HEARTLAND SNAPSHOT, DECEMBER 2006

Indianapolis Industrial Market

To say the Indianapolis industrial market is enjoying continued growth may be an understatement. Record demand for space is fueling new construction, but not without a price. As the industrial sector moves forward, so are projects in several other arenas, leading to longer wait times for materials and a shortage of skilled workers. As it stands, nearly 4.5 million square feet of industrial product is under development, with approximately half of this expected to be finished by year’s end.

Absorption during the first three quarters of this year reached 5.3 million square feet, nearly surpassing last year’s total of 5.6 million square feet. And, with the inclusion of the fourth-quarter numbers, the Indianapolis industrial market has a shot of surpassing the record absorption of 6.4 million square feet in 2004.

Much of the development either underway or completed this year centers on the demand for modern bulk space, which continues to drive the market and accounts for nearly 70 percent of this year’s occupancy growth.

Major modern bulk speculative projects either completed or near completion include Lauth Property Group’s 668,000 square feet in Greenwood and 506,000 square feet in Brownsburg; Duke’s 650,000 square feet in Plainfield and 630,000 square feet at Anson; Verus Partners’ 624,000 square feet in Whitesown; Precedent Development’s 594,000 square feet in Mount Comfort; Browning Investments/ProLogis’ 501,000 square feet in Whitestown; Panattoni Development Company’s 500,000 square feet in Plainfield; and Opus North’s 321,000 square feet in Plainfield.

Besides these spec projects, tenants and developers have met demand with a number of build-to-suit projects throughout the past few years. This year, Panattoni completed a 750,000-square-foot build-to-suit for Epson America in Plainfield, and Duke finished a 653,000-square-foot building for Becton Dickinson in Plainfield.

Additionally, Indianapolis will soon see the advent of its first industrial condominiums, giving small to mid-sized users an opportunity to own space in a business park setting. Two separate projects will open during the next 6 months just a mile from each other on opposite sides of Interstate 69 in the Indianapolis suburb of Fishers.

New construction is expected to drive the area vacancy rate up, with 3.2 million square feet of vacant space in new speculative projects. Overall, the vacancy rate stood at only 6.6 percent at the end of September and should rise into the mid-7 percent range by the year’s end. Continued occupancy growth supports the need for this space, with all expectations that this uptick in the vacancy rate will be short-lived.

This leasing activity should remain strong through year’s end, with distribution leading the way. PepsiCo has already announced plans to build a $14 million, 1.2 million-square-foot distribution facility in Ameriplex on the city’s southwest side. With FedEx also moving into space in Ameriplex, interest and activity should heighten in this submarket.

All in all, Indianapolis’ industrial market continues to play a major role in the area’s economic health and success.

— Luke Wessel, SIOR, is a principal and senior vice president at Colliers Turley Martin Tucker in Indianapolis.

©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.