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Indianapolis Industrial Market Headed Toward Record Year

INDIANAPOLIS—Overall, the Indianapolis industrial market is in its strongest position since the recession.

By Brian J. Rogal | brianjrogal | | Updated on August 12, 2016

 

ind-GatewayIndustrial HSA Commercial recently leased up this 220K spec in Plainfield, IN, and has started developing another spec nearby.
INDIANAPOLIS—Although this robust market saw a bit of a leasing slowdown in early 2015, since then users have largely absorbed the millions of square feet in new construction built in the past several years. And with demand continuing to intensify, developers have plans ready to go for additional millions of square feet. Overall, the Indianapolis industrial market is in its strongest position since the recession. That’s the conclusion of a new report on the metro area by Colliers International . The firm found that the vacancy rate fell to just 5.8% by the end of the second quarter, a decline of about 140 bps since last summer. Furthermore, “direct net absorption is at a record high midway through 2016, and leasing activity is up 64% year-over-year – both indications of a strong market.” Leasing activity in the first half of the year was already at 7.3 million square feet, mostly due to a set of new leases for modern bulk buildings, a reflection of this market’s importance in national distribution networks. There was 9.1 million square feet of leasing activity in all of 2015, and 13 million in 2013, the market’s record year. The size of the market’s bulk deals appears to be growing, Colliers found. In the past few months, users signed seven deals averaging 380,080 square feet, but in the first quarter 14 such deals averaging just 178,728 square feet were completed. “The trend of users pulling down large blocks of space will continue throughout the year,” according to Colliers. About 30 companies are shopping for 11.1 million square feet of space in the market, an average of around 350,000 square feet. This remarkable level of demand has pulled down the vacancy rate for modern bulk buildings to 8.6%, a decline of about 400 bps in just six months. There has been a lull in construction deliveries as developers waited for tenants to absorb completed spaces. But Colliers expects things to start picking up again. The firm says builders will put the finishing touches on 2.6 million square feet of new space by the end of the year, and break ground on another 2.3 million square feet by the end of this summer. However, “developers are showing more caution in speculative developments after sitting on vacancies longer than expected in recent projects.”

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