Indianapolis Multifamily

by admin

What area is your expertise?
Multi-housing properties (rental only) and Central Midwestern markets. However, my answers here apply only to the Indianapolis area.

What trends do you see presently in multifamily development in your area?
There has been a shift in development activity from the south side of Indianapolis to the north side. Approximately 3,000 units are slated for completion through 2009 along the 146th Street corridor and surrounding areas in Hamilton County. With the recent extension and opening of 146th Street, development activity has intensified along this critical corridor.

Who are the active multifamily developers in your area?
Currently active: Flaherty & Collins, Pedcor Investments, J.C. Hart, Welbourne Companies, Herman & Kittle Properties, Edward Rose of Indiana and Sheehan Development. Prepared to resume development activity: Paragus, Gene B. Glick Co., and Hearthview Residential.

What trends do you see presently in multifamily development in your area?
Roughly two-thirds of our buyer base is coming from the East Coast. We have historically had East Coast capital but not significant levels. The heightened interest from coastal investors is due to a widely recognized rental market recovery and stable employment growth.

Please name one or two significant multifamily developments in your area. What impact will these projects have on the market?
Of particular interest are two urban developments in Indianapolis under construction now. This represents the first wave of ground-up urban rental construction since 2002. The Cosmopolitan will be 218 units and is being developed by Flaherty & Collins. The Waverly will be 164 units and is being developed by J.C. Hart. Rents at both communities will be in excess of $1.00 per square foot.

Where is the majority of development taking place? Why is this area doing well?
The majority of the planned new construction is on the north side of Indianapolis. There are over 3,100 units planned for Indianapolis’ north suburbs. The development is spurred by tremendous household growth due to strong school districts, Class A amenities, shopping and dining, existing employment concentrations and good road systems connecting the north suburbs to the city.

What area do you expect to be the next big development market? Why?
Hamilton County and more specifically the 146th Street corridor are experiencing tremendous growth due to the previously mentioned factors.

What areas are doing well in terms of apartment leasing? Which areas are struggling with leasing?
The urban Indianapolis market is leasing very well. There is continued demand to live downtown. The north side of Indianapolis has historically outperformed the market as a whole with strong demand live among large employment concentrations and near amenity centers. Bloomington, home of Indiana University, is a supply constrained market that historically operates near full occupancy. Indiana Univ. experienced an enrollment surge of 743 last year further strengthening the market fundamentals.

Please give a measure of apartment vacancy rates.
The Indianapolis-area Top-50 first quarter 2008 performance was the strongest on record. Occupancy moved .6 percent to 93.2 percent.

What impact do current interest rates have on the apartment and condo markets? What predictions do you have for interest rates and their effect on the multifamily market in the next year?
Fannie Mae and Freddie Mac rate levels are virtually where they were one year ago, albeit with considerably more volatility; however, the lack of full leverage has left institutional and well capitalized private investors with the advantage. The days of full leverage sub-prime single family/condo financing are likely gone forever. This will bode well into the foreseeable future for multifamily market fundamentals.

What is the status of job growth/(un)employment rates and what bearing will it have on the multifamily market?
The condition of the multifamily market is tightly linked to labor market. 59,000 jobs have been created in the Indianapolis MSA since 2003, representing a 7 percent increase in the number of jobs. The Indianapolis unemployment rate as of April 2008 stands at 4.2 percent, well below the statewide and national averages of 4.6 percent and 4.8 percent, respectively.

Would you like to make any additional observations about the multifamily market in your area?
As many markets around the country continue to cool down, Indianapolis is gaining steam. The positive reaction by investment capital is encouraging, sustainable and reflective of many investors’ diversification strategies. Given the controlled levels of new supply, the slowdown in the for-sale market and current stable recovery, the outlook for the Indianapolis-area for the foreseeable future is bright.

Submitted by Steve LaMotte, Jr., senior vice president with the Indianapolis office of CB Richard Ellis.

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