SOUTHEAST SNAPSHOT, JULY 2007

Baton Rouge, Louisiana Multifamily Market

The population of the Baton Rouge MSA swelled in a matter of days following Hurricane Katrina, which resulted in immediate housing shortages. Though the area’s population has returned to something approaching normalcy, most economists are still projecting a long-term increase of roughly 30,000 people in the Baton Rouge area which is directly attributable to Katrina and Rita.

Baton Rouge, Louisiana, is cultivating an economic setting for growth. Factors contributing to this growth are an increase in state and local revenues, a current MSA population of more than 777,000 people, the location of the state capital, Louisiana State University, Southern University, and the influx of new residents. This growth and development in Baton Rouge is generating increased demand in the multifamily market.

The Baton Rouge Area Chamber’s data demonstrates that multifamily housing, including condominium permits, have nearly doubled from the fourth quarter of 2005. It is expected that alternative housing options such as condominiums for the Baton Rouge region will expand this year. This is compared to the past year’s 19 percent decline in single-family housing permits.

The Baton Rouge multifamily market has been very active with 1,719 rental units under construction currently, and reports a vacancy rate of less than 3 percent. Of particular note are the 2,290 condominium units built or planned for the Baton Rouge MSA for 2006 to 2008. These condominiums primarily draw on the segment of the market oriented toward owner-occupancy, but many have been acquired by investors and represent competition for the traditional rental units.

The East Baton Rouge Parish market is the most active in terms of building permit requests in the multifamily residential category. A handful of projects in various phases have appeared near LSU’s campus, targeting students and gameday enthusiasts. In addition, developers are noting consumers’ desires for condominium-style living that serve long term Baton Rouge residents and New Orleans residents who are interested in purchasing second homes for evacuation purposes. More than 650 multifamily units have been or will be added to this submarket within the next four quarters due to recent projects including Indigo Park Condominiums, Lakes at Bluebonnet, Summerwood Villas, Fieldhouse Gameday Luxury Condos, Red Stick Lofts, Victory Commons, Southgate Towers and Old Hermitage Townhomes.

With a strong absorption rate of five to 10 units selling per month, depending more on construction schedules and availability than market demand, it is likely the influx of units will continue not only in East Baton Rouge Parish, but in the Baton Rouge metropolitan area. A continued upward swing in mortgage interest rates could have an adverse impact on this demand.

There is a wide variance of unit pricing for condominium developments throughout the area. The LSU area submarket commands the highest unit prices, with average starting prices of $178,990 and average end prices of $371,190. Southgate Towers, developed by R.W. Day & Associates, boasts the highest end unit pricing at $950,000 in its 133 unit, 10-story condominium tower. However, there are more affordable options for first time home buyers in the multifamily market, such as Riverview Condos. Developed by Donnie Jarreau and Bobby Waters, this condominium conversion located on River Road, north of the CBD starts pricing at $99,950 for a one-bedroom, 671-square-foot condominium.

While conversions can fill a more immediate housing need, new construction developments like Indigo Park, located near the Bluebonnet extension of Nicholson, have the quality, luxury and amenities that Baton Rouge residents are looking for. Starting at an affordable price of $127,900, Phase I should be completed by fall 2007. Residents will enjoy tree-lined sidewalks and balconies that will give the property a small town Southern feel, while its location will provide all the appeal of urban living such as quick access to museums, cafes, shops, office spaces, and fine dining. Because of its convenience to downtown Baton Rouge and LSU, this prime real estate area has recently seen numerous mixed-use developments announced including a casino, golf course, retail establishments, and housing. 

 Due to the rapid growth of the multifamily market, particularly the condominium market, Baton Rouge residents will soon have several options to rent or own, regardless of the price range. The only challenge to growth will be the ability of the city’s infrastructure to accommodate and maintain the character and marketability of Baton Rouge as a great place to live, work and do business.

The federal GO Zone Act has received a lot of attention of late. It is worth exploring with one’s accountant because benefits are available for real estate investors and buyers.

Baton Rouge’s low unemployment rate and strong consumer spending signal that the market is ready for developments like Indigo Park Condominiums and other multifamily developments with the goal of a healthy, emergent economy.

— Colin Edelstein and Denise Koehl are with Cortland Partners. Cook, Moore & Associates and the BatonRouge Area Chamber provided information for this article.


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