A devastating pandemic. Businesses struggling with shutdown orders and capacity restrictions. Social unrest and protests. A contentious presidential election. Despite all this — or partly because of some of it — the Indianapolis industrial market notched a record-setting year in 2020.
Colliers International recently released its fourth quarter Indianapolis industrial report. And it presents a snapshot of a market that boomed despite the unrest that marked last year.
How strong was the industrial market in this key Midwest city? Colliers reported that year-end leasing activity nearly reached 19 million square feet, besting the previous record set in 2019 by 8.4 percent.
Year-end direct net absorption for 2020 hit 10.4 million square feet. Despite the disruption of the pandemic, this figure was only slightly less than what the Indianapolis market recorded in 2019. And a record 14.3 million square feet of new product, most of it speculative, was completed last year. That did push the direct vacancy rate up a bit to 5.7 percent.
The continued demand for ecommerce played a major role in Indianapolis’ busy industrial market. Amazon doubled its presence in the Indianapolis market. E-commerce-only operations in general accounted for 24 percent of all new bulk transactions in 2020.
3PL and packaging users, though, are still the dominant occupiers in the Indianapolis industrial market. In one big deal last year, XPO Logistics, operating for Apple, leased a new 1.1-million-square-foot speculative building. The firm is scheduled to occupy the building in the summer of this year.
More good news? The average size of bulk transactions increased by 20 percent to 265,879 square feet. As Colliers says in its report, there is no end in sight to this market’s growth.
The construction boom is evidence of the surge in this market. Nearly 90 percent of the record 14.3 million square feet delivered in 2020 began on a speculative basis, and 57 percent of those projects were either fully or partially preleased by the time of their completion.
Huge BTS distribution centers are already underway in many Indianapolis submarkets. This includes a 2.2-million-square-foot project for Walmart in Mount Comfort and 997,656-square-foot facility for Cooper Tire in Whiteland. Overall, 12.2 million square feet of new product is under construction as the Indianapolis market moves into 2021. Nearly 60 percent of that space has already attracted tenants.
Traditional warehouse and flex spaces are in demand, too. Colliers reports that these industrial types continue to see vacancy rates fall to record lows while asking rents are rising to record highs. The vacancy rate for nonbulk warehouse space fell to 2.8 percent by the end of 2020, a dip of 1.3 basis points from a year earlier. The flex market vacancy rate fell to 5.3 percent, its first time below the total market.
The best news? Colliers predicts that the exponential growth of the Indianapolis industrial market will continue in 2021. Another 7.5 million square feet in speculative projects is expected to break ground in the spring.