John McCloud is editor of Industry Property Journal, from which this article is excerpted.

Baton Rouge, LA—Two years after hurricanes Katrina and Rita devastated the Gulf Coast, the focus of Louisiana’s industrial market has shifted north from New Orleans to the Interstate 12 corridor linking Baton Rouge and Hammond. The former city is drawing additional strength from its location along the Mississippi River, while the latter benefits from its position along Interstate 55 heading north to Chicago.

“The market is hot,” declares Tony DeMarco, a broker with NAI/Latter & Blum in Baton Rouge. “The Mississippi River was dead for 20 to 30 years, but it’s come back since Katrina and Rita. A lot of companies in New Orleans had to shut down because the infrastructure was out, so they moved here.”

DeMarco recently represented Cemus LLC in the purchase of a former Kaiser Aluminum plant in Baton Rouge that the local company plans to redevelop for manufacturing and distribution uses. Cemus bought 22 acres of the plant in January and 65 additional acres in July for $14.5 million. It subsequently sold 9.5 acres to West Point, MS-based Southern Ionics Inc. for construction of an aluminum chloride plant and leased 13 acres to River Mountain Quarries, a division of Pine Bluff Sand & Gravel Co. of Pine Bluff, AR.

The Cemus site has about a half mile of Mississippi River frontage and includes berths for deep-water ships. According to DeMarco, Baton Rouge is the only Mississippi River port other than New Orleans capable of handling larger ocean-going vessels. He says it has begun to eclipse its down-river rival as the state’s primary shipping and distribution market.

“The whole complexion of this state has changed,” he remarks. “Baton Rouge is the state’s most populous city now. All the communities around Baton Rouge are booming.”

That includes Hammond, about 35 miles east of Baton Rouge and north of New Orleans, where an affiliate of Chicago-based WexTrust Capital just bought a 20-year-old multi-tenant warehouse/distribution and production complex for $28.4 million. The buy includes a building with 471,127 sf of warehouse/office space and 207,872 sf of freezer and cooler space, a 20,604-sf office building and an 11,000-sf truck-maintenance building on 107 acres.

Michael Gorney, director and chief investment officer for WexTrust Equity Partners, a division of WexTrust Capital, calls Hammond extremely well situated for distribution purposes. “I’ve been watching Hammond for over 20 years,” he says. “I’ve seen it grow from a good distribution location into a great distribution location. With the movement of a lot of distribution and warehousing functions out of New Orleans, it provides a very solid alternative location.”

According to Roy L. Splansky, a principal of Chicago-based Venture One Real Estate LLC, which represented the seller in the transaction, the area’s location above sea level is a major factor in its current growth. Gorney adds that insurers use I-12 as the boundary for high-risk rates, with businesses and properties north of the freeway getting much lower rates.

He says this gives more northerly properties both an economic and psychological advantage: Not only are costs lower, but the lower-risk designation makes people feel more secure. “You’re on high and dry ground here,” he says. “It was not affected by either of the major hurricanes, and that’s very attractive to users.”

DeMarco says demand for properties is so strong that Cemus has already received cash offers for “much more” than it paid for the Kaiser property, but the company is not interested in selling since leasing demand is equally strong. “This is becoming part of the petrochemical corridor. Plant expansion plans in this area are in the billions of dollars. Everybody wants to be here,” he says.

Besides, the broker adds, Cemus couldn’t sell if it wanted to because Louisiana law discourages real estate speculation by prohibiting the sale of a property within two years of buying it. “It’s part of the Napoleonic Code, which is the basis for state and local laws here,” he explains.

Gorney tells IPJ the Hammond purchase was WexTrust’s first industrial buy in the region. The company is marketing a new 100,000-sf building it plans to build on the site and is negotiating with a tenant to take at least half the space. It also plans to build two more structures in the 200,000-sf range and is looking into the possibility of selling some land to users. The existing properties were 100% leased at the time of purchase.

“We feel market demand is pretty strong,” says Gorney. “We’re an owner with a five to 10-year horizon, and Baton Rouge is a target market for us. In fact, anywhere along the I-12 corridor from Houston to Florida is a target. We have a strong appetite for the region.”

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