1. real estate

MARKETBEAT
OFFICE SNAPSHOT
INDIANAPOLIS, IN
Q3 2014
A Cushman & Wakefield Alliance Research Publication
Summit Realty Group
241 N Pennsylvania Street, Suite 300
Indianapolis, IN 46204
www.cushmanwakefield.com/knowledge
Y-O-Y
CHANGE
18.8%
18.0%
-0.8pp
$17.35
$17.96
3.5%
1,550,993
1,421,917
-8.3%
Direct Asking Rents (psf/yr)
YTD Leasing Activity (sf)
12 MONTH
FORECAST
DIRECT RENTAL VS. VACANCY RATES
25.0%
$18.20
$18.00
$17.80
$17.60
$17.40
$17.20
$17.00
$16.80
$16.60
20.0%
15.0%
10.0%
5.0%
0.0%
2010
A CHANGING OWNERSHIP LANDSCAPE
2011
2012
2013
DIRECT GROSS RENTAL RATE
Q3 14
DIRECT VACANCY RATE
OVERALL OCCUPIER ACTIVITY
2.5
2.0
1.5
For more information, contact:
James Winkler, Director of Market Research
(317) 713.2131
[email protected]
2010
2011
LEASING ACTIVITY
2012
2013
0.5
1.4
2
0.0
0.6
0.5
0.4
1.0
1.6
msf
Several high profile buildings and portfolios have new owners since
Q2 14 as investors take advantage of the growing rental rates and
dipping vacancy of class A product in the suburban submarkets and
opportunities in the lagging CBD. Precedent Office Park, a 21-building
portfolio in the thriving Keystone Crossing submarket, was acquired
by global REIT LaSalle Investments for $120 million. Keystone
Crossing’s direct vacancy rate has improved by 10.8 percentage
points in five years. In the CBD, locally-owned Regions Tower sold to
New York City-based Nightingale Group. With less than 70% direct
occupancy at the time of sale (nearly ten percentage points below the
CBD’s 79.4% average), the transaction represents an out-of-state
investor entering the Indianapolis market seeking an opportunistic
play in the CBD. Overall, more than 3 million sf of office product
totaling nearly $250 million has traded hands this year.
Q3 2014
Overall Vacancy
2
The direct vacancy rate for the suburban market fell to 16.3% from
17.8% one year ago, even with the market addition of a 132,991-sf
primarily vacant speculative building. Direct weighted asking average
gross rental rates are rising, especially in suburban class A buildings,
now up 5.1% from just one year ago to $19.48 per square foot.
Q3 2013
0.2
The Indianapolis-area employment base will benefit from major new
job announcements made by national corporations in Q3 14. Lowe’s
Home Centers closed on the sale of Intech Twelve, absorbing
140,368 square feet (sf), with plans to use the facility for call center
operations. Also, after years of sitting on the market, the former
Verizon/Frontier Communications building along U.S. 31 in Westfield
is being partially absorbed by Carrington Mortgage Services,
expanding its operations from Fishers. These two announcements
vow to add 1,360 jobs to the local base, while contributing to the
309,966 sf of year-to-date direct net absorption market wide in 2014.
STATS ON THE GO
0.2
SIGNIFICANT OCCUPIER INVESTMENTS
The changing of building ownership is not the only shift in the office
market landscape. Carmel, a north-side suburb with an urban model,
has seen its population double since 2000, and occupancy in nearby
office submarkets has risen while asking rates jumped. Fishers, Ind., is
following the same model with its Nickel Plate District. Broad Ripple,
a neighborhood in the Midtown submarket, is proposing new office
developments with high asking rates to capitalize on its existing retail
and residential presence. The definition of suburbia in the area is
transitioning into a collection of urban meccas in suburban areas,
giving users more options with a downtown-feel outside of the CBD.
1.4
The U.S. economy marked another month of
more than 200,000 jobs added to payroll in
September, while the labor force participation
rate fell to 62.7%, its lowest rate since 1977.
The two mixed-message events resulted in
national unemployment falling to 5.9%, and to 5.1% in the Indianapolis
MSA. The positive news – office-using industry employment (financial
services, business/professional services and information) now exceeds
30 million jobs for the first time. Locally, those industries have grown
by 6,000 jobs, up 2.7% since Q3 2013. A Sentier Research study also
noted Midwestern median income is now back to pre-recovery levels.
OUTLOOK
psf/yr
ECONOMIC OVERVIEW
2014 YTD
USER SALES ACTIVITY
The market terms and definitions in this report are based on NAIOP standards. No
warranty or representation, express or implied, is made to the accuracy or completeness
of the information contained herein, and same is submitted subject to errors, omissions,
change of price, rental or other conditions, withdrawal without notice, and to any special
listing conditions imposed by our principals.
© 2014 Cushman & Wakefield, Inc. All rights reserved.
