HEARTLAND SNAPSHOT, DECEMBER 2008

Indianapolis Industrial Market

The Indianapolis industrial market seems to be weathering the economic storm thanks in no small part to the news from the logistics arena and the city’s key location. The metro area’s central location and superior interstate access puts it within a single day’s drive of 75 percent of the United States, which, given unpredictable fuel costs, has become critical when rationalizing a network of facilities.

The city has capitalized on its location by offering a balanced mix of product, ranging from the modern bulk facility that large national and regional transportation and logistics companies are looking for, to the more traditional distribution and flex/warehouse properties local operators require. This diversity has helped keep vacancies relatively stable. 

A recent boost to this sector came from a new Los Angeles-to-Indianapolis intermodal connection, which was made possible by a partnership between CSX and Union Pacific railroads. For the first time, Indianapolis has direct access to the busy Long Beach, California, port. The connection enables West Coast shipments to go to St. Louis, where they are loaded onto CSX trains and taken to a rail yard in Avon, a western suburb of Indianapolis. 

Out West

Avon is only part of the west side story. Just south of the town, Plainfield, Indiana, is ripe for continued growth. It is located off Interstate 70, adjacent to the $1.1 billion Indianapolis International Airport. The new facility is the nation’s seventh-largest cargo airport and home to the world’s second-largest FedEx hub.

Construction is nearly completed on a 533,000-square-foot speculative building in the AllPoints Midwest development, where Prime Distribution Services has leased 1.2 million square feet. Just down the road, Gatorade PepsiCo leased 1.1 million square feet at Ameriplex, and Monsanto grabbed 600,576 square feet within another Plainfield facility.

Additionally, Siemens recently leased 320,000 square feet within Atlanta-based Republic Development’s 500,000-square-foot modern distribution center in Plainfield. Amazon.com leased 950,000 square feet off of I-70 in Plainfield on the heels of leasing 630,000 square feet off of Interstate 65 in Whitestown, Indiana, earlier this year.

Other Compass Points

The city’s north side submarket is also bustling. Known as a strong office market, the area is seeing new demand for industrial development near access points along I-65 on the northwest side and Interstate 69 on the northeast side.

Indianapolis is also seeing new players enter the industrial development scene. Minneapolis-based Meritex has thrown its hat into the ring with the purchase of 50 acres in the Noblesville Corporate Campus on the northeast side. Development plans call for seven buildings catering to the medium distribution and office/warehouse user. The first building is scheduled for completion in second quarter of 2009.

Chicago-based Verus Partners has moved into the market with its medium distribution product on the northeast side. The property is nearly 100 percent leased to multiple companies including a GE subsidiary and Weaver Popcorn. Verus also built a 624,000-square-foot modern bulk building off of I-65 on the northwest side of Indianapolis, near Anson, which is a new master-planned business and residential community. Pitney Bowes leased 185,000 square feet within the new building.

While much of the industrial growth has come from the modern bulk product along I-70, expect I-69 to get more attention, particularly at Exit 10, which offers a desirable location for light industrial product and high-tech R&D facilities. 

Axcess 70, a new industrial park in Mount Comfort, Indiana, near I-70, is taking shape in the East submarket. Two buildings are set to begin construction in the park, including a 450,000-square-foot modern bulk facility, as well as a 250,000-square-foot medium distribution facility. The buildings are slated for completion in the spring of 2009.

The south submarket has taken a back seat with regard to development activity; nevertheless, the south side remains relatively stable as a result of commitments from two national tenants. Nestle Waters took an entire 295,000-square-foot building in the popular Precedent South Business Park located off of I-65 in Greenwood, Indiana, and Cooper Tire is constructing an 800,000-square-foot building just down the interstate in Franklin, Indiana.

Rates and Demand

The average rate for modern bulk in Indianapolis is $3 per square foot triple net. The northeast side continues to command the highest rates, where office/warehouse facilities go for $13 per square foot. At the opposite end of the spectrum, the asking price for a former manufacturing building converted to a distribution use downtown would go for $1.50 per square foot.

Indianapolis raised the bar for modern bulk distribution space this year, with more than 8 million square feet leased. When compared to the average gross leasing activity levels over the past decade of approximately 4 million square feet per year, it was definitely a banner year for the city’s industrial sector.

Without question, the uncertainty in the global economy will impact supply and demand for industrial space throughout the United States. But some markets may benefit as companies reconfigure their supply chains to maximize cost savings. Due to its location and its ability to offer significant logistical cost savings for companies, Indianapolis stands to benefit in the near future.

— Jeremy Woods is a senior director of Indianapolis-based Summit Realty Group.

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