the market as a whole.”
Pesnell says he still hasn’t filled the space at One American Place left behind by the Water Institute of the Gulf, which moved to a flagship building at the Water Campus. The Coastal Protection and Restoration Authority, another Water Campus tenant, also moved from an existing downtown office building—the Riverside North Tower—but the leasing agent couldn’t be reached for comment on the space.
Pesnell doesn’t see the slow market speeding up much in the next six to 12 months. A downturn in the oil industry is still hurting the local office, he says, and because there aren’t many new tenants moving to Baton Rouge, vacancies—especially downtown—are hard to fill.
“The downtown market is pretty soft right now because of all the new competing office buildings like IBM and the Water Campus,” Carmen Austin, agent/broker at Saurage Rotenberg Commercial Real Estate, said late last month.
Mathew Laborde, founder and CEO of Elifin Realty, says he expects the Water Campus and its new office space to impact downtown, but not the rest of the market. Leasing activity has been strong in the garden-style offices, he says, partly because Baton Rouge companies increasingly want convenient parking and easier access to homes and interstates.
“I think all the sectors have been building more space,” Laborde says. “With the garden style, we’ve been absorbing it. The multi-tenant, multi-story space, we’re not.”
John Davies, president and CEO of the Baton Rouge Area Foundation, which is behind the Water Campus, calls the project an “international play” to solve what is perhaps the state’s most pressing challenge—coastal erosion. BRAF has been in talks with organizations from outside the state.
“We’re not doing this for economic reasons,” he says, adding the goal is to build a “water cooler” around the sphere of coastal research.
The uptick in oil prices in recent months should help boost the industry and eventually backfill some of the vacant office space, Pesnell says, but a massive oil spike may not be in the offing in the near future.
For downtown, the softening of the market is more acute, as developments like II City Plaza and the Water Campus in the past decade have pulled from a relatively narrow tenant base.
“The Water Campus isn’t pulling anybody from the suburbs,” Pesnell says.
