HEARTLAND SNAPSHOT, AUGUST 2006

Indianapolis Office Market

The suburban submarkets of Indianapolis have seen significant increases in single-story professional space developments. These new developments, which are strategically located for optimal visibility, are being marketed to physicians, dental specialists and small law offices.

According to CB Richard Ellis’s first quarter market survey, the Carmel submarket, with the highest rents, is leading the Indianapolis area with 89 percent occupancy. “Much of this is due to the incredible growth in the surrounding county,” says Greg Carter, sales professional at CB Richard Ellis in Indianapolis. “Hamilton County has long enjoyed the highest per capita income in the state, and the population growth has created a need for more services and amenities.”

A major focus in the Carmel submarket is the North Meridian corridor, which has seen an influx of larger developments. In addition to the emergence of specialty hospitals and medical-use buildings, several developers are building Class A office parks in the area. There is a trend of organic growth for small and mid-sized companies in the North Meridian ccorridor and other suburban markets are vying for their attention.

Lauth Property Group is developing its Meridian Corporate Plaza (MCP) development, a three-building office complex in the North Meridian Corridor. The complex will contain more than 340,000 square feet including Lauth’s 65,000-square-foot headquarters located in MCP I. MCP’s second and third buildings will each have 140,000 square feet.  Also in the Meridian Corridor, Duke Realty Corporation is working on One West, the first building in its Parkwood West development. Parkwood West, Duke’s newest speculative office development, will include three office buildings totaling 570,000 square feet, a 1,200-vehicle parking garage and two restaurants. In the Fishers/Geist submarket, Williams Realty Group is marketing Allisonville Professional Center in Hamilton County. The development features office condominiums, which can be purchased by individual tenants.

In the central business district (CBD), several long-term tenants such as Simon Property Group and AUL are relocating within the downtown area, while Guidant and Safeco have closed their doors. The effects of these moves are still unseen and may be double-sided. “On the negative side, these vacancies will leave a significant amount of central business district space to absorb,” Carter says. “On the positive side, the downtown market is vibrant and attractive to many new and expanding companies. With the move of these long-term tenants, there is more opportunity to attract new business and these large spaces would allow a company to move its headquarters into a growing market.”

The Class A rental rates in Indianapolis are ranging from $18 to $20 per square foot in the suburban markets and $18 to $22.50 in the downtown area. First quarter 2006 vacancy rates for the suburbs were 16.78 percent, with the downtown market slightly lower at 14.55 percent.

For future developments, Carter suggests watching the Interstate 69 corridor, noting that the Saxony development at Exit 10 may create a noticeable impact. Also watch the technology areas and parks, Carter says, as there has been much discussion about expanding Indianapolis’s life sciences and technology companies.

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