by Dan Rafter
Midwest Real Estate News recently spoke with Dustin Looper, senior vice president in the Indianapolis office of Resource Commercial Real Estate, about the strength of the Indianapolis industrial market. Looper said that the industrial market here continues to soar, and that this won’t be changing anytime soon.
Midwest Real Estate News: There are plenty of Midwest markets in which the industrial sector is thriving, but Indianapolis appears to be one of the strongest. Are you seeing the same thing?
Dustin Looper: Yes. There has been a similar pace in the industrial market here for the past two to three years. We have had 13 or 14 quarters in a row of positive net absorption. But no one here is getting over the tips of their shoes. The amount of industrial construction here is well-controlled. The amount of absorption we’ve had seems to match the amount of construction we are seeing.
MREN: Why is the Indianapolis industrial market performing so well today?
Looper: This is just an attractive market for industrial users. The pricing and acquisition costs for ground here is attractive. Rental rates here remain competitive, considering our competition throughout the Midwest. At the same time, our labor pool continues to perform well. Indianapolis is a low-risk and affordable place to operate industrial facilities in, compared to the competition.
MREN: Why is the Indianapolis market such an attractive one for users?
Looper: It really is in the center of where the country makes its products. We are surrounded by the manufacturing belt. So Indianapolis is close to where products are being produced and from where they are being supplied. That is a good situation for those who distribute products and for those who make them, whether it be automobiles or little plastic widgets.
MREN: When you look at the Indianapolis market, are there any particular submarkets that are doing especially well today?
Looper: The southwest part of the city, near the airport, has been seeing most of our bulk construction. That is the submarket where we are seeing at least half of our new construction. The herd mentality plays into it a little bit. Once someone goes out there, others seem to have to follow. There is also a large employer base there. The airport and FedEx are located there. Interstate-70 is right there. This submarket is also close to the south side population core of the city. The labor force is strong there.
MREN: When end users are searching for new industrial space, what sort of amenities are they demanding now?
Looper: Well, 36-foot clear heights have become the new standard for large bulk construction. Users also want 140-foot truck courts on both sides of their facilities. They want a cross-dock facility. They really want to have the ability to increase trailer or auto parking to satisfy the e-commerce customer who might have drastic peaks in employment and truck-trailer usage. When October and November roll around, these facilities what to have the flexibility to be able to hire 500 new people without having to suffer through a logistical nightmare.
MREN: Obviously, e-commerce is steadily becoming more important. How important has e-commerce been to the industrial market in Indianapolis?
Looper: E-commerce is an important driver for Indianapolis, and so many other markets. It’s a continuing trend with no end in sight. How big it is going to get, we don’t know. For Indianapolis, it’s been a perfect storm. Indianapolis is like Chicago without the cluster and without the more challenging business climate. Everything from labor prices to the price of ground is more affordable in Indianapolis. That has helped make us an important market for e-commerce.
MREN: When it does come to speculative industrial space, are you worried at all that developers are building too many spec warehouses and facilities in the market?
Looper: Not as of now. I describe Indianapolis as being a market that features well-controlled development. We build optimistically, but we are not seeing 15 million square feet of it at a time. We are only seeing a few million square feet. And then developers are waiting in the wings with their plans ready to go. When a space gets sold or leased, they pull the trigger on the next one because we can build them so fast, permitting is not a cause for delay here. There is not a lot of complexity to the land we build on. It is flat and readily developable. They don’t have to build multiple buildings at a time. You can typically get a building from start to finish in seven or eight months. That has kept the big rise and fall out of our marketplace.