(Photo by The Associated Press)
In the immediate aftermath of the historic flood of 2016, the flurry of activity in the multifamily housing sector was reminiscent of the days following Hurricane Katrina, when displaced New Orleanians scooped up every available apartment unit in the area and drove residential home sale prices through the roof.
With an estimated 41.5% of the Capital Region’s housing stock located in areas that were impacted by the record floodwaters, those who lost homes, large employers and the federal government leased up most of the available units in the metro area within a week of the first day of the flood.
“I suspect we’ll be at 100 percent occupancy, if we’re not already,” says Craig Davenport, an appraiser with Cook, Moore and Associates. “It’s going to be very, very difficult to find apartments that haven’t been leased.”
In other respects, however, the current tragedy is very different than Katrina and is not expected to impact other segments of the real estate market as dramatically as it has the multifamily sector. It will undoubtedly cause some ripples, but it won’t upend the local market.
“This is a very different animal than Katrina, when the state’s largest city shut down for several months and everyone came here,” says economist Loren Scott.
In the single-family residential sector—which had reached a 12-year low for available inventory before the flood struck—agents and brokers are already starting to see an uptick in activity, though so far, there’s no evidence of the kind of price gouging that was so widespread after Katrina. Vicki Spurlock of Locations Real Estate had dozens of showings within a few days of the flood and had closed on several listings. All the buyers were flood victims.
“I think this will have a positive impact on high, dry parts of south Baton Rouge,” Spurlock says. “It will help move some properties that haven’t moved already—not that we have much inventory to begin with.”
By contrast, brokers see problems in the commercial sector, particularly in the small strip centers that flooded. Most of those properties are leased to small, local retailers who lost everything in the flood. Many of them don’t have flood insurance.
Still, landlords are legally obligated to repair their properties within 90 days or tenants can cancel their leases. Can those landlords afford to do it? Will their tenants—whose business interruption insurance excludes flooding—be able to hang on for weeks until those repairs are complete?
“It will be interesting in the next 90 days to see who can repair what,” says Branon Pesnell, an agent/broker with Beau Box Commercial Real Estate. “Because if you didn’t have flood insurance it’s a lot of out-of-pocket expenses and some people aren’t going to be able to afford it.”
One area that’s expected to remain relatively unaffected is the office sector. None of the major office users clustered in downtown towers, along Corporate Boulevard or in the United Plaza development flooded. Most office parks in the heart of Baton Rouge were also spared, though smaller ones in Livingston and Ascension parishes were not.
As a result, there hasn’t been a mad dash to lease large chunks of office space as there was post-Katrina, when entire law firms and corporate offices relocated to Baton Rouge. Average occupancy rates in the Capital Region’s office market averaged 85% before the flood, according to Pesnell.
“We don’t expect that to change,” he says.
As for the industrial real estate sector, the picture is mixed. The South Choctaw Drive area in north Baton Rouge took a hit, as entire blocks along Mammoth Avenue flooded. Newer, pricier industrial corridors off Siegen Lane and in Geismar fared much better. Mathew Laborde of Beau Box Commercial Real Estate, who tracks the industrial sector, says it’s still too soon to predict how it will shake out.
In one respect, warehouse space is generally easier to clean after a flood than are other types of properties, so affected industrial buildings should be able to get back into commerce relatively quickly.
“Still, it’s never a good thing when you flood,” Laborde says.
—Stephanie Riegel
