The Indianapolis office market was active in 2019, with more than 2 million square feet of new leases. But that wasn’t enough to stop the market from recording negative absorption last year, according to the latest research from NAI Cressy.
And what does the future hold for this market? That’s a difficult question now that the country is reeling from the spread of the COVID-19 virus.
NAI Cressy, in its year end office report for Indianapolis, released earlier this week, said that the Indianapolis market saw about 2.8 million square feet of new office leases in 2019. Total net absorption for the year, though, came in at -975,000 square feet.
The reason for this negative absorption? NAI Cressy pointed to companies either leaving the market or downsizing their office space. This included companies such as Wiley, State Farm, Pearson and Fifth Third Bank.
As a result, office vacancy rates remained flat in the Indianapolis suburbs at 23.72 percent at the end of the fourth quarter of 2019 and increased slightly to 14.02 percent in the CBD. That CBD figure is up from 14 percent at the end of the second quarter of 2019.
On a more positive note, average asking rents continue to increase in the region’s high-occupancy Class-A buildings, with the rest of the market following suit.
Despite these somewhat sluggish overall numbers, developers are prepared to build at least some new office space in the region. BW Development, for example, announced that it would soon start construction on the Ellipse, a 46,000-square-foot speculative office building in the suburb of Fishers, Indiana. And Agora at the Proscenium, a 100,000-square-foot speculative office building, is under construction in the suburb of Carmel.
There were some major office sales in the market last year, too. Tempus Realty Partners purchased Crosspoint Plaza One in Indianapolis for $8.8 million. And Lids sold its corporate headquarters in Indianapolis to a group headed by Guggenheim Insurance for $18.25 million.