Economic diversity helps ensure steady growth, and corporate users are driving development.
Corporate users are stimulating the economy in the nine-county Indianapolis metro area, and the real estate market is riding on their coattails.
United Airlines brought a new maintenance facility to the Indianapolis International Airport, with a guarantee that it will create more than 6,300 jobs when it is fully operational in 2004. Federal Express is completing an expansion of its package-sorting hub at the airport. The NCAA announced it will move its national headquarters and museum to Indianapolis' White River State Park. And, in the largest privatization of a military facility in U.S. history, Hughes Electronics Corp. assumed full operation of the Air Warfare Center on the east side, preserving approximately 2,200 jobs at the center and another 2,000 jobs that are dependent on it.
"The Indianapolis economy is steadily moving forward," notes F.C. Tucker senior vice president David Funke. "It's time to have a new wave of development to accommodate our growth in the suburban market."
Indianapolis' office market -- suburban and downtown combined -- continues to improve, with pent-up demand driving up occupancy. Overall vacancy at the end of the second quarter was 12.5%, according to Indianapolis-based F.C. Tucker's Commercial Real Estate Services Division, up slightly from 12.4% at the end of the first quarter and down from the 12.9% vacancy at the end of second quarter 1996.
After seven consecutive quarters with overall suburban vacancy below 10% and continued growth, development is on the verge of taking off.
"Most of the submarkets along the north belt have bounced back well. They were running 18% to 25% vacant four to five years ago; today it's in the single digits," says Tom Gracey, president of the Mortgage Co. of Indianapolis.
According to Gracey, much of the Class-A space is on the north side.
In July, Duke announced development of a 77,125 sq. ft. office building, which is more than 67% preleased, at its 1,600-acre Park 100 Business Park. In the north central suburbs, Duke's 120,000 sq. ft. Three Parkwood is scheduled to open this month substantially leased. And a 33,000 sq. ft. build-to-suit at Duke's Hamilton Crossing in Carmel is due to open this fall 77% preleased to Firestone Industrial Products for its corporate offices.
Carmel-based Eaton & Lauth broke ground this summer for College Park Plaza, a five-story, 180,000 sq. ft. Class-A office building due to be completed in mid-1998. Eaton & Lauth reports strong interest from several large office users, and the top two floors are under negotiation with a single user.
"I think the office market will continue to improve," says Duke executive vice president Richard Horn. "As long as the market stays this healthy, we'll be building."
"The downtown office market continues to improve, but at a slower pace than the suburbs," Horn adds.
It may be improving, but downtown continues to struggle from an overabundance of Class-B and -C space. During the second quarter, overall downtown vacancy increased to 17.7%, according to F.C. Tucker. That's up from 17.3% at the end of the first quarter but improved from 18.5% a year earlier.
Several downtown buildings are finding new life.
A group of local investors bought the Guaranty Building on Monument Circle and is engaging in a $3 million rehabilitation, says Gracey, who places Class-A space in the $18 to $22 per sq. ft. range.
The former L.S. Ayres building on Meridian Street has been turned into office space for USA Group, and the Chesapeake Building on South Meridian Street was renovated into a Hampton Inn.
In August, it was reported that the Adam's Mark chain was interested in turning the 20-story former Blue Cross/Blue Shield office building into a hotel or that the building was slated for inclusion in a county tax sale. But a spokesman for Mansur Group, which is affiliated with the building's owner, says the firm has not received any real offer from anyone and the building would not be included in the coming tax sale. Mansur hopes to redevelop the building, which is across from the capitol.
As far as industrial goes, the Indianapolis office of CB Commercial reports that development of new industrial parks is expected, especially in the airport area, Plainfield, Brownsburg, Lebanon, Mount Comfort, Greenfield and southeast Indianapolis.
United Technologies-Carrier Corp. signed a five-year lease to occupy 247,680 sq. ft. in North Airport Park.
Duke announced two bulk warehouse projects at Park Fletcher Business Park near the airport: one targeted at midsize distribution tenants and the other to accommodate larger bulk warehouse users. Duke also anticipates developing 2 million sq. ft. of bulk distribution product on newly acquired land in Plainfield.
Macmillan Publishing will consolidate two current Indianapolis facilities into an $11 million, 577,000 sq. ft. distribution center at Duke's Lebanon Business Park.
The retail arena is active as well, with nearly 2 million sq. ft. either in the development or planning stage, according to The Linder Co., Indianapolis. With vacancy rates as low as 2% in some areas, rents range from $23 a sq. ft. in the Keystone area to $12 to $17 in well-anchored strips on the west and north sides.
Linder is presently working on the area's largest retail project, a $25 million redevelopment called Merchants' Square, which involves the 'de-malling' of a 25-year-old single-anchor mall in Carmel.
The largest project on the west side is Shiloh Crossing, a 350,000 sq. ft. center anchored by Regal Cinema and Sears Hardware.
Simon DeBartolo completed a 1.2 million sq. ft. renovation at Lafayette Square in the northwest and plans a major overhaul of Castleton Square on the northeast side. North of that, the 125,000 sq. ft. first phase of Sunbeam Development's Castle Creek Commons is being leased by Linder.
A major project on the southeast side is Southport Commons, a 200,000 sq. ft. center at I-65 and Southport Road.
Activity downtown remains brisk, due largely to Simon DeBartolo's Circle Centre Mall, which opened in 1995 and continues to have strong sales. Planet Hollywood opened downtown in July, and Saks reportedly is looking at two locations in the market.
"A lot of the retail traffic that's occurring downtown -- over 50% -- relates to tourist and convention trade," says F.C. Tucker's Bill French.
Tourism officials have joined with others in the Midwest in a cooperative marketing effort to attract more foreign visitors. Already, requests for information from foreign tour operators have increased about 60% from last year.
Hotel occupancy through November 1996 was 68%, according to Smith Travel Research.
CB Commercial expects 1997 residential rent growth to average 3% to 3.5%, a decline from 5% last year. During the first quarter, building permits were issued for 611 multifamily units in the metro area. CB Commercial projects that 3,000 units will be placed in service in 1997. The projected vacancy rate is 8.1%.
In one notable seniors project, Mansur will convert the 121,000 sq. ft. Missions Building in Irvington into approximately 80 retirement apartments.