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Derbes Falgoust Commercial Real Estate

Right Place, Right Time: Industrial Space is the New Hot Property

It's a market situation that gets real estate professionals excited: As supply and demand begin to converge, deals happen quickly and prices start to rise. The market for industrial space is approaching that point in parts of greater Baton Rouge as big plant expansions generate the first ripples of new business activity. "Demand is extremely high," says Mike Eades, President of Ascension Economic Development Corp., which scouts available space in Ascension Parish for prospective tenants. "There's not a lot of vacant space here, and what there is goes quickly." Sales and leasing agents say activity is brisk throughout Ascension Parish and in some neighboring areas, with no sign of a slowdown. But while they welcome the rising interest in industrial properties, some strike a cautionary note about the possibility that prices could reach a tipping point. There's no denying the market is tight. Of some 25 million square feet of industrial real estate in the metropolitan area, only about 9% was vacant at the beginning of this year. That's a sharp change from a vacancy rate above 14% that held sway in 2009, according to real estate market data compiled by Baton Rouge Trends.

Scot Guidry, an industrial specialist at Mike Falgoust & Associates, says signs point to a continued pickup in space absorption. He thinks that, barring unforeseen changes in global markets that could blunt the petrochemical business boom, demand for local industrial space will climb. "It has definitely not peaked, in my opinion," he says, "and in some ways it's just beginning." A big source of the demand is a host of businesses that serve south Louisiana's petrochemical and refining industries, which are poised to invest billions of dollars in plant expansions and construction. The service businesses run the gamut from equipment rental, transportation and construction firms to valve, electrical component and pipe fabrication companies. Guidry says businesses with "light industrial" needs generally are shopping for 6,000 to 20,000 square feet in a building that can provide both a front office for sales staff and warehouse storage with some truck-loading space. Such configurations in high-demand areas typically fetch $8.50 to $9 per square foot, including taxes, insurance and maintenance costs, he says.

Article Provided by the Greater Baton Rouge Business Report | Kathy Finn

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