INDIANAPOLIS—Last year at this time, a flurry of speculative construction here in the industrial market had several experts concerned that supply and demand had gotten out of balance. Still, these experts also said that the mismatch was probably temporary, and that robust leasing would continue in 2015. The results are now in, and the data show that was a solid prediction.   

According to a new report from JLL, developers finished about 6.0 million square feet of new construction in the Indianapolis metro area, slightly less than the 6.4 million square feet completed the previous year. And about 40% of the new space was leased at delivery. The vacancy rate did increase from 6.3% to 8.2%, but total net absorption for the year was 5.2 million square feet, a significant increase over 2014, when tenants absorbed 4.2 million square feet. Furthermore, over the past 12 months, rental rates increased 7.3%.

"The market continues to evolve to a more balanced market in 2016 than it was in 2015," Brian T. Seitz, executive vice president in JLL's Indianapolis office, tells GlobeSt.com. "There is a steady amount of activity in the market right now that we believe will absorb additional space in the vacant spec buildings, building on the momentum that started to take hold with lease up activity in 2015."

"Indy historically has been a market where we will see either over supply or under supply of product, it's rarely positioned at total equilibrium," Seitz adds. "Once we've run out of space there is a 'rush' to build spec space, that is followed by a period when development stops until we eventually run out of the excess space. And the cycle continues. It really is a matter of evening out the peaks as much as possible."

Developers have slowed down a bit as they wait for all that new space to get absorbed. JLL found that builders have about 2.3 million square feet currently underway. Last year at this time, there was almost 5 million square feet under construction.

"It is interesting to note that today we are also seeing an increase in activity of users in the 50,000 to 100,000 square feet range which tend to be vendors or partners of larger e-commerce users in the market," Seitz says. "That certainly helps to create absorption and shift things back in balance."