by Dan Rafter
Soon. That’s when the brokers working in the Indianapolis market expect a flow of industrial deals to hit their city and its suburbs.
But Michael Weishaar, managing director and principal with the Indianapolis office of Cassidy Turley, thinks that “soon” is already here.
“Many of the brokers are saying that there are a lot of people looking at and walking through space, but that not a lot of deals are getting cut quite yet,” Weishaar said. “I agreed with that, up until about two or three weeks ago. Now I see deals getting done in the industrial market. We’ve been able to get some nice-sized deals close to signed up and a couple of others actually signed up. We’ve been seeing that momentum continue throughout this year.”
Weishaar is far from alone in seeing this. The industrial market in Indianapolis has been a busy one, with a large amount of speculative construction.
And today, the interest from investors is turning more rapidly into actual closed deals. The best news? It’s a trend that doesn’t look ready to slow.
“The strength of the industrial market here is growing,” said Bob Smietana, chief executive officer of HSA Commercial Real Estate. “We think the industrial market in Indianapolis is strong. How deep the market is, only time will tell. But we think we’ve hit the market at the right time and the right place.”
The numbers paint the picture of an Indianapolis industrial market that is remarkably stable. In the first quarter of 2014, the overall industrial vacancy rate for the Indianapolis market stood at 5.1 percent, according to research from Cassidy Turley.
Certain submarkets saw an even lower rate. The downtown market had an industrial vacancy rate of just 1.8 percent in the first quarter, while the West (2.6 percent), North (3 percent), Northeast (3.7 percent) and Northwest (4.4 percent) markets all enjoyed vacancy rates under 5 percent.
Cassidy Turley researchers predicted that by the end of 2014, the Indianapolis industrial market might see a new post-recession high-water mark for net absorption.
HSA is a big player in the Indianapolis industrial market. The company is developing, in partnership with Great Point Investors LLC, a 220,000-square-foot spec industrial building in the Gateway Business Park at 1025 Columbia Road in the Indianapolis suburb of Plainfield.
The new building will sit on 13 acres and feature 32-foot clear heights, 24 truck docks, four drive-in doors, 155 parking spaces and easy access to Interstate-70. Delivery is expected this spring.
The project is different because it is targeting smaller users, those needing between 40,000 and 100,000 square feet of space.
And so far, the interest in the building has been strong, Smietana said.
“No one else here was building a product that could be subdivided down easily for tenants who wanted 50,000 square feet,” Smietana said. “Most of the industrial product being built in Indianapolis is 500,000 square feet and above. What we’re finding is that those building developers aren’t necessarily willing to divide those larger buildings down to 50,000- or 100,000-square-foot tenants. That’s where we came in. There isn’t a lot like what we are offering in this market.”
This isn’t the first development that HSA has made in the Gateway Business Park. The company has developed three other industrial buildings here, and have watched as the Plainfield submarket has become an important one in Indianapolis.
“The response has been phenomenal,” Smietana said. “We are delivering space over the next 60 days, and we have never developed a spec building that has so much activity before the building was even completed.”
Weishaar from Cassidy Turley predicted that the spec trend will continue here.
“Absolutely, that momentum is carrying on,” Weishaar said. “There are several spec buildings under construction right now. When you look at what is also in the pipeline, what developers are looking at, it’s clear that the trend will continue.”
Last summer, for instance, Sunbeam Development Corporation purchased the I-70 West Commerce Park located in Monrovia, Ind. The company has a long-term plan to develop the park, beginning with the construction of a 525,000-square-foot speculative industrial building.
And there’s plenty more spec industrial activity in the area.
“A lot of developers are bullish about the Indianapolis industrial market,” Weishaar said. “They still feel confident about building all this space.”
Weishaar isn’t sure if developers will be able to fill all the new spec industrial space that is hitting the Indianapolis market this year. But he does predict that some very large blocks of space will be taken off the market in the next six to nine months.
“Geographically and logically speaking, Indianapolis is always going to be one of the top-five industrial markets in the entire country,” Weishaar said. “We are in the middle of the country, so geographically we have an advantage. The FedEx being here in the city is a major contributor to the current and future health of the industrial market. We also have a government that is proactive in many business-related matters. We are very friendly to developers who want to come here and build product.”