Downtown Indianapolis is already feeling the impact of Salesforce.com Inc.’s recent decision to lease more than 220,000 square feet for a new regional headquarters in the state’s tallest office building, located at 111 Monument Circle.
The firm’s $40 million investment over 10 years includes expansion plans for its regional headquarters as well as changing the name of the 48-story office tower from Chase Tower to Salesforce Tower Indianapolis.
This will be one of only four towers in the world that bear the Salesforce name — the others are located in New York, London and San Francisco.
John Crisp, Cushman & Wakefield
Salesforce.com, a publicly traded company (NYSE: CRM), is a business software provider best known for applications that help salespeople track customer contacts and marketers plan campaigns, according to The Wall Street Journal.
The San Francisco-based tech company currently has 1,400 employees in Indianapolis and plans to hire 800 new employees over the next five years. The company is expected to move into the tower in early 2017. The firm currently leases space in three other buildings downtown.
This speaks volumes about Indianapolis’ efforts to become the Midwest hub for technology. While Salesforce is one of Indianapolis’ largest technology employers, nearly 100 tech companies are located inside the inner loop of I-465, some 58 of which are in a square mile around the CBD and 29 are within one-quarter mile of Monument Circle, the center of downtown.
In addition to Salesforce, other tech companies have recently located in downtown office towers that were constructed in the 1980s and 1990s.
Gerry ‘Spud’ Dick, Cushman & Wakefield
Kronos, a global leader in workforce management solutions, now occupies space in the PNC Tower. Return Path, an e-mail data solutions provider that has only 12 offices across the world, and Emarsys, a global provider of marketing automation software, are both located in Market Tower.
Healthy vital signs
Indiana’s economic development focus on tech firms is paying off. Downtown is on the upswing with an office market vacancy rate of 17.2 percent and positive absorption of 119,166 square feet so far in 2016.
The vacancy rate has dropped in the last six years from a high of 20.3 percent and negative absorption of 81,842 square feet in 2013. The lowest vacancy rate in the last six years was in 2010, at 15 percent, and absorption of just 22,000 square feet.
Indianapolis ranks as the third most cost-effective city in the U.S. for business, according to a KPMG study. The city also is known for its pro-business stance and talented workforce.
Forbes magazine ranks Indianapolis as one of the top 10 best cities to begin a new career and one of the top 10 for young professionals. More than 63,755 post-secondary students downtown will help feed the talent pool. These are all key reasons for tech companies to call the city home.
Apartment sector benefits
There are 942 multifamily units currently under construction downtown, with an average rent per unit of $1,344. The total market average is $808 per unit. The influx of tech workers is spurring apartment demand downtown.
Higher-paying tech jobs, which in Indiana average about $73,000 annually, according to the Bureau of Labor Statistics, enable tech workers to afford newly constructed apartments and the amenities of an urban lifestyle.
In 2016, developers have gained approval but have yet to break ground on more than 7,000 multifamily units for the greater Indianapolis area.
A byproduct of the increase in downtown dwellers is the corresponding relief on parking requirements. For many years, the cost and density of parking drove companies to the suburban submarkets, where parking has traditionally been free.
Today, more employees are able to leave their cars at home and walk to work or live without a car altogether. This has enabled companies to locate downtown with less cost associated with parking.
Good times ahead
As Indianapolis continues to attract tech firms, the cascading effect of that growth will drive increased demand for office space — not only from those firms but also from other industries looking to position themselves in an urban setting. In turn, that will generate demand across property sectors. For example, the uptick in the number of
office workers downtown is fueling the current apartment boom.
Currently, $2.8 billion of investments are planned through 2022, according to Downtown Indy Inc., a private, nonprofit organization focused on developing, managing and marketing downtown Indianapolis. Over 1.2 million square feet of commercial space will be built or refurbished in the next two years, including modern office space that is much needed.
Most of the existing office product downtown is second-generation space. Many of the cool spaces — non-traditional buildings and modern-designed space with open, collaborative areas, natural lighting and a “cool factor” — have already been snatched up.
— By John Crisp, SIOR, Senior Managing Director, and Gerry “Spud” Dick, Associate Vice President, Cushman & Wakefield. This article first appeared in the November 2016 issue of Heartland Real Estate Business magazine.