INDIANAPOLIS—The rise of American manufacturing and the reboundof the housing market, among other factors, have boosted demand forwarehouse and distribution space across the US, but few places havebenefitted as much as Indianapolis. Its dense transportationarteries and proximity to other major metro areas like Chicago,Detroit, Columbus, Louisville and many others, have attracteddevelopers of modern bulk distribution buildings, medium-sizeddistribution, manufacturing and other facilities.

|

According to Cassidy Turley, a commercial realestate services provider, the industrial sector here has alreadysurpassed the five-year annual absorption average of2.7-million-square-feet. In the third quarter alone, the market saw1.4-million-square-feet of absorption and net occupancy gains forthe year have already hit 2.84-million-square-feet.

|

“The Indianapolis industrial market is on an absolute tear,”says Jason Tolliver, regional vice president inCassidy Turley's Indianapolis office. “The traditional drivers ofindustrial space like housing, manufacturing and warehousing aresolid, but the new engine of e-commerce has shifted the market intoanother gear. As a result, Indianapolis has emerged as one of thestrongest markets in the US with some of the largest e-commercedeals completed anywhere in the country.”

|

Nearly all product types registered positive absorption in thethird quarter. “Demand within the modern bulk and mediumdistribution segments was particularly strong, with occupancy gainsfor each surpassing the 1-million-square-feet mark through thefirst three quarters,” the firm found.

|

As a result, investors have been moving in as well.Chambers Street Properties, a real estateinvestment trust in Princeton, NJ, for example, earlier this yearcompleted the $30.2 million purchase of 445Airtech Parkway, a 622,440-square-foot warehouse anddistribution property developed by Prologis/BrowningInvestments in suburban Plainfield's AirTechBusiness Park. The partners finished it last year, thefirst speculative industrial development in Indianapolis since2008, and Hartz Mountain Corp., a pets productsupplier, quickly signed a triple net lease for the entirespace.

|

Although leasing velocity was most pronounced in the Southwestand Northwest submarkets, net absorption gains for the yearimproved fundamentals in virtually all industrial submarkets. Keylease transactions included Dart Care taking291,977-square-feet at 4430 Sam Jones Expressway in the Southwestsubmarket and Kenco Logistic Services' leasing of257,030-square-feet at AllPoints inWhitestown.

|

Not surprisingly, overall vacancy continues to remain well belowthe national average. Even with the delivery of several speculativeprojects the rate is only 5.2%. The vacancy rate for mediumdistribution was even lower, only 4.2% for the third quarter,followed by a modern bulk rate of 6.4% and traditional bulk rate of8.1%.

|

These rates may have reached their lowest ebb. With developersslated to deliver 4.92-million-square-feet of speculative productin 2014, Cassidy Turley forecasts that the vacancy rate will“rebalance closer to its historical average, tracking in the low-to mid-6% range.” Furthermore, the firm expects “average askingrents for all types of industrial product to rise by at least 1.5%over the balance of 2014, with gains eventually reaching 2.4% in2017.”

|

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

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.