Baton Rouge real estate market on solid ground as August 2016 flood recovery continues

BIRDEYE VIEW: The Rouzan TND is being built in a hot Baton Rouge residential market that’s showing little signs of cooling. (Photo by Collin Richie)

Aided by relatively strong regional and national economies, the Capital Region continues to see solid gains in real estate as the market recovers from the August 2016 flood, which upended virtually every sector.

Each local expert who presented overviews of their respective sectors at the recent TRENDS in Real Estate seminar expressed optimism for further growth in 2018, while the keynote speaker—real estate economist, author and consultant John Tuccillo—said Baton Rogue should be insulated from any uncertainty in the national economy.

“There are certain cities within the U.S. that tend to be recession-proof—they’re islands of stability in a rapidly changing economy,” Tuccillo said. “Baton Rouge fits that description.”

Here’s an overview of how the local market is performing in five key sectors.

Residential: There just doesn’t seem to be any slowing of the single-family sector. Sales increased 4.4% last year to a record 11,186 homes across the Capital Region, while the average price per square foot rose by about $1 to $112. “That’s the first time we’ve ever been anywhere near that” number of annual home sales, says RE/MAX Professional agent Kyle Petersen. And homes are selling at rapid speed, with the average days on the market declining from 66 to 60 days.

Multifamily: Though 2017 started out strong for local apartment complexes as demand increased due to the 2016 flood, vacancy rates have been on the rise over the past year and are now averaging 8%, higher than historical norms, while average rental rates have fallen about 4%. Rising inventory continues to be a cause for concern, as 3,800 apartment units are expected to be completed this year and another 2,300 are expected to come online by 2020.

Retail: The Amazon effect is having a real impact on the local retail market, but average Baton Rouge area shopping center vacancy rates, at 8.8%, are still below the national average of 10%. The local rate, however, has been inching up in recent years and was as low as 7.5% just three years ago. As brick-and-mortar retailers face increasing competition online, they’re placing more emphasis on engaging and entertaining customers to keep them coming in. “So retail isn’t dead, but brand awareness is key,” says Jonathan Walker of Maestri-Murrell Commercial Real Estate, adding retailers with the best “phygital presence”—a mix of physical and digital sales—“will be the most successful.”

Office: While 2016 was a down year—with occupancy rates falling about four percentage points to roughly 82%—2017 could be characterized as a year of recovery, as the rate held steady. And perhaps even more than in other real estate sectors, location is a big factor in which properties are doing well and which are struggling. Along bustling corridors such as College Drive, Corporate Boulevard, Essen Lane and Bluebonnet Boulevard, office occupancy rates are at about 97.5%, while properties along Florida Boulevard and Airline Highway have average occupancy rates of roughly 70%.

Industrial: Though activity has slowed in recent years, the petrochemical expansion boom that began in 2013 continues to drive the market to new heights. Local average vacancy rates fell to 5.7% last year—the lowest level seen in a decade—while inventory expanded by nearly 2 million square feet to approximately 29.3 million square feet. Average rental rates also continue to rise, particularly on newer facilities, as construction and land prices head further north and supply tightens.

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