INDIANAPOLIS—Indianapolis has become known as one of the nation's top logistics and distribution hubs. But at DTZ's recent State of Real Estate® Indianapolis event, held at the Murat Theatre here and attended by more than 1,000 professionals from across the state, experts said that each of the region's sectors has rebounded.
“Indianapolis has had a pretty remarkable recovery,” Kevin Thorpe, chief economist for the Americas for DTZ, told the crowd. Five years ago, he pointed out, the unemployment rate in the region was 9.3%, but today that has sunk to 5.3%. Furthermore, five years ago, the region lost 41,000 jobs, but “today it is blowing past peak levels of employment. In many ways this market has fully recovered.”
Thorpe tied the good news coming out of Indianapolis with the increasingly solid economic numbers generated by the rest of the US. “Job growth is at a 15-year high,” and job openings, which typically show how many jobs the economy will produce in the near future, “are at a record. So we can't poke holes in this employment data anymore.”
“The US economy as it pertains to commercial real estate is on fire,” Thorpe added. And that is true for Indianapolis as well. The region saw more than 18,000 new net jobs last year and has outpaced the rest of the country for the past four years. In fact, in 2014, it ranked 35th out of 382 metro areas. “The local labor market is outperforming 91% of the country.”
One-third of those new jobs were in the office sector, Thorpe noted, a significant factor in a region mostly notable for its top place in the nation's distribution network. And the office market has seen about 400,000 square feet of net absorption each year since 2012. He did not consider that level robust, “but it has been pretty consistent.” Like many office users, the tenants in Indianapolis have moderated their needs by using space more efficiently. Still, the vacancy rate has slowly sunk to 19.3% and Thorpe expects that rental rates will start climbing this year. He declined to describe the office market as either a landlord's or a tenant's market. “I would simply describe it as a balanced market.”
As expected, it was the region's industrial market which put up the best numbers. “The local industrial market is on fire,” Thorpe said. In the last four years, users have absorbed 17.6 million square feet and “that is in fact a record.” And with a 4.8% vacancy rate, it is one of the tightest markets in the country. Perhaps most impressive, Thorpe pointed out that it was one of the few markets that actually absorbed space during the recession. The increased emphasis on quick and even same-day delivery of goods, coupled with the region's central location and the ability of local distributors to quickly reach a vast number of the nation's consumers, explains why the market is so vibrant. “That's become the name of the game.”
Indianapolis also has an incredibly robust multifamily market. “This is the single greatest apartment boom in the history of the country,” Thorpe said, and he expects the boom to continue in Indianapolis. DTZ research shows that in 2013 over 10,000 people migrated to the region. “This is one of the most important dynamics that Indianapolis has going for it. People drive demand, and people want to be in Indianapolis.” In the same year, Cleveland, Milwaukee, St. Louis, Detroit and Chicago lost people, making Indianapolis “a standout in the Midwest.” And DTZ forecasts show the population boosts will continue for at least the next several years. This “is going to drive healthy real estate dynamics in Indianapolis well into the foreseeable future.”
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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.
