INDIANAPOLIS—This Midwest city is well known as a hub for national distributors, but its downtown office market has also begun to draw a lot of attention. After a few very rough years during the recession, new companies seeking youthful workers have started moving into the CBD, and institutional investors are snapping up the city's top office towers.
From 2007 through 2011, no investment activity was seen among the class A or trophy properties, according to JLL's Spring 2015 Indianapolis Skyline Review, its study of the top twelve downtown office properties. But in the last three years, 40% of the Skyline properties have traded hands, even though some of these buildings were struggling. In 2014, New York-based Nightingale Properties purchased the 36-story, 696,000 square foot Regions Tower, and the 515,000 square foot Market Tower was bought out of foreclosure by Chicago-based Zeller Realty Group.
“Zeller knows this market really well,” Adam Broderick, JLL executive vice president, tells GlobeSt.com, and if it's willing to buy here, it's a sign that the CBD is leaving the doldrums behind. The recession forced financial companies and law firms here to downsize, but other users such as tech firms have moved in to fill the gaps.
“Millennials is the buzzword everyone is using these days,” Broderick adds, and many companies believe they need to be in the CBD if they want to “attract and retain employees that do not wear suits and ties, and as a result, we anticipate strong absorption for quite a few years.”
The tech company Salesforce.com, for example, anchors the Century Building, a 153,849 square foot office building in the CBD at 36 S. Pennsylvania St. Although the historic Century is not one of JLL's Skyline properties, the company is part of a growing tech infrastructure that is bringing other start-ups to the downtown.
Developers have about 3,200 condos and apartments under construction, and with a plethora of restaurants, entertainment options, events like the Super Bowl and the Final Four, and a walkable environment, “the downtown is now a place where people want to live,” Broderick says.
The other significant factor that attracts investors to the trophy office towers here is affordability. According to JLL, combined the Regions Tower and Market Tower were picked up for an average of about $98 per square foot. “From a national perspective, the price per pound is quite low,” Broderick says. And the low costs have given the new owners the opportunity to add modern amenities such as fitness centers, employee lounges, and revamped lobbies that will eventually bring in the CBD's new users.
“It's going to take some time,” Broderick says, pointing to a vacancy rate that remains a relatively high 20%, “but the downtown office market is definitely coming back.”
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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.
