Demographic shifts and the subsequent demand for affordable housing are currently impacting the greater Indianapolis multifamily sector, but the most marked influence is increased and expanded investor interest. Demographic shifts in population are influencing developers and owners in their long-term decision making when it comes to the multifamily sector. Two primary factors are at play. One, the traditional renter’s segment is changing as millennials age and delay having children. Two, national population projections are showing a decline in the prime renter’s segment as Baby Boomers begin to move into seniors housing. As a result, developers and owners are beginning to plan more senior living communities. Millennials are also impacting affordable housing occupancy rates as they want to live in walkable and amenity-rich areas without the cost of high-end apartments. This is leading to more rehabbed properties. At the moment, Class C properties in the Indianapolis area are reflecting greater occupancy movements, as occupancy declines when properties become distressed and increases when they are purchased and rehabbed. Additionally, college debt is delaying graduates in purchasing traditional homes. Both of these factors are causing occupancy rate increases which, in turn, result in a shortage of affordable housing. New housing construction costs are …
Market Reports
Recently, my national research colleagues released “The Top 10 Commercial Real Estate Trends for 2019,” a piece featuring predictions on subjects such as trade tensions, labor shortages and the evolution of “co-everything.” Of all the predictions, one stood out as being especially relevant for the Indianapolis industrial market as we inch further into 2019. Indianapolis has lacked industrial space for occupiers seeking to grow, particularly in smaller segments. The great news is that the market is well on its way to remedying this ailment. Demand causing shortage As we all know, the industrial sector is undergoing an e-commerce revolution. This has created a rush of demand by retailers and third-party logistics (3PL) providers for distribution and warehouse space, especially in cities like Indianapolis, which historically has been recognized for logistics strength. As a result, industrial market fundamentals have generally tightened across much of the United States. In the fourth quarter of 2018, the U.S. industrial vacancy rate fell to 4.8 percent, the lowest rate on record. Similarly, Midwestern markets currently sitting at 4.8 percent vacancy have experienced a 50-basis point decline in vacancy since the fourth quarter of 2017. Pair that with north of 111.5 million square feet of …
While Indiana is well known for the Indianapolis 500, the state’s economy is firing on all cylinders and experiencing noteworthy job growth. Indiana’s marketing campaign, “A State That Works,” has been successful in attracting investment to the state by touting its highly ranked business climate, competitive cost of doing business, pro-business tax climate, low cost of living, extensive logistical infrastructure and access to strong educational systems. In June 2018, Bloomberg ranked the Indiana cities of Elkhart (No. 1), Kokomo (No. 3) and Columbus (No. 13) for having the largest employment gains in the country since the recession. The Indianapolis metro area has created one of the nation’s top burgeoning tech scenes with a 68.1 percent increase in tech job growth from 2006 to 2016, landing No. 5 on Forbes’ list of “Cities Creating the Most Technology Jobs.” The state’s stable economy and encouraging unemployment rate have provided strength to the rapidly evolving retail industry. While national news is filled with retail bankruptcies and store closures, there has been tremendous retail activity backfilling vacancies and spurring new development from the following retail sectors: grocery, home living, health and wellness, beauty, fitness, off-price/discount, and dining and entertainment. Backfilling bankruptcies Following the bankruptcy …
You would be hard pressed to find another city more excited about transformation than Indianapolis right now. Previously known as “Naptown” by outsiders due to the sleepy feel the city exuded, those days are long gone. Indy has experienced incredible transformative activity in the past decade, and that extends to the commercial real estate office sector. For the 18th consecutive quarter, this sector has experienced positive net occupancy gains, and 14 of those quarters have fallen below the 10-year average vacancy rate of 18 percent. Average asking rental rates have experienced healthy growth, with five-year rental rate growth at nearly 14.3 percent. Changing ownership According to colleague Bennett Williams, director, the office landscape is really about change right now. “Long-term Indianapolis owners, such as Duke Realty, historically have developed and held their assets, but now that they are selling off their product, national and international firms are entering the market,” he says. “These new firms have been pushing all facets of the deal to maximize the return for their investors.” Within the past five years, Indy has experienced many ownership changes of large office assets both in the suburban markets and the central business district (CBD). Cushman and Wakefield research …
If you happen to read or listen to Freddie Mac officials, the key economic factor driving housing demand is the labor market. In 2017, the Indiana Economic Development Corp. (IEDC) secured 293 commitments from companies across the country to locate or grow in Indiana. Collectively, this will make for more than $7 billion in new investments and 30,158 new jobs in the coming years, marking the highest annual commitment in IEDC history. Companies currently expanding and adding thousands of jobs throughout the region have been contributing greatly to the growth of the multihousing market in central Indiana. More than 2,380 market-rate apartment units were completed in 2017. Construction doesn’t appear to be slowing down either, as over 2,200 units were under construction at the beginning of 2018. Apartment deliveries soar Central Indiana has experienced a marked increase in overall multifamily deliveries. Between 2014 and 2017, developers delivered approximately 15,000 new units, compared with 13,500 units over the previous 14 years combined. A large majority of the projects are greater than 100 units, particularly the market-rate developments. Lately, most of these projects have contained pockets of amenities or are located near amenities. Downtown Indianapolis was home to one of the more …
