RESOURCE Commercial Real Estate provides high-level market research services to our brokers and their respective clients. We combine market knowledge with excellent internal and external data sources to compile an accurate assessment of the market conditions.
The first quarter of 2017 began with a fast start and saw the largest rise in new supply since
Q4 2015. This marks the Indianapolis industrial market’s 16th consecutive year with positive net absorption, recording 481,800 SF. The vacancy rate grew to 3.83%, up from 3.71% last quarter.
After posting 1,950,540 SF net absorption in Q4, the total net absorption for 2016 was the most of any year on record with 7,637,690 SF. Vacancy rates responded to the record-setting absorption by declining from 6.25% in Q1 to 3.71% in Q4. Construction increased each quarter in 2016 from under 2 million SF at the end of Q1 to nearly 6.4 million SF at the end of the year.
The third quarter of 2016 marked the industrial market’s 14th straight quarter with positive net absorption, recording an impressive 1.9 million SF. This brings the YTD net absorption to over 5.6 million SF – more than the 12-month total for years 2012 through 2015. The vacancy rate continued its historic decline by reaching 4.72%, breaking the 5% threshold for the first time in recent history.
The industrial market reached 2.37 million SF of net absorption, bringing the total absorption for the first half of 2016 to an impressive 3.8 million SF, on pace to surpass 2015’s total by the end of the 3rd quarter. Significant transactions in the second quarter include a 737,850 SF lease renewal by RR Donnelley in Park 100 and a 503,880 SF lease by Nippon Express in Plainfield.
As the year begins, completions have paused briefly while 1.8 million square feet is expected to be delivered later this year. Vacancy declined to 6.25%, and net absorption spiked at 1,410,520 SF. It seems that tenants have caught up with the flood of new supply issued last quarter by occupying a large amount of the new space. One of the most significant transactions this quarter included a new lease with New York-based Hachette Book Group in Lebanon Business Park for 418,000 SF, which brought their total square footage in the industrial park to 1.8 million SF.
The fourth quarter has seen the largest rise in new supply since the beginning of the year. This includes a positive net absorption of 868,507 SF. Vacancy slid to 6.55% this quarter, down from 6.87% last quarter. Significant transactions included a renewal of 904,254 SF by an e-commerce company at 710 South Girls School Road, and a new 235,000 SF lease with Nestle Waters at 650 Commerce Parkway East Drive. Construction has dropped for the quarter, resulting in a decline from last year.
The Indianapolis industrial market saw 1.2M SF of net absorption this quarter, causing the vacancy rate to dip to 6.87% compared to 6.99% in Q2. Leasing velocity picked up slightly, with notable deals occurring in the Northwest and Southwest submarkets.
After Q4 2016 tallied 7,384 SF of net absorption, the o ce market reached over 450,000 SF of net absorption for the year – the most since 2012. Class A space led the way with over 100,000 SF of positive absorption in Q4 while Class B and C space had negative absorption of 55,000 SF and 45,000 SF, respectively.
Download Full Report
Inventory continued to tighten as vacancy rates declined for the ninth consecutive quarter. Despite 163,050 SF of construction completed during Q3, the vacancy rate fell to 14.99% – breaking the 15% mark for the first time. Completions included the 61,050 SF Lakeside Green in Carmel and the 102,000 SF River North in the Keystone Crossing.
The office market continued to tighten as vacancy rates declined across the state. Suburban and downtown vacancy decreased by 37 and 47 basis points respectively, bringing overall vacancy to a historically-low rate of 15.07%. Three skyline properties were purchased during the quarter–The Hearn Company acquired the 460,000 SF BMO Plaza and Mission Peak Capital invested in Market Square Center and 251 East Ohio which total 635,500 SF.
This quarter, rents downtown rose to $18.43 on average, while remaining relatively stable at $16.57 in the suburbs. CBD vacancy edged above Q2 2014 levels. However, vacancy in the suburbs is now at its lowest since the beginning of 2010, at 14.44%. The submarkets that experienced the lowest levels of vacancy included Northwest, Keystone Crossing, and Carmel/Meridian Corridor.
Demand for office space in the Indianapolis market remains strong, as evidenced by declining overall vacancy rates. Negative absorption reflected completions occurring primarily in the Fishers submarket. More than 400,000 SF of new construction is occurring in the Carmel submarket as well as the CBD.
Indiana continues to lead the Midwest in labor force growth and declining unemployment rate. In August, the unemployment rate was 4.6%, a significant decline from 5.8% last year. The Indianapolis office market had a particularly strong quarter, registering the highest amount of net absorption (268,906 SF) in two years. In addition, more than half of the absorption occurred in the CBD, driving the vacancy rate down to 17.78%, the lowest it has been since Q1 2013.