The slump in global oil prices is starting to cause a slowdown in what has been a strong local industrial market for the past several years, according to data presented this morning at the Greater Baton Rouge Association of Realtors’ annual Real Estate Trends seminar.
In 2015, some 440,000 square feet of industrial space was absorbed, which is a “healthy” amount, according to Mathew Laborde of Beau Box Commercial Real Estate. Vacancy rates, meanwhile, held steady at 7.6% from the previous year.
“2015 was one of the most stable growth years in the Baton Rouge industrial market in a long time,” Laborde said.
Still, the 440,000 square feet of industrial space added to the market last year was only about one-third of the 1.2 million square feet absorbed in 2014. Continued depressed oil prices and the resulting slowdown in industrial activity is the primary reason, according to Laborde and co-presenter Scott Guidry of Mike Falgoust & Associates.
“Permits for new construction dropped significantly in the second half of the year,” Guidry said.
As in the past, the South Choctaw industrial corridor in north Baton Rouge is the submarket with the highest vacancy rates and the most persistent vacancies. Laborde believes this presents opportunities.
“There is opportunity in north Baton Rouge because there is not a lack of demand for affordable functional space,” he said. “The problem is a lot of the spaces are older so they’re either not affordable or functional. It’s an opportunity for investors, developers, creative problem solvers.”
Among the strongest areas of the market are Livingston Parish, which enjoyed growth in 2015 due in large part to the development of Epic Piping’s new fabrication facility, and Ascension Parish.
“The highway 30 corridor remains the preferred location for industrial companies servicing industry,” Guidry said.
Looking to the future, Guidry and Laborde said it’s hard to predict when oil prices will rebound but it’s important to remember they will. More immediately of concern is the state’s ever-changing tax code, and the new liabilities that have been placed on business and industry in order to plug the state’s budget deficit.
“Temporary taxes on industrial use and equipment and the removal of exemptions is changing what industry headquarters think as far as their investment capital for the future,” Guidry said. “The concern is that these temporary things may be long term or permanent.”
—Stephanie Riegel
