INDIANAPOLIS – Cassidy Turley, a leading commercial real estate services provider in the U.S., announced today that the Indianapolis regional real estate market is showing signs of improvement across all sectors. Market segments should continue to recover, but cautious consumers and slow job growth may temper the pace of growth.
Q1 2013 Highlights by Industry Sector (Click here to view the full reports.)
“Hiring and healthier Hoosier households have helped the retail sector grow despite the one-two punch of payroll tax increases and sequestration drama,” said Jason W. Tolliver, J.D., vice president, research for Cassidy Turley. “It is no longer a question of whether consumers can spend but rather a question of whether they feel comfortable enough to do so. Until that comfort level rises I expect the retail ride to be bumpy, especially for mid-priced retailers.”
- Quick Summary: The Greater Indianapolis retail market experienced its third consecutive quarter of growth, registering 268,329 square feet (SF) of quarterly net occupancy growth.
- Growth Areas: Trade areas posting the most notable gains included Lafayette Square/Speedway (+70,083 SF), Mooresville (+27,736 SF), Castleton/Keystone (+20,666 SF) and Michigan Road/Zionsville (+13,726 SF).
- Vacancy Rate: Overall vacancy for all retail types is currently 7%, the lowest level since the onset of the recession.
- Outlook: An overall increase in retail and restaurant sales is expected over the balance of 2013. However, pressure on discretionary purchasing will likely slow the pace of growth over the coming quarter.
“Housing has emerged from its recessionary slump and is once again driving demand for both warehouse and flex product,” Tolliver said. “Additionally, the manufacturing sector continued to expand in the first quarter, although, the pace of growth seems to be slowing. Despite this, factory hiring has continued and this bodes well for future CRE demand.”
- Quick Summary: Growth was challenged in the first quarter by political uncertainty related to fiscal policy and continued economic concerns in Europe. Despite that, leasing velocity continued at a respectable clip and the industrial market has now grown for three consecutive years.
- Growth Areas: Although lower than 1Q12, net absorption registered 650,374 SF with good leasing velocity. Warehouse, flex, manufacturing and distribution product types all expanded in the quarter.
- Vacancy Rates: The multi-tenant vacancy rate remained relatively flat at 3.1%—with manufacturing posting the lowest vacancy and flex space the highest at 7.1%.
- Outlook: With a considerable amount of speculative product coming online yet this year, the Indianapolis vacancy rate should rebalance and get closer to its historical average. Consequently, healthy leasing velocity levels should place upward pressure on rents, especially for bulk and medium distribution sector landlords.
“While the market is improving, it’s important to acknowledge that the office sector is going through a transformation,” said Tolliver. “Many businesses are reassessing space needs and recognizing they can function perfectly well with a smaller, more efficient footprint. As a result, job growth is not giving us the same pop in demand to which we have grown accustomed.”
- Quick Summary: Net demand for office space in the first quarter of 2013 improved over the final quarter of last year, with 57,928 SF of occupancy gains registered.
- Growth Areas: Growth was primarily driven by 57,928 SF of positive net absorption in the following submarkets: Downtown (+38,470 SF), Northwest (+27,800 SF), East (+25,771 SF), West (+19,790 SF) and South (+4,798 SF).
- Vacancy Rate: The Indianapolis multi-tenant office market remained relatively unchanged in the first quarter of 2013 at 19.9%, but has increased 40 basis points (bps) over the course of the last four quarters. Growth simply isn’t occurring fast enough to drive down overall vacancy.
- Outlook: The latest employment figures suggest that commercial real estate fundamentals will stay on a course of slow, bumpy improvement. Multi-tenant office vacancies are expected to remain elevated for the remainder of the year, with asking rents holding steady.
“Renter demand continues to be brisk as economic and demographic shifts remain promising for multifamily,” Tolliver said. “I expect we will continue to see investor demand for multifamily properties as solid fundamentals and favorable lending conditions continue to offer more certainty, less risk and, in some cases, higher returns than other investment vehicles.”
- Quick Summary: The Indianapolis multifamily market positively absorbed 529 units in the first quarter of 2013, marking more than three years of uninterrupted occupancy growth.
- Sales Volume: With over 6,500 units sold since 2012, multifamily sales volume has remained healthy with increased investor interest in Central Indiana.
- Vacancy Rates: Multifamily vacancy rates for all classes currently register 5.6%, down 40 bps from a year previous. Vacancy rates should continue to decline for the next 24 months.
- Outlook: Occupancy should remain stable over the balance of 2013, with vacancy expected to decline through the forecast horizon of 2013–16. Additionally, expect piqued interest by out-of-state buyers who seek to take advantage of higher returns in the Indianapolis multifamily market than those found in other gateway metros.
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 3,700 professionals in more than 60 offices nationwide. The firm completed transactions valued at $22 billion in 2012, manages 455 million square feet on behalf of institutional, corporate and private clients and supports more than 28,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. The Indianapolis Business Journal 2013 Book of Lists ranks Cassidy Turley as the #1 Indianapolis-area commercial real estate brokerage and the #1 Indianapolis-area commercial property management firm. Cassidy Turley has been named one of the Best Places to Work in Indiana by the Indiana Chamber of Commerce for each of the past seven years. Please visit www.cassidyturley.com for more information.