With fewer developments coming online in 2020, those looking to rent should begin putting an absorption dent in the oversupply that’s been plaguing the Baton Rouge market, ending a several-year pattern of declining occupancy rates. But make no mistake: It’s still going to be a renter’s market.
Baton Rouge already has 4,600 vacant units on the market—nearly double what the area historically absorbs over a 12-month cycle. Not included in the vacant tally are the 2,429 units that have been proposed so far for 2020, the bulk of which are being constructed in Gonzales, Addis, Denham Springs and other suburban areas.
“If we continue to pour new units in a market that isn’t growing at the pace of population, then we’re going to get a hangover,” says Wesley Moore, an appraiser with Cook, Moore & Associates. “But there’s possibly going to be a window when we’re going to absorb some of the slack we’ve been creating.”
While a construction slowdown will enable a bump in occupancy rates, the oversupply problem will continue, adds Moore, as long as new units—regardless of pace—come on the market.
Much of the oversupply problem can be traced to LSU-area student housing. While 9,000 beds have been added to that market since 2010, particularly along Burbank Drive and Ben Hur Road, LSU’s enrollment has gone up by only 3,300 students—nearly half of whom study online—over the same period.
Yet more developments, including the revamped, 230-unit Ion Baton Rouge complex on West Chimes Street, formerly known as The Standard and later as University House, will hit the market this year. Unless LSU sees a significant increase in student enrollment, it will take longer for demand to catch up with supply for this submarket than others—and it won’t happen in 2020.
Where that catch-up might begin this year is in the high-end submarket. But luxury developments like The Heron—which has had to ramp up the concessions it offers residents since recently joining the downtown mix—reveal a softening market.
“We definitely don’t need to add more units,” says Moore.
Don’t expect to see many affordable housing units pop up, either. Now that it’s more difficult for developers to win tax credits and other incentives offered through the competitive process, comparatively fewer units have been built locally in the past five years. Of the 2,300 units built in Baton Rouge in 2019, just 400 were classified as affordable housing.
Instead, Moore is bullish on demand rising among construction workers in Ascension Parish—a wager, he admits, is largely contingent upon economist Loren Scott’s prediction that industrial construction will pick up again in 2020, reviving a lull that’s cost the greater Baton Rouge area some 1,100 construction jobs over a 12-month run.