HEARTLAND SNAPSHOT, AUGUST 2005

Indianapolis Multifamily Market

Given the challenging operating environment combined with low cap rates (due to aggressive lending and low interest rates), there is an increasing number of property owners looking to sell in Indianapolis, according to George Tikijian, president of Tikijian Associates – Multihousing Investment Advisors. “There remains an abundance of capital available for A & B grade properties, but C grade properties are more challenging unless there is a true value-add component,” he says.

Several significant multifamily developments are underway in Indianapolis. Stonebridge, a JC Hart community, is currently being developed on US 31. The 197-unit project will be complete in 2006. “Stonebridge will target young professionals (as typical of JC Hart Community) and is set on a beautiful wooded site with some topography – unique for apartments in Indianapolis,” Tikijian says.

Herman & Kittle, one of the area’s more active developers, also is developing Nora Commons, a 272-unit seniors apartment community located on 91st Street in Washington Township. Completion is scheduled for 2006

In Plainfield, Central Park at Metropolis is being developed by Flaherty & Collins as part of the more than 800,000-square-foot lifestyle center Metropolis. Phase I of the 264-unit community will be complete in 2006.

In Carmel, Edward Rose is currently developing the 324-unit Alexandria of Carmel, which is set for completion in 2006. The high-end property is located just west of State Route 31. “Carmel has seen a significant amount of new construction from 1999 to 2003, which caused a supply/demand imbalance; however, in the last 6 months the market has absorbed the new units and occupancy rates have risen,” Tikijian says.

The new development pipeline is slowing down throughout Indianapolis, and the development that is taking place is largely on the south side due to the availability of land with income and rent levels there to support new construction. “There is also some activity on the north side where available land can be found and rents will be able to support the high-end projects,” Tikijian says. “With the apartment market’s softness during the past couple of years and construction costs increasing, we don’t expect much new development. Effective rents will need to increase to support new construction in the future”.

The downtown market has strong occupancy and high rents, but finding land is difficult. “It will be interesting to see the effect of the introduction of numerous condo projects on this high demand of units,” he says. 

Fishers, Carmel, Zionsville, Westfield and Noblesville have strong population growth, so the need for units will continue to grow. However, the occupancy rates and effective rents will need to increase to support development in those markets.

No new multifamily developers have entered the Indianapolis market, as many of the national developers are focused on other markets. “Developers interested in building in Indianapolis are having a hard time finding sites and making the numbers work given the rent levels,” Tikijian says. The projects that are getting developed tend to be high-end, high-amenity projects targeting affluent young professionals as well as tax credit developments for the affordable market. Also, the number of condominiums being developed is increasing dramatically, causing pressure on new apartment development.

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