Office Development, Tenant Demand Heat Up in Northern Suburbs of Indianapolis
The office sector in the northern suburbs of Indianapolis shows clear signs of solid growth and stability with new construction and deeper tenant demand for space, particularly in the Class A segment.
A number of factors contribute to this trend, including job growth, availability of land for housing and favorable demographics. Decision-makers live in the northern suburbs along with families, empty nesters and educated workers.
Nearly 90 percent of all suburban office space in greater Indianapolis is located north of 71st Street in five key submarkets: North/Carmel, Keystone, Northwest, the Fishers/I-69 Corridor and Northeast/Castleton.
Five I-465 interchanges define these five northern suburban office submarkets of Indianapolis, providing workers efficient access to 17.5 million square feet of office space.
Through the third quarter of this year, overall occupancy in these five suburban submarkets stood at nearly 85 percent. The occupancy rate for Class A space was considerably higher at 89 percent.
There are only seven blocks of contiguous office space 100,000 square feet or greater available in the suburbs and downtown — four of which are located in the northern suburbs.
These spaces include 133,000 square feet at Two Concourse, 10194 Crosspoint Blvd.; 113,000 square feet at the former Charles Schwab Corp. campus, 12115 Visionary Way; and 193,000 square feet at one of the facilities currently occupied by Roche Diagnostics Corp., 10300 Kincaid Drive, which will be vacated when Roche’s current headquarters expansion is completed in 2016.
The first three spaces are all located in Fishers in the I-69 corridor. The remaining space is located in northern Hamilton County with 150,000 square feet in the former Verizon Wireless building at 19845 U.S. Highway 31 North.
New Projects Emerge
Fishers is experiencing a tremendous amount of office development with a number of projects. The Depot at Nickel Plate, a luxury mixed-use development that opened in July. The $42 million project features 242 market-rate luxury apartments and 17,045 square feet of street-front retail, located 21 miles from downtown Indianapolis.
The Depot at Nickel Plate is one of the first developments in a series of projects to help transform downtown Fishers into a walkable, bike-friendly hub of activity.
Another $28 million mixed-use project, Fishers Switch, is in the works and will be located directly across from The Depot at Nickel Plate in the heart of downtown Fishers.
Recently, IKEA announced it would build its first Indiana store in Fishers. The Swedish furniture retailer expects the 296,000-square-foot store to open in 2017 and employ about 250 people. The $40 million project will be located on 35 acres at the southeast quadrant of I-69 and 116th Street.
With this announcement, city leaders expect further growth across all sectors in Fishers, spurred further by a new $35 million roundabout interchange coming in 2017 at 106th Street and I-69.
In Carmel, the project to upgrade U.S. 31 in Hamilton County to federal freeway standards is expected to spur significant development. The 13-mile upgrade is taking place from I-465 at the Marion County-Hamilton County line through Carmel and Westfield to State Road 38.
The road project is intended to reduce congestion and improve safety, with the addition of several new roundabouts between 106th Street and 126th Street along U.S. 31/Meridian Street. Construction began in 2011, and the roadway is expected to be open to traffic between I-465 and State Road 38 by early 2016.
River North at Keystone, a new 102,000-square-foot office building under construction, is already 40 percent pre-leased by apartment development and management firm The Gene B. Glick Company, among others.
National Government Services, Inc., a subsidiary of Anthem Inc., leased 186,000 square feet at Castleton Park. The Art Institute of Indianapolis and Bluegreen Vacations Unlimited Inc. have leased 47,000 square feet and 42,000 square feet, respectively, at The Pyramids at College Park.
Tech Sector is Catalyst
During the first half of 2015, more than 50 percent of Indiana’s economic development successes have been in the information technology sector, and this focus is paying off for Central Indiana.
In the last two quarters alone, firms have announced plans to invest more than $69.3 million in Central Indiana and create nearly 1,500 new jobs.
This burgeoning sector is expected to drive increased demand for office space.
Combine that with continued improvement in property fundamentals and it translates into continued leasing demand and steady vacancy rates across the northern suburbs as well as all of Central Indiana.
— By Darrin Boyd, SIOR, CCIM Managing Director, Cushman & Wakefield. This article originally appeared in the December 2015 issue of Heartland Real Estate Business.