In Indianapolis, speculative office development has been reduced to a trickle. Overall vacancy rates have remained steady during the past two quarters, and are currently at 19 percent for the suburbs and 16 percent for downtown. “We believe that the Indianapolis office market has seen the worst of the economic fallout, and we expect the market to slowly improve,” says Sam Smith, CEO of Indianapolis-based Meridian Real Estate.

Sam Smith CEO Meridian Real Estate

The North Meridian/Carmel submarket has been the hot spot for office development. Two recent Carmel development projects include Duke Realty Corporation’s 43,000-square-foot build-to-suit project for ITT Educational Services and ALLETE Automotive Services’ 125,000-square-foot headquarters lease in Duke Realty Corporation’s Hamilton Crossing Development.

Duke also recently opened Eight Parkwood Crossing, a five-story, 204,000-square-foot building, with Katz Sapper & Miller leasing 40,000 square feet and Pearson Education leasing 82,000 square feet. Duke Realty plans to develop Nine Parkwood, but it requires 60,000 square feet to 70,000 square feet of pre-lease commitments.

In Fishers, two new projects include Forum Credit Union’s 155,000-square-foot expansion in Sunbeam Development’s Exit Five project, located at 116th & Interstate 69, and Irwin Mortgage’s new 125,000-square-foot headquarters office facility in Delaware Park located south of 106th and east of I-69.

The only new downtown office construction is a 62,000-square-foot building that was redeveloped and expanded for the Advanced Research Technology Institute.

Clarian Hospital Systems is in the process of selling the Meridian Corporate Plaza, a 60,000-square-foot office building, and 19 acres located at Pennsylvania Parkway and 103rd Street. Clarian is seeking to rezone 60 acres, located on a 100-acre parcel of land at 116th and Meridian streets, to build a 365,000-square-foot Women’s Hospital. “Clarian’s new facilities will bolster the tremendous growth of the medical field in the north Meridian corridor,” Smith says. Clarian Hospital Systems is also expanding its presence on the west side with a new hospital in Avon, which will include a Cancer Center, a Women’s Center and a 100,000-square-foot medical office building.

One major development that will affect the North Meridian/Carmel Corridor is the planned upgrade of U.S. 31 to a limited access highway, which will take place within the next 10 years. Jim Brainard, the mayor of Carmel, has expressed concerns that the project could hamper visibility and access to existing Class A office buildings and businesses in the corridor. “The project would also force many businesses along U.S. 31 to relocate due to the imminent domain takings required for the planned improvements,” Smith says.

Most of the new development is taking place along the North Meridian/Carmel Corridor and the I-69/Fishers Corridor. “The availability of cost-effective land and easy access to a growing population are key reasons spurring new development,” Smith says.

Recently, Indianapolis has attracted investors such as Atlanta-based Wells Real Estate Funds, which purchased the 84,000-square-foot Allstate building in Ameriplex and the 140,000-square-foot Crosspoint Plaza One from Lauth. Although Indianapolis does not currently have many active national office developers, the area is seeing interest from outside developers such as Hamilton Partners, the Alter Group and Sierra Crest Equities.

Because Indianapolis-based Duke Realty has a market share of 30 percent or more, few national developers have chosen to play in the company’s backyard. Opus has had success in the industrial market in Plainfield and Lebanon, but it has been unable to kick-start its planned 340,000-square-foot office project, Landmark at Meridian. The project, located at 126th and Meridian, will be the company’s first office foray in Indianapolis.

Currently, average asking rents are $19 per square foot for space downtown and $19.25 per square foot for space in the suburbs.

One notable downtown relocation is the move of the Greater Indianapolis Chamber of Commerce, The Indy Partnership and Indianapolis Downtown, Inc. into 25,000 square feet of office space in Bank One Tower. By sharing space, the groups hope to gain synergies, reduce cost and convey Indianapolis’ competitive position in economic development.

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