INDIANAPOLIS—The Indianapolis suburbs have dominated the regional office market for many years. But the latest data show that the balance between the CBD and outlying areas has changed. Like many cities throughout the Midwest, the downtown has begun attracting both start-up and established tech firms, along with thousands of new millennial residents. As a result, among the region's submarkets, it was the CBD that posted the highest level of net absorption for the year.
Tenants new to the CBD leased 170,000 square feet of space during 2016, according to a year-end report from JLL, or more than the past two years combined. And many of these firm were transplants from the suburbs. Flaherty & Collins Properties, for example, moved from Keystone to 24,503 square feet in the Regions Tower, and Teradata Corp. exchanged a suburban office for 20,454 square feet in BMO Plaza. Positive net absorption in the CBD was 104.548 square feet for the year, beating Keystone's 71,701 square feet, and way ahead of the Northwest and Northeast submarkets, which saw negative absorption of 65,495, and 183,261 square feet, respectively.
“Companies are now attracted to the CBD,” Adam Broderick, managing director, JLL, tells GlobeSt.com. In fact, this is the first time in fifteen years the downtown has seen more than 100,000 square feet of positive net absorption during a calendar year.
To say the CBD now dominates the region would probably be overstating the case, he adds. Instead, the trend toward urban living, especially among younger workers, has brought about more of a balance between the downtown and suburban markets. Healthcare companies and financial services have kept their focus on the suburbs, partly because these offer greater access to clients. But many firms that once would only hunt for space in the suburbs have now added the downtown to their list of possibilities. As reported in GlobeSt.com, a similar change is underway in the Kansas City metro area, another office market where the suburbs had primacy. And in both cases, companies from the same sector have helped lead the way.
“A lot of the growth in the CBD is related to tech,” says Broderick. In 2013, for example, Salesforce.com, a San Francisco-based cloud computing giant, bought Indianapolis-based ExactTarget, a marketing software firm. The firm anchors an eight-floor, historic building in the downtown, but recently decided to take on an additional 227,781 square feet in Chase Tower, a traditional, modern office building, the state's tallest, now called Salesforce Tower. And the former owners of ExactTarget have not abandoned Indianapolis. Many have decided to invest their proceeds in local start-ups, most of which pick downtown offices.
Indianapolis is now the largest tech market among secondary and tertiary cities, says Broderick. And that is changing the face of its downtown. The owners of four out of the top five office towers have committed millions toward renovations. That includes Salesforce Tower, Market Tower, BMO Plaza and Regions Tower.
And in just a few years, developers have added thousands of residential units to the CBD and adjacent neighborhoods. The addition of all of these new residents has also transformed the downtown's retail offerings. The restaurant scene, for example, was once dominated by steakhouses, but today boasts of many “farm-to-table” bistros, says Broderick, and several James Beard award-winning chefs. “Downtown is now a fun place to be.”
He also expects this trend to continue. JLL found that a number of suburban tenants, requiring a total of around 150,000 square feet, are currently looking for spaces in the CBD.
Still, most office developers in the CBD have confined themselves to renovating older buildings into class B spaces. Although one small office building with about 30,000 square feet is underway in the CBD, when it comes to launching a significant class A building in the downtown, Broderick says “we're a long ways from that.”
INDIANAPOLIS—The Indianapolis suburbs have dominated the regional office market for many years. But the latest data show that the balance between the CBD and outlying areas has changed. Like many cities throughout the Midwest, the downtown has begun attracting both start-up and established tech firms, along with thousands of new millennial residents. As a result, among the region's submarkets, it was the CBD that posted the highest level of net absorption for the year.
Tenants new to the CBD leased 170,000 square feet of space during 2016, according to a year-end report from JLL, or more than the past two years combined. And many of these firm were transplants from the suburbs. Flaherty & Collins Properties, for example, moved from Keystone to 24,503 square feet in the Regions Tower, and Teradata Corp. exchanged a suburban office for 20,454 square feet in BMO Plaza. Positive net absorption in the CBD was 104.548 square feet for the year, beating Keystone's 71,701 square feet, and way ahead of the Northwest and Northeast submarkets, which saw negative absorption of 65,495, and 183,261 square feet, respectively.
“Companies are now attracted to the CBD,” Adam Broderick, managing director, JLL, tells GlobeSt.com. In fact, this is the first time in fifteen years the downtown has seen more than 100,000 square feet of positive net absorption during a calendar year.
To say the CBD now dominates the region would probably be overstating the case, he adds. Instead, the trend toward urban living, especially among younger workers, has brought about more of a balance between the downtown and suburban markets. Healthcare companies and financial services have kept their focus on the suburbs, partly because these offer greater access to clients. But many firms that once would only hunt for space in the suburbs have now added the downtown to their list of possibilities. As reported in GlobeSt.com, a similar change is underway in the Kansas City metro area, another office market where the suburbs had primacy. And in both cases, companies from the same sector have helped lead the way.
“A lot of the growth in the CBD is related to tech,” says Broderick. In 2013, for example, Salesforce.com, a San Francisco-based cloud computing giant, bought Indianapolis-based ExactTarget, a marketing software firm. The firm anchors an eight-floor, historic building in the downtown, but recently decided to take on an additional 227,781 square feet in Chase Tower, a traditional, modern office building, the state's tallest, now called Salesforce Tower. And the former owners of ExactTarget have not abandoned Indianapolis. Many have decided to invest their proceeds in local start-ups, most of which pick downtown offices.
Indianapolis is now the largest tech market among secondary and tertiary cities, says Broderick. And that is changing the face of its downtown. The owners of four out of the top five office towers have committed millions toward renovations. That includes Salesforce Tower, Market Tower, BMO Plaza and Regions Tower.
And in just a few years, developers have added thousands of residential units to the CBD and adjacent neighborhoods. The addition of all of these new residents has also transformed the downtown's retail offerings. The restaurant scene, for example, was once dominated by steakhouses, but today boasts of many “farm-to-table” bistros, says Broderick, and several James Beard award-winning chefs. “Downtown is now a fun place to be.”
He also expects this trend to continue. JLL found that a number of suburban tenants, requiring a total of around 150,000 square feet, are currently looking for spaces in the CBD.
Still, most office developers in the CBD have confined themselves to renovating older buildings into class B spaces. Although one small office building with about 30,000 square feet is underway in the CBD, when it comes to launching a significant class A building in the downtown, Broderick says “we're a long ways from that.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