In 2017, newly signed bulk space deals in the greater Indianapolis industrial market totaled 10.2 million square feet. Of that total, over 50 percent had some affiliation with e-commerce. With 26 new buildings and another 5.7 million square feet under construction, the Indianapolis industrial market will clearly become increasingly linked to the performance of e-commerce as the total share of online retail sales remains in a significant growth mode. Projections by Cushman & Wakefield show that by 2020 nearly 12 percent of all retail sales will be associated with e-commerce — three times what it was 10 years ago. Stronger growth will be driven by the onset of e-grocery and e-pharma. Additionally, e-commerce will continue to be a driving force in these industrial deals because the online industry is getting better at what it does. Coming off the strongest holiday season since the Great Recession, companies are now focused on the cost of package returns and are re-examining the value of brick-and-mortar stores. When it comes to package returns, not only is the processing time significantly slower, but it is six times costlier to return a package using regular shipping methods. Returning items to physical store locations is the cheapest …
The northern suburbs of Indianapolis aren’t just following the latest trend of developing dense urban cores within suburban markets — they’re on the leading edge. In particular, Fishers and Carmel boast flourishing downtown environments that are walkable and bike-friendly. The idea is to develop a core urban area amid the suburban sprawl by creating activities and concepts that serve various community needs such as cool restaurants, shops, office and living space, evening events for adults, family activities and music and arts entertainment. It’s a lifestyle choice that more and more people prefer. While retail is struggling to regain balance in traditional environments, these mixed-use developments are resonating with their communities. Consumers are looking for experiential opportunities with multiple touch points, such as living, shopping, fitness, dining and entertainment options that integrate open green space. The suburbs of Indianapolis are responding to this trend. Grocery stores and medical facilities also are key to these types of developments, as residents desire the convenience of making one stop. Fishers blazes its own trail Fishers, located just northeast of Indianapolis in Hamilton County, officially became a city in 2015. The community elected a mayor with a strong vision. That vision included the urban core …
No matter where you turn in the Indianapolis metro area, there is one common thread — change. From Mile Square to Downtown Fishers to Main Street in Speedway to Fletcher Place, all are nearly unrecognizable from a few years ago, and they are just a sampling of central Indiana commercial districts that are transforming at a rapid pace. Restaurants, retail and mixed-use developments are a big part of this rapid evolution, but the ripple effects on office real estate are taking hold. Tech jobs are catalyst Downtown Indy Inc. estimates the population in the central business district (CBD) will double from 2010 to 2020. According to the Indy Partnership, approximately 60 percent of the market’s 11,100 new jobs in 2016 came from the information technology and logistics fields. The downtown office market, where a majority of these jobs are landing, is evolving as a result of this technology job growth. In the past few years, large blocks of vacancy have plagued the Indianapolis CBD, specifically in high-rise office towers. In mid-2016, the largest of those availabilities became an asset. San Francisco-based Salesforce.com signed a new lease to consolidate operations into nearly 250,000 square feet on 11 floors in the tallest …
Strong job growth in the second half of 2016, robust tenant absorption of new apartment supply and falling vacancies throughout the Indianapolis metro area supported a markedly improved multifamily marketplace by the end of the year. This year, steady employment gains and rising home prices will continue to bolster apartment property performance metrowide. In the first half of 2016, hiring was sluggish due to a lack of available workers, but ramped up at midyear. By year’s end, area employers increased employee headcounts by 25,300, a 2.5 percent increase overall. Although employment gains were widespread, the education and health services sector led job creation followed by construction. With the opening of Cummins Inc.’s new distribution headquarters and tech sector growth most notably Salesforce’s significant expansion in the area hiring this year is expected to remain stable. The forecast calls for employers to add 20,000 new workers to payrolls this year, which will further elevate demand for multifamily rentals. Construction ramps up Developers delivered 2,500 rental units to the marketplace last year, the second largest annual supply increase in nine years, but tenants readily absorbed the new supply. Nearly half of the submarkets in the metro area received new supply in 2016, …
To say that the greater Indianapolis industrial market experienced a historical year in 2016 almost seems trite. By every measure, the city’s industrial records were shattered. Net absorption in 2016—8.3 million square feet—crushed that of previous years. Additionally, 11.2 million square feet of new leases were signed, which is more than the 2014 and 2015 totals combined. And, the market saw its lowest vacancy rate in 36 years at 3 percent – down from 5.8 percent at the end of 2015. Now that’s historic! The industrial market is on fire, and Indianapolis is among the brightest embers. While the city has always competed well with its peers, Indianapolis outpaced the competition in 2016. The city was ranked in the top 10 for industrial space absorbed last year, and it has a history of being “recession-resilient,” in that it is one of the few industrial markets that actually grew during the last recessionary period. The industrial market was tight heading into 2016 and tightened even further throughout the year as historic leasing demand dramatically outpaced new supply. After no new buildings were delivered in the third quarter of 2016, the fourth quarter produced four newly constructed industrial warehouses totaling 635,000 square …