What area is your expertise?
Indianapolis and Central Indiana Industrial buildings sales and leasing and land sales.
What trends do you see presently in industrial development in your area?
The Indianapolis industrial market got off to a strong start this year with 2.5 million square feet (MSF) of positive net absorption recorded for the first quarter 2008. Completed deals during the quarter included Fastenal Company (435,000-SF purchase), National Distribution Centers (230,000-SF expansion), Firestone Building Products (221,000-SF lease), Adidas (162,000-SF lease) and Remy International (57,000-SF lease) to name a few.
This increase in activity from year-end 2007 helped the overall industrial vacancy rate lower from 7.9 percent to 7.7 percent. Several move-ins by companies that signed deals late in 2007, such as CVS Indiana LLC. in Mount Comfort, as well as Gatorade’s occupancy of its mammoth 1.1 MSF build-to-suit (BTS) facility in Ameriplex also contributed to this vacancy reduction.
Another factor enabling vacancy to lower was the slowdown of speculative construction, particularly in the bulk market after 7.5 MSF of mostly speculative, bulk construction occurred in 2007. In fact, no new construction of any kind was completed during the 1st quarter as developers took a step back to allow this new bulk product to be absorbed. This doesn’t mean development has stopped however. Developers have just shifted focus to other product types.
Meanwhile, the bulk market is still experiencing construction, but of the BTS variety. Several noteworthy BTS projects are currently under construction or will be starting shortly including Prime Distribution (1.2 MSF), SMC Corporation of America (668,000 SF), Medco Health Solutions (340,000 SF), ASI Limited (180,000 SF) and Goodwill Industries of Central Indiana (101,000 SF). Look for this trend of BTS bulk development in lieu of speculative bulk development to continue.
What type of industrial product is doing well in your area?
Type II medium warehouse space and Type III bulk distribution space. Type II space is experiencing strong demand. Organic growth and the desire by many companies to own their space has fueled the need for this product. Developers have not ignored this trend and have completed medium warehouse projects this year. The Northeast area and Saxony in Noblesville, as well as Plainfield have gained new space from Verus Partners, Precedent, First Industrial, Coastal Partners and Mann Properties. Likewise, Panattoni has added 161,280 SF of medium space along Interstate 65 on the south side.
Who are the active industrial developers in your area?
Duke, Browning, Lauth and ProLogis. Duke, Lauth and ProLogis are all active in bulk distribution development. Duke will begin construction on 2 speculative bulk buildings, one at AllPoints Midwest (646,380 SF), and a second spec bulk building at Anson (750,820 SF). Precedent, Coastal Partners, Verus and First Industrial are currently active with spec development of medium distribution projects in Greenwood; Precedent and First Industrial in Saxony in Noblesville; and Coastal Partners at the Airport.
Please name one or two significant industrial developments in your area. What impact will these projects have on the market?
Duke Realty & Browning Investments are developing 2 of the largest Industrial projects in Central Indiana. The two developments, AllPoints Midwest in Plainfield and Allpoints at Anson in Boone County will encompass more than 1,500 acres and will offer bulk distribution product along I-65 in the northwest corridor and along I-70 at the New Ronald Reagan Parkway just north of the Indianapolis International Airport. AllPoints Midwest and AllPoints at Anson will offer speculative bulk distribution warehouse space and build-to-suit sites for development for end users looking to locate in the Central United States.
Where is the majority of development taking place? Why is this area doing well?
Plainfield has been the most active area for development. Plainfield and the west side of Indianapolis has benefited from superior infrastructure, the availability of tax abatement and a large base of speculative warehouse space. The Indianapolis International Airport, the Interstate 70 corridor infrastructure, the second largest Fed Ex Hub in the United States and the availability of labor in Plainfield, Avon, Brownsburg and the Westside of Indianapolis continues to draw employers to the area.
What area do you expect to be the next big industrial development market? Why?
Whitestown on the northwest side of Indianapolis along I-65; Plainfield on the west side of Indianapolis along the I-70 corridor; and Mt. Comfort along I-70 on the eastside. Browning plans industrial buildings ranging in size from 270,000 sf to 753,000 SF on a 154-acre site bordering Mt. Comfort Airport in Hancock County. Browning is pursuing additional land for development along I-70 at the Mt. Comfort Exit in the east submarket to offer an alternative to the Plainfield area. The Precedent Cos. was the original developer in the Mt. Comfort area. They built three modern bulk distribution facilities on a speculative basis. The Mt. Comfort area has successfully attracted Emerson Electronics, Reebok, Caterpillar Logistics and CVS Pharmacies to their facilities and are currently under construction with a mid sized distribution facility. The I-70 Exit at Mt. Comfort is currently being widened and rebuilt to accommodate the future growth anticipated for the area. The new interchange shall be completed by the end of 2008. I-70 will continue to develop west of Exit 39 in Hendricks County with Lauth’s Westpoint development. Infrastructure for this project is scheduled to start third quarter 2008. Development will continue on this new North-South corridor connecting I-65 and I-70 and development will take place at the new interchange at I-74 and Ronald Reagan Parkway.
Please describe the industrial leasing activity in your area.
The East and Airport submarkets saw the highest absorption, with a combined figure of approximately 2.4 million sf. Rental rates have slowly begun to rise for medium and flex space. The bulk activity has been slower than years past, but is still active.
Bulk distribution rental rates have remained relatively flat, due to the current inventory of product. Users have a variety of options and landlords are sharpening their pencils to get the deals in the market. While concessions such as fixture upgrades and tenant improvement monies are common, free rent is currency of choice for the tenant.
Rental rates have slowly begun to rise for medium and flex space. As noted in our market highlights, this is because the demand for medium space has been growing and little new flex space has been built. This is a positive sign for the owners of these types of properties and a change of focus for developers.
Please describe the industrial sales activity in your area.
Less expensive second generation space has been absorbed in the past three quarters as companies are tying to control and reduce occupancy costs. Sales activity for smaller buildings from the 20,000 to 50,000 square feet range has been active in 2007 and into 2008. The inventory for larger buildings for sale is low, and we have very little product available for sale