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  • Writer's pictureFoster Murphy

Baton Rouge Garden Office Market - 2023 Outlook

The Baton Rouge garden office market in 2022 saw a record number of office sales, primarily by groups who normally would have been tenants taking advantage of historically low-interest rates to become owner-occupants. However, with interest rates skyrocketing and construction costs remaining high, sales volume has started to trend downward going into 2023.

Leasing activity, on the other hand, has increased going into 2023, with an increase of 10% to 15% in lease rates for modified gross leases due to increased insurance and operating costs. So much so, a few recent leases on new construction have flipped to NN leases with tenants paying a portion of insurance and common area maintenance.

In terms of space needs, there has been a higher demand for 2,500 to 5,000 square feet going into this year compared to the previous years' need for 1,200 to 2,500 square feet. The three most common tenant groups recently have been medical, financial, and engineering.

Overall, the Baton Rouge garden office market occupancy has remained steady, although the Bluebonnet, Jefferson, and Perkins corridors have seen some of the lowest move-in ready inventory in years. Most of the office parks in these areas that have been developed over the last 2-4 years are seeing their last pads built out this year.

In terms of notable deals for 2022, Alexander Sides purchased a 10,000 square feet pad site in the Exchange @Jefferson, while Goss Financial purchased 6,500 square feet in The Metro Office Park.

2022 saw record sales prices for garden offices in both new construction and existing. Sale prices ranged from $225.00. PSF to $300.00 PSF. Even some older office product has traded in the high $100s PSF.

Looking ahead, there is expected to be future demand for the development of garden-style office parks, given the recent trends in the market. As such, developers may want to consider building new garden office parks in areas with high demand and low inventory. Additional trends and demands have been; large windows providing natural light and LED fixtures, flexible floor plans with an efficient flow, modern finishes, and sufficient parking, particularly for medical groups.

Till next time.

Your Garden Office Guru,

W. Foster Murphy

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