Businesses continued to absorb empty space in Indianapolis' commercial real estate markets in 2013, driven by several trends, including a logistics boom, revamped suburban office space and retail businesses catering to healthier lifestyles.
As a result, vacancy rates have fallen for retail and office space as the economy continues to recover, real estate brokerage Cassidy Turley reported in its annual "State of Real Estate" report for the metro area.
Cassidy Turley will deliver its findings at 4 p.m. today at the Murat Theatre at Old National Centre.
Industrial space booming
Warehouse and industrial space has been booming, said Cassidy Turley industrial broker Michael Weishaar.
The metro area's appeal as a goods distribution hub lies in its central location, pro-businesses tax structure and regulations, freight rail connections and the presence of FedEx's second-largest cargo shipping facility, Weishaar said.
The vacancy rate is 4.9 percent, he said, higher than the 3.3 percent posted in 2012, but that is because the market is expanding and must absorb the 4 million square feet added in 2013. Central Indiana has 236,857,866 square feet of industrial space in total.
Growth in three sectors spurred the improvement, he said — small businesses moving into larger locations, companies buying land for future growth and companies making big deals.
Companies signed new leases on 7.5 million square feet of industrial space in large transactions, up from 4.2 million square feet a year ago. Companies renewed another 7.8 million square feet of space, up from 6.3 million square feet a year ago.
Suburbs drive office rate
The vacancy rate in the office industry also improved, falling slightly from 20 percent in 2012 to 19.2 percent in 2013, as the market absorbed empty and refurbished space.
Most of the growth was in revamped building space available in the suburbs, said Cassidy Turley office broker Andy Martin. Available suburban space fell from 19.1 percent to 18.6 percent, Martin said, though it's at a premium in markets like Carmel and Keystone that offer up-to-date space and close amenities.
The market Downtown is another matter.
Downtown Indianapolis is struggling with a changing business environment, Martin said, leading to an increase in the vacancy rate from 19.2 percent in 2012 to 20.3 percent in 2013.
Larger firms and companies have been downsizing space to save money and maximize resources.
New companies, such as those in the growing tech market, are attracting millennials who want to work in nontraditional space. They're moving into historical buildings designed around common areas and amenities, rather than traditional high-rise office space. But that market is scarce.
"Someone who owns one of these downtown towers is going to have to do something with their lobbies and their areas," he said. "All of the available space is now in the towers."
Healthy lifestyles fuel retail
The retail sector has been driven by a trend toward healthy living, driving an increase in the number of health-food stores, fitness studios and health-care centers, said real estate broker Jacqueline Haynes.
In particular, Fresh Market, Fresh Thyme Farmers Market, Wal-Mart Neighborhood Center and Earth Fare are building locations in the metro area.
While that segment of the marketplace is growing, the overall vacancy rate only decreased from 7.3 percent in 2012 to 7.2 percent in 2013. Vacancy rates at strip centers and malls have risen, in particular.
Hamilton County, the Zionsville area and the Greenwood area are experiencing the largest growth in retail space, she said.
Source: Indianapolis Star
Posted by Scott A. Baldwin at 03:06 PM on Thursday, January 23, 2014