The market for office and industrial space in Baton Rouge remains strong, though growth in the office sector will likely not be as robust in 2015 as it has been the last two years, according to experts who spoke at today’s Trends in Real Estate seminar.
“We have a slight increase in occupancy, and rental rates are on the rise,” said Branon Pesnell of Beau Box Commercial Real Estate, who presented data on the local office market. “We’ve seen four years of growth. It will be slightly lower this year.”
That predicted slowdown in growth is due to the decline in oil prices, which have caused engineering and oil service industry firms to put expansions on hold. Another contributing factor: the lack of large space of 10,000 square feet or more.
“There’s not a lot of supply out there,” Pesnell said.
That said, occupancy rates for the first quarter of 2015 increased to 89.3%, up from 88.3% in 2014 and 86.4% in 2013. The Essen Lane/Bluebonnet Boulevard corridor saw the highest rates at 96.6%, while downtown climbed to 92% and Acadian/College to 91%. The Florida/Airline corridor was the lowest at 70.9%.
Average rental rates also increased slightly during the same period. Downtown commanded the highest rates at an average of $19.64 per square foot for both class A and class B buildings. The Florida/Airline corridor had the lowest rates, with an average of $13.29 per square foot for A and B buildings.
While lower oil prices may hamper the office market somewhat, the area’s industrial market continues to boom. Net absorption—the net change in occupied inventory from one year to the next—topped 1.2 million square feet in 2014, a year-over-year increase of 85%.
“That’s a huge number,” said Mathew Laborde of Beau Box Commercial Real Estate, who presented the industrial data today. “We haven’t seen anything like that since Katrina.”
In 2014, the total inventory of industrial space in East Baton Rouge, West Baton Rouge, Livingston and Ascension parishes increased by 3%, while vacant space decreased by 14% and occupied space increased by 5%. Growth was strongest in the Industriplex area in southeast Baton Rouge, while it was weakest in north Baton Rouge.
“All of the vacancies are concentrated in the north Baton Rouge submarket,” Laborde said. “The buildings are a half century old, and they’re less desirable. They need work. Then you’ve got the crime, which is a factor, and the problem with persistent vacancies.”
Laborde and others predict that in 2015, vacancy rates in the industrial sector will likely remain flat at around 7.5%. Expect continued interest from service companies entering the market, even though oil prices are not expected to return to the levels of $100 per barrel. Also, look for new announcements of more than 25,000-square-foot build-to-suit facilities as a result.
—Stephanie Riegel
