Peter Quinn, Executive Vice President and Principal, Summit Realty Group

Modern, bulk distribution space is continuing to be developed on a speculative basis in Indianapolis, according to Peter Quinn, executive vice president and principal of Indianapolis-based Summit Realty Group. A study recently conducted by Chicago Consulting showed that the geographical center of the United States would be in South Central Indiana for a company developing one distribution location to ship product nationally using the current U.S. population distribution.

“Indianapolis has become a major player in distribution,” Quinn says. “As the distribution capabilities continue to grow, more companies will consider Indianapolis as a viable option for high-tech and manufacturing. There is potential for significant, measurable savings in transportation costs by locating your manufacturing facilities close to your distribution network.”

A number of developers are working on projects in the area. For example, Keystone Property Trust/Browning Investments (Keystone/Browning) will complete its 813,054-square-foot building in Plainfield this year. In addition, Quadrangle Development has nearly completed its 442,000-square-foot facility, which is expandable to 832,000 square feet, in Greenwood. Lauth Property Group has had great success in Brownsburg and will complete construction on Eagle Four, a 405,547-square-foot facility, in the first quarter of 2004. Pizutti Companies has a 455,000-square-foot building available in Whitestown. ProLogis is pad ready for a 1 million-square-foot facility on the east side, and The Precedent Companies is developing in the Mount Comfort area.

A trend toward larger distribution centers is apparent. Examples include TJX’s 805,200-square-foot facility at Eagle One in Brownsburg; Whirlpool’s 804,586-square-foot facility at 2801 Airwest in Plainfield; and Belkin’s 798,096-square-foot facility at 558 Airtech in Plainfield.

Most of the new industrial development continues to take place in specific areas. Plainfield continues to be a major player because of the proximity to the airport and the second largest Fed Ex hub in the world. Greenwood has been active due to its labor pool and the Precedent Business Center. The north and south Interstate 65 corridors have seen new construction, and The Precedent Companies is developing a 450-acre park on the I-65 south corridor and a 300-acre park on the I-70 east corridor. Both parks have had good activity. In the I-65 north corridor, Duke Realty’s Lebanon Business Park has been a great success, according to Quinn.

“Indianapolis is fortunate to have a number of quality developers who are on the cutting edge of bulk distribution developments and willing to build with or without a tenant in hand,” Quinn says. Duke Realty, Pizutti Companies, Keystone/Browning and Lauth Property Group have been the most active developers recently. Quadrangle Development, which is a new player in the market, chose to develop in the Greenwood area to take advantage of the strong labor pool there. Other developers are expected to enter the Indianapolis market in the next 12 to 24 months, according to Quinn. Users of distribution space will always consider Indianapolis for their Midwest and national distribution, Quinn says.

“I anticipate a growth in third-party logistics (3PL) providers in our market,” Quinn says. “It is estimated that the 3PL industry manages 20 percent of warehousing in the United States, and this is anticipated to grow to more than 40 percent in less than 5 years.” 3PL firms like Pittsburgh-based Genco and Des Moines, Iowa-based Jacobsons continue to increase their presence in Indianapolis.

Recent leases include Brylane, which is expanding into a 741,000-square-foot facility in Plainfield that is being developed by Opus North Corporation. Sur La Table leased 198,000 square feet in Lauth Property Group’s Eagle Three building in Brownsburg.

“The lease rates in Indianapolis continue to be as competitive as, or more competitive than, anywhere in the country,” Quinn says. Good credit, 10-year lease build-to-suits for the larger facilities can acheive rates in the mid-$2-per-square-foot range. Existing buildings with tax abatement will range from $2.50 per square foot to $3.25 per square foot depending on tenant finish, length of term and credit of tenant.

Summit Realty Group’s third quarter report, which covers multi-tenant buildings, single-tenant buildings, owner-occupied buildings and government buildings with a minimum of 25,000 square feet, shows a vacancy rate of 11.13 percent. “A large percentage of the vacant buildings tend to be older, functionally obsolete buildings inside the I-465 beltway,” Quinn says.

“Indianapolis will continue to develop new industrial parks in the counties surrounding Marion County,” Quinn says. “Future development will continue in areas that have available tax incentives, good labor and are near major highways. As utilities are added, I anticipate continued development in Plainfield and the I-65 north Corridor as well.”

“The low-cost of doing business, availability of modern bulk distribution space, the Fed Ex hub, a strong labor pool, the interstate system and the central location of Indianapolis assures that the city will continue to be a major player in logistics,” Quinn says.

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