1
INDIANAPOLIS, IN
SUBMARKET
INVENTORY
Indianapolis CBD
11,409,898
OVERALL
VACANCY
RATE
20.9%
CBD SUBTOTAL
11,409,898
20.9%
20.6%
361,297
0
0
(53,074)
(60,092)
$19.16
$21.14
Airport
1,049,437
33.1%
33.1%
21,906
0
0
(16,025)
(16,025)
$14.37
$16.98
Carmel
644,368
22.7%
22.7%
15,638
0
0
(4,929)
(4,929)
$16.80
$18.75
2,160,081
22.0%
22.0%
117,108
0
0
32,992
32,992
$17.44
$18.02
752,279
18.1%
18.1%
1,400
0
0
(33,193)
(33,193)
$14.63
$20.00
I-69/Shadeland
2,659,344
20.5%
19.2%
72,036
39,500
132,991
32,434
10,108
$17.04
$21.63
Keystone Crossing
4,178,115
14.2%
13.7%
246,692
0
0
68,398
51,517
$19.36
$19.99
Meridian Corridor
6,391,326
11.2%
11.0%
236,713
0
0
173,663
166,761
$18.29
$20.39
Midtown
1,538,674
10.1%
8.0%
1,466
0
0
(20,516)
(52,413)
$15.00
$0.00
Northwest
3,813,907
15.0%
14.5%
287,136
119,000
16,880
178,878
157,311
$17.49
$19.02
South
1,176,617
22.7%
22.7%
33,910
0
0
(40,004)
(37,779)
$17.51
$20.11
West
854,790
32.3%
32.3%
26,615
0
0
(8,658)
(2,530)
$15.17
$0.00
SUBURBS
25,218,938
16.8%
16.3%
1,060,620
158,500
149,871
363,040
271,820
$17.21
$19.48
TOTALS
36,628,836
18.0%
17.6%
1,421,917
158,500
149,871
309,966
211,728
$17.91
$20.16
Castleton
East
DIRECT
VACANCY
RATE
20.6%
YTD LEASING
ACTIVITY
361,297
UNDER
YTD
CONSTRUCTION CONSTRUCTION
COMPLETIONS
0
0
YTD DIRECT
NET ABSORPTION
YTD OVERALL
NET ABSORPTION
(60,092)
OVERALL WTD. AVG
ALL CLASSES GROSS
RENTAL RATE*
$19.16
DIRECT WTD. AVG.
CLASS A GROSS
RENTAL RATE*
$21.14
(53,074)
* RENTAL RATES REFLECT ASKING $PSF/YEAR
MARKET HIGHLIGHTS
SIGNIFICANT Q3 2014 LEASE TRANSACTIONS
SUBMARKET
TENANT
Castleton Park 32/40/46/47/48, Indianapolis
Castleton
National Gov’t Services* (expansion) B
College Park Plaza, 8909 Purdue Road, Indianapolis
Northwest
Republic Airway* (expansion)
A
91,048
19845 US 31 North, Westfield
Meridian Corridor
Carrington Mortgage Services
B
77,623
4550 Victory Lane, Indianapolis
South
ACS Human Services LLC*
B
40,204
Keystone Office Centre, 8335 Keystone Crossing, Indianapolis
Keystone Crossing
Paychex, Inc.
A
26,435
300 N Meridian St, Indianapolis
CBD
First Financial Bancorp
A
18,294
Three Woodfield Crossing, 8425 Woodfield Crossing Blvd
Keystone Crossing
Bader Company
A
13,085
SIGNIFICANT Q3 2014 SALE TRANSACTIONS
SUBMARKET
BUYER
BUILDING CLASS
SQUARE FEET
Precedent Office Park portfolio, Indianapolis
Keystone Crossing
LaSalle Investment Management
A
1,155,575
Regions Tower, One Indiana Square, Indianapolis
CBD
Nightingale Properties
A
705,292
Lake Pointe Center III/IV, 8470/8520 Allison Pointe Blvd, Indianapolis
Castleton
USAA Real Estate Company
A
170,147
Intech Twelve, 6620 Network Way, Indianapolis
Northwest
Lowe’s Home Centers
B
140,368
Keystone Office Park portfolio, 3021-3105 E 98th St, Indianapolis
Keystone Crossing
Olymbec Corporate Group
B
114,980
SIGNIFICANT Q3 2014 CONSTRUCTION COMPLETIONS
SUBMARKET
MAJOR TENANT
COMPLETION DATE
Two Concourse at Crosspoint, 10194 Crosspoint Blvd, Fishers
I-69/Shadeland
Speculative
Q3 2014
SIGNIFICANT PROJECTS UNDER CONSTRUCTION
SUBMARKET
MAJOR TENANT
COMPLETION DATE
5401 W 106th St, Zionsville
Northwest
Hat World/Lids (BTS)**
Q4 2015
BUILDING SQUARE FEET
(% LEASED)
150,000 (100%)
Woodland Corporate Center VII, 7676 Interactive Way, Indianapolis
Northwest
Interactive Intelligence (BTS)
Q3 2015
119,000 (100%)
11787 Lantern Dr, Fishers
I-69/Shadeland
Meyer Najem (BTS)
Q1 2015
39,500 (55%)
BUILDING CLASS
SQUARE FEET
190,000
BUILDING SQUARE FEET
(% LEASED)
132,991 (5%)
* RENEWAL - NOT INCLUDED IN LEASING ACTIVITY STATISTICS
**SINGLE TENANT OWNER-OCCUPANT - NOT INCLUDED IN CONSTRUCTION STATISTICS
Summit Realty Group
241 N Pennsylvania Street, Suite 300
Indianapolis, IN 46204
www.cushmanwakefield.com/knowledge
For more information, contact:
James Winkler, Director of Market Research
(317) 713.2131
[email protected]
The market terms and definitions in this report are based on NAIOP standards. No
warranty or representation, express or implied, is made to the accuracy or completeness
of the information contained herein, and same is submitted subject to errors, omissions,
change of price, rental or other conditions, withdrawal without notice, and to any special
listing conditions imposed by our principals.
© 2014 Cushman & Wakefield, Inc. All rights reserved.
2