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Nearly 6,000 units are under construction or planned through 2016. But emerging trends suggest the market can handle it.
On the surface, it might appear the Baton Rouge multifamily market is in danger of being overbuilt, especially when you consider that more than 2,100 new units are currently under construction and some 3,700 more are planned for later this year and 2016. But absorption and occupancy rates suggest the market can more than handle the demand.
That’s partly due to the general growth and health of the local economy. But it’s also the result of a national trend with some troubling economic implications: The number of renters in this country is at an all-time high while the number of homeowners is at an all-time low.
Over the past two decades, the nation’s rental population has increased by eight million people, while the home-owning population has declined by two million during the same period, to a 20-year low. That’s good for developers doing multifamily deals but it suggests some deep-seated problems with respect to the disparity of wealth in the U.S., according to Lawrence Yun, chief economist and senior vice president of the National Association of Realtors.
“We have more renters and fewer homeowners at a time when home values are starting to rise,” says Yun, who spoke earlier this year at the Greater Baton Rouge Association of Realtors annual Trends seminar. “We are in a situation where just when housing wealth and equity is rising we have fewer homeowners participating in this. … You hear people talk about how America has become more unequal. Well, here it is.”
What’s perhaps most troubling from a big-picture perspective about the data Yun cites is that the trend doesn’t appear to be turning around any time soon. It is expected to continue for the foreseeable future.
“Apartment rentals are rising because we have a huge rental population,” he says.
From the perspective of those developing the multifamily sector, however, the preponderance of renters compared to homeowners is a good thing. Absorption rates for new inventory are high and occupancy rates are averaging around 95%. Rental rates, meanwhile, are holding steady.
What’s more, despite projections that hundreds of new units in 2014 would become available, only 50 units were actually completed, creating pent-up demand in the market for the new inventory that will come on line this year and next.
“We had time to take up some of the slack,” says appraiser Wesley Moore of Cook Moore and Associates. “So there is some pent-up demand and a lot of people are very exuberant about building the next complex.”
The recent flurry of activity in the multifamily sector is the latest of several over the past few decades. The cycles come and go with the economic tides. Because of the growth of the renter population nationwide and the health of the local economy, however, this cycle is expected to last awhile.
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HED: Multifamily on the rise
Apartment complexes completed in 2014
Name, location units
Gardens of Baton Rouge, Plank Road south of Hooper 50
Apartment complexes under construction in 2015-2016
Name, location units
The Addison, The Grove Parkway 139
The District, Perkins Road near Pollard Pkwy. 312
Terraces at Perkins Rowe, Perkins Rowe, Bldg. E 88
Bayonne at Southshore, Stanford Ave. 240
The Exchange at Baton Rouge, 449 Ben Hur Road 304
Sterling University, 4149 Burbank 235
The Standard, West Chimes St. at Alaska St. 247
525 Lafayette (IBM building), Lafayette and Main streets 85
The Onyx, 100 Third St. 28
440 on Third, 440 Third St. 65
Commerce Building, 333 Laurel St. 93
One Maritime, 101 France St. 18
Windsor Court, La. Hwy 74, St. Gabriel 120
Audubon Apts., La. Hwy 64, Zachary 182
Total 2,156
Apartment complexes announced for 2016 and beyond
Name, location units
Park Rowe, Perkins Rowe 334
River House, Nicholson Drive 224
Cypress Springs Elderly, Hooper Road 144
Ivy Park, Phase II, Jones Creek Road 60
Beauregard Quarters, Napoleon St. 25
Lofts at 6C, Sixth St. 144
342 Lafayette, 342 Lafayette St. 20
Park 7 Apartments, West Parker Blvd. at Dodson Ave. 280
Wildwood of BR, Burbank Drive at Ben Hur Road 204
Arlington Townhomes, Ben Hur Road south of Burbank Drive 179
Tapestry Park on Jefferson, Jefferson Hwy. 124
Nicholson Place, W. Roosevelt St. at W. Garfield St. 40
Columns at Long Farm, Jefferson Hwy. at Barringer Forman Road 276
Greens at Millerville, Millerville Road at I-12 320
Livingston Apartments, Denham Springs 272
Palms at Juban Lakes, Denham Springs 180
Creekside Crossing, Walker 168
Zachary Parkside, phase two, La. Hwy. 964, Zachary 40
University Club Centre, St. Gabriel 160
Machac Lake Apartments, Prairieville 272
Silver Oaks, Duplessis 280
Total 3,746
