Despite gloomy numbers caused by hikes in interest rates, lingering inflation and increasing insurance costs, local experts said they are generally optimistic about the state of the Baton Rouge market.
“Remain calm. All is well,” said Tom Cook, an appraiser with Cook, Moore, Davenport & Associates, right after he showed a clip from the end of “Animal House” during his presentation Thursday morning at the Trends in Real Estate seminar.
The total dollar value of all home sales in metro Baton Rouge was down 24% in 2023 compared to a year earlier, the median sales price for a house was virtually flat, the month’s supply of houses rose by 57% and the median number of days a house was on the market before it sold was up by 280%, Cook said the real figures weren’t as bad as the percentages indicate.
The dollar value of home sales in 2023 was $2.5 billion, about the same as what it was in 2019. The supply of houses was 3.3 months at the end of 2023, comparable to 3.5 months at the end of 2020. And the median number of days a house was up for sale before a buyer was found was 19 days, compared to 5 in 2022. “Is 19 days too long to sell a house?” Cook said. “It’s not something to panic over.”
The local housing market is projected to look about the same in 2024 as it did last year, Cook said. Lingering inflation has caused the Federal Reserve to pull back on its plans for multiple interest rate cuts this year, meaning homeowners who are paying 4% interest on properties they bought a few years ago will be less likely to sell.
Cook said it isn’t known yet what sort of impact the newly created city of St. George will have on the housing market. There are still lawsuits going on around the city and a mayor and city council need to be selected.
“There’s a lot of stuff that has to go on before it will start to impact the real estate market,” he said. “But if you talk to people in Central and Zachary, they’ll tell you their property taxes went up when they incorporated. So expect some increases.”
Branon W. Pesnell with Marcus & Millichap was less optimistic about the local office market. “The office market is terrible. Thank you very much,” he said at the start of his presentation.
Nationally, office vacancy rates have hit all time highs, as workers have gotten used to hybrid, work-from-home schedules that started during the COVID pandemic. While employers have made strong demands to get workers back in the office, employees are resisting. Pesnell cited a survey where 63% of people said they would be willing to take a pay cut in order to continue working from home.
Kastle, a company that tracks employee key card entry data, found that office occupancy nationally was at 52% of pre-pandemic levels. Pesnell estimates Baton Rouge office occupancy is at about 60%, based on key card use and the number of occupied paid parking spaces downtown.
The number of employees back at garden offices, the single story buildings found along Bluebonnet Boulevard and Siegen Lane, is higher. Employees like the convenience of being able to park close to their work and being near amenities such as restaurants, he said.
The local multifamily, retail and industrial markets are expected to look the same in 2024 as they did last year.
Craig A. Davenport with Cook, Moore, Davenport & Associates and Mark Segalla of Elifin said apartment vacancies should remain in the 5% to 7% range, with rents remaining flat. There’s not much new construction on the horizon, due to interest rates and insurance. Just one LSU area complex was completed in 2023, the 132-unit Flatiron of Baton Rouge on West Parker Boulevard and there are none on the drawing board.
Charlie Colvin of Momentum Commercial Real Estate said retail vacancies should stay in the 8% to 9% range with minimum rent increases. One of the biggest retail trends locally are “eatertainment” facilities that combine family entertainment with a restaurant. The Drew Brees co-owned Surge Entertainment center recently opened in a former Winn-Dixie store on Burbank Drive; it features a bowling alley, golf simulator, laser tag and mini golf course. Local personal injury attorney Gordon McKernan is planning to open a pickleball venue at the former Shed BBQ restaurant on Burbank, it will feature a restaurant and bar developed by Ozzie Fernandez. Fernandez is CEO of GO Eat Concepts, whose eateries include Lit Pizza, Izzo’s Illegal Burrito, Modesto and Rocca Pizzeria.
Evan Scroggs of Lee & Associates said the supply of industrial space should remain limited. The local vacancy rate for warehouse space is below 2.5%. “Leasing is gridlocked,” he said. “Tenants outside the market can’t move in and tenants in the market can’t move up.”
The situation isn’t expected to change because there aren’t any large speculative developments and the petrochemical industry keeps on adding jobs, he said.
One of the issues holding back development is the difficulty in getting commercial insurance. During a discussion featuring Christian Leach of TSL Insurance Group, Bobby “Boots” Adams of McClure, Bomar & Harris and Steven Brooksher of Steven Brooksher State Farm, the panelists said reforms need to be taken to attract more insurance companies to south Louisiana.
Adams noted that the state had a volatile worker’s compensation insurance market in the 1980s and 1990s, but reforms were undertaken to lure carriers back in the market. “We need to make a difference to attract carriers,” he said. “That will drive rates down.”
In the meantime, businesses need to keep up with maintenance and be proactive and work with their agent. “If you’re 90 days out, 120 days out from an insurance renewal, talk to your agent,” he said.
The Trends seminar started in 1988 as a joint project of the commercial and investment division of LSU’s Real Estate Research Institute. The goal of the program is to educate members of the division, their clients and other real estate practitioners in the Baton Rouge area about the local real estate market.
