HEARTLAND SNAPSHOT, OCTOBER 2004

Evansville, Indiana

The west side of Evansville, Indiana, has shown steady growth in recent years, and there is no sign of a slowdown at this point, according to Steven Martin, senior investment advisor with Sperry Van Ness/Martin Commercial Group in Evansville. This area is growing with a new Wal-Mart Supercenter — and the associated development that surrounds a new Wal-Mart center — under construction. The general contractor on the project is Indianapolis-based Nestel Inc.

“There is also a great deal of effort to revitalize downtown Evansville,” Martin says. The city hopes to attract companies to locate downtown by wiring downtown buildings with Wi-Fi wireless Internet. The ultimate goal is that if companies locate downtown, they will have Internet on a wireless basis, he says. Old National Bank is currently moving out of its 135,000-square-foot headquarters into its newly completed $47 million headquarters located at the southeast corner of Main Street and Riverside Drive. Industrial Contractors was the contractor for the project and Helmuth, Obata and Kassabaum, a St. Louis architectural firm, partnered with Indianapolis-based Veazey, Parrott, Durken & Shoulders to provide architectural services. The eight-story, 225,000-square-foot facility will also have a 625-space attached parking garage. Old National Bank will utilize all floors except the 6th floor, which will be leased to three or four tenants. Vectren has purchased the Riverside One building located at 101 Court Street for approximately $7 million. Vectren is replacing the building with its new $20 million headquarters, which is currently under construction. The Riverhouse Hotel located at 127 First Street is being converted to office, housing and restaurant space. Commercial Associates Corporation acquired the 39-year-old property in May 2003. New housing is being considered for downtown, such as the Curtis Square proposal, which will supply approximately 62 units in central downtown. “There is also new development on the east side of Evansville, but it appears to have slowed down in the secondary locations where there is an overabundance of land,” Martin says.

“Evansville recently has seen a great deal of medical development,” Martin says. “Deaconess Hospital and Tri-State Orthopedics will make the Eastside intersection of Interstate 164 and the Lloyd Expressway become more of a regional medical usage area.”

Tri-State Orthopedics has completed its new facility at I-164 and the Lloyd Expressway, and Deaconess Hospital is building a new 100-bed acute care hospital on its eastside campus. Additionally, the hospital will be expanding its main campus to include an additional 52 beds, convert all rooms to private patient rooms, improve the Cardiovascular Surgical Intensive Care Unit and add additional patient parking. The general contractor on the Deaconess project is Industrial Contractors. St. Mary’s Hospital has also expanded its parking and has leased a portion of Washington Square Mall for a Geriatrics clinic.

Some of Evansville’s new and upcoming retail developments include the Target Pavilion retail center on the east side, which started leasing up in late 2002 and currently has only 1,200- to 3,000-square-foot spaces available. The former Kmart site, which is located at the northwest corner of Burkhardt and Lloyd Expressway, recently came on the market and will be redeveloped in the near future, but it is unclear at this time what will be done with the property. In addition, three new Starbucks Coffee stores will enter market during the next 12 months; Romain Automotive Group has plans to consolidate two locations into the previous Builders Square location on the Lloyd Expressway near I-164; and Spurling Investments recently finished construction of a Schnucks-anchored retail center on Green River and Lynch roads. “There is a new Wal-Mart center that has been proposed for this area as well, although it is still in the planning phase,” Martin says. Krispy Kreme Doughnuts and Coffee, Dick’s Sporting Goods, T.J. Maxx, Linens ‘n Things, Borders Books & Music, Dress Barn, Fashion Bug, Babies “R” Us, Biaggi’s restaurant and Chick-fil-A are some of the retailers new to the Evansville market.

Evansville also is seeing some civic development, with a new jail and vocational school currently under construction. The city has two new libraries, which are located on Oak Hill Road and in downtown Evansville, and a third library is under construction on the north side. The city is planning a new sewage plant near Lynch Road and U.S. 41 as well.

On the west side, Evansville’s most active retail developer is Hahn Realty/Kite Development, which is a retail joint venture partnership. Regency Properties, Spurling Investments and Ream Development are actively involved in the retail, office and multifamily markets on the east side, and Ed Curtis Development develops office and multifamily product downtown. Ken Ubelhor is the developer of Newburgh Apartments located east of Bell Road in Newburg, Indiana.

“The market varies significantly throughout town and by property type,” Martin says. “The vacancy rate for apartments is 9 percent to 10 percent according to our most recent finding with Institute of Real Estate Management (IREM) reporting, and there is an 11 percent vacancy for the overall Evansville market in IREM’s 2004 publication.” Based on permits filed at the Vanderburgh County Building Commission, more than 600 units are either open, under construction and/or have been planned in the past 18 months. For the office market, vacancy is at 17 percent overall, with Class A space at approximately 5 percent and Classes B and C at significantly higher vacancy rates. Vacancy rates run from 12 percent to 25 percent in Evansville’s retail market, with the north side at 25 percent and the east side at about 12 percent. In the hospitality industry, room vacancies range from 40 percent to 45 percent. “Occupancy has been improving slowly during the past year and a half,” Martin says.

“Future development predictions are that Evansville developers are looking more and more at the north and northeast sides of Evansville, and we are starting see signs of that movement,” Martin says. “Retail seems to be growing and current inventory is becoming absorbed.”

Developers should also watch for Interstate 69, as it is currently in the planning stages. “People are already buying some land in anticipation of the new road and are focused on the parcels that surround the proposed intersections,” he says.

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