HEARTLAND SNAPSHOT, DECEMBER 2007

INDIANAPOLIS OFFICE MARKET

Indianapolis is experiencing a trend towards work/live/play mixed-use projects that merge work, services/amenities and housing. This new aesthetic is blossoming in three main developments: Saxony, Anson, and Venu. 

Saxony is a 700-acre, mixed-use development located in Hamilton County. It will feature a pedestrian-friendly community connecting housing, multiple office opportunities, and retail at Exit 10 off of Interstate 69. The 50,000-square-foot Community Health Pavilion at Saxony has already been completed and opened. Saxony’s Corporate Campus will feature more than 3.5 million square feet of planned office, light industrial and retail space. The development will house the headquarters of Intrametco in a 20,000-square-foot office building. Directly across the interstate from Saxony’s Corporate Campus North will be a Clarian hospital and medical campus.

Anson is Duke’s 1,700-acre mixed-use development located in Boone County. The retail, housing and office segments of Anson are all interconnected by a network of trails and gathering places that lend to the neighborhood feel. The Marketplace at Anson, a retail center located within the development, is currently under construction. Additional plans call for a medical and professional office building in the central business district of Anson.

Finally, Venu is Premier Properties’ 2.3 million-square-foot lifestyle center. Once built, it will be the largest LEED-certified development in North America. Venu will also feature a 575-room hotel, which will be the city’s third largest [for more on area retail activity, see sidebar]. Premier Properties bought Two and Three Woodfield, as well as the current lease for Whole Foods. The center will also feature enough restaurants to seat more than 2,000 people, a 5,000-seat performing arts theater, 116 condos, and a 21,000-square-foot health club. Underground parking will accommodate more than 6,300 vehicles. Venu will be an all-weather center, featuring retractable sections of roofing and walls.

A majority of development is taking place in the North County submarket; Hamilton County is the ninth fastest-growing county in nation and the seventh richest. People here want to be close to home, entertainment, shopping and dining. We are seeing substantial growth on the northern tier, including Westfield, Lebanon, Zionsville, and Fishers. The North Meridian/Carmel area is also especially active. The year-to-date net absorption in the North County market is 119,285 square feet. This, combined with the year-to-date net absorption in the Northwest County market of 125,324 square feet, totals almost 73 percent of the total absorption in the Indianapolis area. Keystone at the Crossing will also continue to experience growth.

Pannatoni, which has up until now been a major player in the industrial sector, is now making a move in the office segment with City Center at Penn Office Plaza. Located at City Centre Drive and Pennsylvania Street in the Carmel business and medical corridor in Carmel, the development features 369,000 square feet of office space. It will also include an upscale 263-room hotel with a conference facility and a restaurant. Allied Solutions has already signed on to occupy 40,000 square feet in the development. Completion is expected by the end of this year.

Other development occurring throughout the market includes Parkwood West, a three-building project located at 96th Street and U.S. Highway 31 that totals 558,750 square feet. Firestone will occupy 165,000 square feet of space in Parkwood West, vacating 96,000 square feet at Two Parkwood. McDonald’s Corporation is also leasing 18,000 square feet in the first building.

Additionally, Capital Group has purchased the 106,158-square-foot Opus Landmark Center at Meridian’s first building. Safeco is in the market for 125,000 square feet of downtown office space, and Veola Water is rumored to be taking the 125,000 square feet at National City Center that Simon Property Group vacated last year. Advantage Health will also be occupying 40,000 square feet in Duke’s new 120,000-square-foot building at River Road.

In the pipeline right now is Duke’s One West, a 184,750-square-foot project expected to deliver by the end of the year, as well as River Road II, a 120,000-square-foot building expected to deliver second-quarter 2008.

Lauth is also been very active in the area. Intech 3, a 151,353-square-foot project, is expected to deliver by the end of the year. An 85,000-square-foot medical building located at 12188-B N. Meridian St. is also expecting a fourth-quarter completion. Finally,  South Indianapolis Medical Plaza, a 60,000-square-foot medical office building, is expected to deliver around the same time.

The increased development has done much to increase rental rates and decrease vacancy rates. Rental rates for downtown and suburban Class A office property are almost equal, with downtown posting a rate of $19.22 per square feet and the suburbs posting $19.29 per square foot. When averaged in with other classes, the overall rental rate for downtown property is $17.35 per square foot and suburban is $17.23 per square foot.

Vacancy rates vary overall, from a low 9.9 percent at the downtown submarket to 16.8 percent at Keystone Crossing. Most markets, though, fall between 12 and 14 percent. For Class A property, vacancy is a little higher, ranging from 10.4 percent in the downtown submarket to 22.8 percent in Carmel. The entire market, though, averages 13.8 percent for Class A property.

— Samuel F. Smith II is the CEO with Indianapolis-based Resource Commercial Real Estate.

©2007 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.