Although the Indianapolis retail market took a hit during the downturn, it never sunk as deeply into the doldrums as other U.S. cities, and has been relatively quick to rebound from its modest slide. Maintaining an unemployment rate well below the national average (8.7 percent at year-end 2010), with the prediction of 20,000 new jobs for 2011 ensures this market is headed in the right direction.
Retail real estate brokers in this statistical region of more than 2 million were actually quite busy in 2008 and 2009 when most other regions were reeling from the economic crunch. Recognizing still-strong market fundamentals, retailers tried to seize on the doom and gloom of the times to lowball local landlords, who for the most part would not yield to unreasonable rent offers that they knew would tie them up for years to come.
While retail vacancies remain low in the city’s most robust retail corridors, they are higher than they were before the downturn began in areas where demographics have shifted. We continue to see a flight to quality in this market with the most attractive, well-positioned shopping centers commanding surprisingly strong rents. For instance, Class A big box rents in highly desirable locales are backfilling to almost pre-recession levels, with average rents at about $14 per square foot. Areas around such top-performing centers like The Fashion Mall along the 82nd Street retail corridor are commanding even more. Premium shop space rents for about $30 per square foot, and in strong neighborhood centers, tenants are paying just under $20 per square foot.
Thus far, however, retailers have been slow to gravitate to the area’s much larger inventory of empty Class B and C box spaces where rents dropto about $10 per square foot. In predominantly blue-collar areas, space is renting from the low to mid teens per square foot.
Numerous retailers have announced new-to-the-market expansion plans, including Nordstrom Rack, The Container Store and the Bed Bath & Beyond Subsidiary buybuy Baby. All three have committed to stores at Kite Realty Group’s Rivers Edge. This older center, which sits between the two highly successful Simon-owned regional malls The Fashion Mall and Castleton Square Mall, is currently undergoing a $2.5 million redevelopment at the corner of East 82nd Street and Dean Road.
Other new-to-market retailers include the high-end apparel retailer, The North Face, which opened its first Indiana shop last fall at The Fashion Mall, and OshKosh B'gosh, which opened a 4,000-square-foot store in The Shops at River Crossing next to The Fashion Mall. Lego will open its first Indiana store this spring at Castleton Square Mall. And, Charming Charlie, the fashion accessories chain, is eyeing several sites in Indianapolis. Kroger is also actively looking at multiple locations for its Convenience Store concept Turkey Hill Minit Market.
Quality big box spaces are starting to fill up. Hobby Lobby relocated to a former Ashley Furniture site in Carmel, while K&G Fashion Superstore took over a former Circuit City in Castleton.
A number of new stores are opening outside city limits, including a new Meijer that opened in 2010 in the city of Marion, which is about 45 minutes northeast of Indianapolis. PetSmart and Kohl’s are expected to be added to the lineup in 2011, along with a new Best Buy store in Richmond, about an hour east of the city. And, TJ Maxx was recently approved for a new store in Warsaw, which is about 90 minutes north of Indianapolis.
In addition to the popular Cooper's Hawk Winery & Restaurant which opened in a space formerly occupied by Bahama Breeze on 96th Street, an abundance of new eateries are headed to the Indianapolis market along the popular stretch of 82nd Street between Castleton Square Mall and The Fashion Mall. Two restaurants are already pegged for the area, including Montana-based MacKenzie River Pizza Company, which plans to take over the 7,200-square-foot former Adobo Grill space located at Allisonville Road for a June opening, and, the homegrown Harry & Izzy’s steakhouse which is slated for the 8,600-square-foot space next to the Nordstrom Rack at Rivers Edge. Seasons 52 is currently under construction next to The Fashion Mall and the daytime-only First Watch Restaurants chain is eyeing several locations. Nationalfast-food juggernaut Jack in the Box is also planning its entrance into the market.
While there were some developments on the drawing board prior to the recession that were put on hold and have not been resurrected, there are several new mixed-use projects currently in the works that will contain blocks of significant retail space. About 40,000 square feet of restaurant and retail is planned for a new $150 million mixed-use development on 10 acres near Eli Lilly’s Indianapolis headquarters just south of downtown. The public-private project called North of South is expected to include an upscale Dolce hotel and YMCA. In another large deal, local developer Buckingham Companies is developing a new apartment building near the IUPUI campus and plans to include 20,000 square feet of ground-floor retail.
The Indiana Convention Center is expected to help the area become an even bigger draw for tourism and retail spending after its recently completed major expansion. The project, which debuted in January, added 254,000 square feet of exhibit space, 63,000 square feet of meeting rooms and 100,000 square feet of pre-function space for a new total of 750,000 square feet. That figure doesn’t include space in the new Lucas Oil Stadium, home of the NFL’s Indianapolis Colts, which the center is linked to via a climate controlled, street-level connector. The expansion also links the convention venue to more than 4,700 hotel rooms, including those at the new 1,005-room JW Marriott, which will open in February.
While Indianapolis was not immune to the economic woes suffered by every other market in the country, it has remained somewhat resilient and seems to be emerging with strength. The city is in an admirable position of having some of the best demographics and incomes to support a healthy retail climate, which will help to solidify the area as a place retailers want to be now and in years to come.
— Connie and Tom Niessink are X Team International partners and co-owners of Niessink Commercial Real Estate, Inc. in Indianapolis.