An owner's perspective
Louisiana's developers, owners
weigh pros, cons before investing
The market remains strong for owners and developers, according
to national real estate market analysts. Commercial construction
is in an expansion cycle; there was a boost in job creation
in 2005; industrial construction is increasing, particularly
in the Southwestern and Southeastern U.S.; and vacancy rates
are lowering for office property; all of which points to a
healthy market for developers over the next year.
Industrial construction should remain steady, said Robert
Bach, national director of market analysis for the Grubb and
Ellis real estate advisory firm. According to the firm's second-quarter
2005 report, industrial vacancy rates nationwide decreased
to 8.6 percent, 30 basis points below second-quarter 2004.
Construction of new industrial space increased for the fifth
consecutive quarter, according to the report, to 87 million
The retail market will remain strong, as well, said Frank
Warren of Warren and Associates Real Estate Marketing Strategies
in Charlotte, NC. with the most activity seen in the Southwest
and Southeast regions of the nation. In the Gulf Coast states,
population increases due to influx of hurricane evacuees will
boost the retail market considerably, said Robert Dischler,
senior project manager for Stirling Properties in Covington,
"Lots of national retailers are seeing the population
growth in some areas caused by evacuees, and that justifies
them coming into the market with a second or third store.
So the opportunity for retail development will be great,"
The housing market has peaked, according to Warren. The emphasis
in the coming year, he said, will be on urban living. "The
apartment market will come back strong in the next year or
so," he said.
Several factors could still affect the market, however, including
energy prices and interest rates, said Bach.
"As long as the interest rate stays below 7 ¼
to 7 ½ percent, the market will be okay," agrees
Warren, "anything above that, and it will impact the
affordability of housing and the housing market."
Another factor which could have an impact on all real estate
markets is the increasing price of construction materials.
"Prices for construction materials has increased by
eight percent over last year," said Bach. "And the
Gulf Coast recovery efforts will mean that number may rise
to 10 percent by next year."
Keeping the market strong, said Dischler, will require a
larger, more qualified workforce for contractors. The availability
of skilled labor, he said, is declining, a situation aggravated
by a housing shortage along the Louisiana Gulf Coast.
"There's a shortage of qualified labor," Dischler
said. "People are hired, maybe from out of state or out
of the country, and they may be qualified in one specific
trade, but they're asked to do things they're not ready or
qualified to do. They could be doing roofing work one day,
and pouring concrete the next. The result is that work is
done at a faster pace, but with less quality. There's less
quality in the product because contractors' labor forces are
too small or unqualified."
A crucial factor in the health of any sector of the market
is the strength of the relationship between developers and
contractors, said Dischler. Contractor loyalty, particularly
in light of the temptation to chase high-paying but temporary
disaster recovery work, is paramount to the health of the
real estate development market.
"Developers want contractors that are loyal," Dischler
said, "who work for them on a regular basis and who will
stick with (the developer). Contractors can pick and choose
right now, but that won't always be the case. This is an industry
where relationships and loyalty are very important."
Developers can keep that loyalty, said Dischler, by offering
contractors adequate numbers of bid opportunities in a fiscal
year, and fairness in contracts and dealings.
JTS Interests. JTS Interests
of Baton Rouge was established in 1978 by Joseph T. "Tommy"
Spinosa, who remains president and CEO of the organization.
The company focuses on real estate investment, management
and development, and with its affiliates currently owns and
manages eleven office properties, four multi-family properties,
and one mixed-use development. The company also has several
other developments in the design and planning stages.
The company currently employs 65 real estate specialists.
The company's planned development includes the Perkins Rowe
mixed use area on the corner of Perkins Road and Bluebonnet
Boulevard in Baton Rouge. The project has been dubbed "Baton
Rouge's first urban village." Dedicated to providing
an urban environment in which all living, shopping and dining
needs are within walking distance, and inspired by areas in
Savannah, Georgia, Tuscaloosa, Alabama, and New Orleans, the
property will offer upscale condominiums and apartments centered
in an area offering retail, dining and office space.
Tree-lined streets, covered sidewalks, arcades, and balconies
will give the property a small-Southern-town feel while providing
all the needs of urban living in a concentrated area, including
movie theaters, fitness club, markets, a boutique hotel, cafes
and restaurants, book stores, and residences including loft-style
apartments, condos, brownstones, and flats. Homes will include
balconies, large windows and French doors, and gourmet style
kitchens with views.
"We wanted to blend the unique architectural influences
of the deep urban South with a contemporary landscape for
a 21st-century designation," said Brandon Diamond, R.A.,
senior associate at Development Design Group, of Baltimore,
land planner for the Perkins Rowe project.