INDIANAPOLIS—A joint venture between Middleton Partners and Romanek Properties Ltd., both Northbrook, IL-based real estate firms, has just sold its Hillsdale Business Park, a 445,892 square-foot property in Indianapolis for more than $30 million to Brennan Investment Group, the latest among a growing number of investors to seek the higher yields found in this city.
“This is a very active market from a leasing perspective,“ Gary Nussbaum, managing director of Transwestern, tells GlobeSt.com. Along with senior associate David Matheis, he represented the seller. “Normally, we've got two or three tenants looking at every vacancy.”
Currently 90% leased, the six-building campus at 6911 – 6999 Hillsdale Crt. sits in the city's northeast submarket near the intersection of I-465 and I-69 and offers a mix of office, flex and light industrial space. Community North Hospital is nearby, and its Community Health Network occupies 28% of the business park.
“Although occupancy is already at 90%, Brennan acquired the park because of the opportunity to further add value with hands-on leasing through renewals and repositioning space in a rapidly improving market,” says Scott McKibben, chief investment officer and managing principal at Rosemont, IL-based Brennan.
“Relative to what you might pay for similar product in Chicago, you are going to see higher yields in Indianapolis,” Nussbaum adds. “Chicago has the bigger name, but Indianapolis has the better statistics.”
According to CoStar's Mid-Year 2015 Report, the office market in Indianapolis has a vacancy rate of just 8.4%, with 240,720 square feet of positive net absorption in the second quarter.
“That by itself is very attractive to investors,” says Nussbaum. He estimates that property buyers will get yields 50 to 75 bps better when buying in Indianapolis than with similar product in Chicago.
And experts believe things can only get better for the metro region. “The economy is shifting into a higher gear, which will fuel improvement in property fundamentals and translate into leasing demand,” according to a mid-year analysis by DTZ. “Hiring in key office-using sectors will translate into vacancy declines of 50–60 bps. Net absorption will occur in all classes of space, and net absorption for the year should surpass the prior two-year average of 298,288 square feet.”
“Investment activity has picked up in Indianapolis over the past couple of years, especially among institutional buyers,” Nussbaum adds. In 2014, for example, LaSalle Investment Management/Global Property Investment Fund, purchased the Precedent Office Park, a 19-building office complex in the Keystone submarket, for $102.67 million. “That portfolio sale got a lot of groups focused on Indianapolis.”
Class A properties in the CBD also appeared on the radar screens of investors in 2014, although some of these buildings were struggling. New York-based Nightingale Properties purchased the 36-story office tower Regions Tower, and the 515,000 square-foot Market Tower was bought out of foreclosure by Chicago-based Zeller Realty Group.
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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.
