It’s been six months since global engineering and design firm Stantec announced it was moving into a 14,000-square-foot space on the fourth floor of 1200 Brickyard Lane, the 94,000-square-foot building under construction at the Water Campus. But with a softening downtown office market and the high costs associated with constructing a new building, few other businesses are signing up for office space.
Leasing agents say they’re planning to land one tenant by the end of March, and they’re in talks with another possible lessee who may sign on within three months. However, it’s unlikely those would fill the remaining 80,000-square-feet of space, let alone several other multi-tenant office buildings tentatively planned for the development.
“It’s hard to get people to bear the price for a new building, but that’s a problem anybody would have,” says Donna Whalen Little of Corporate Realty, which is handling leasing for the building. “Conceptually, it’s hard to pre-lease property when you have nothing to show them yet.”
Rental rates for the Water Campus office space are also on the high-end, coming out at $30 per square foot, though Little says that includes all expenses as well as a tenant improvement allowance so that businesses can build out their spaces.
“The space is brand-new and beautiful, but with that comes a cost,” says Jonann Stutzmann, an agent with NAI/Latter & Blum who handles properties mostly in the Acadian/College corridor. “Whether the Baton Rouge market can support a rate structure that high, that’s where the issue comes in.”
Additionally contributing to the slow pickup is the fact that the Water Campus is essentially serving two office markets: larger-scale, research-based businesses, and smaller startups with less than a handful of employees. Those in the latter camp would more likely reserve a spot in Waterworking, the campus’ coworking space.
Commercial Properties Realty Trust spokeswoman Tina Rance says Waterworking is about 40% occupied, by a mix of small businesses that hold monthly memberships and day-pass users, such as LSU students looking for a place to study or law firms holding interviews.
However, Rance says it’s good for regular occupancy to hover around the 40% to 50% mark, as they want to be able to accommodate an overflow of employees from The Water Institute and Coastal Protection and Restoration Authority. If those employees eventually need full use of the space, Rance says Waterworking would move into 1200 Brickyard Lane.
“We don’t want to do anything permanent with the space, and we tried to make it flexible,” Rance says. “We want to market it more when we have another office building ready.”
Check out a recent Business Report story predicting the fate of the local Class A office market, which has seen an over-supply downtown.