Steady. Active. Those are the two words that Jimmy Cohoat, senior director of industrial for the Indianapolis office of Colliers International, uses to describe the commercial real estate market in his city.
And while Cohoat focuses most of his attention on the industrial sector, he knows that the same can be done said of the retail, office and multifamily sectors in the Indianapolis region.
“Right now, the commercial market is very active and very steady,” Cohoat said. “Leading and new development activity is especially strong. You see less sales and capital markets activity. I think that’s because from an investor standpoint, people are pleased with what they have now here. We are not seeing a lot of buildings changing hands.”
The numbers back up Cohoat’s views. Cushman and Wakefield, in its third quarter 2017 Marketbeat report for Indianapolis, predicted a strong industrial market for the region.
Cushman reported that 7 million square feet of new industrial space was under construction as of the end of the third quarter last year, up from 6.1 million square feet at the end of the third quarter of 2016. Asking rents were on the rise, too, with Cushman reporting that the average direct asking rent for the industrial sector stood at $3.83 a square foot at the end of the third quarter of 2017. At the end of the same quarter in 2016, the average direct asking rent was $3.76 a quarter.
RESOURCE Commercial real estate, in its third quarter Indianapolis report, also had plenty of positives to report on the Indianapolis industrial market. According to RESOURCE, more than 1.6 million square feet in newly delivered product entered the market during the third quarter.
Net absorption remained positive, too. RESOURCE reported that the Indianapolis-area industrial market absorbed 403,689 square feet of space, bringing year-to-date absorption as of the end of the third quarter to more than 1.5 million square feet.
Cohoat says the new development that is hitting the Indianapolis market is filling up fast.
“Industrial, multifamily, mixed-use projects, they are all leasing up fast,” Cohoat said. “They continue to fill up.”
When it comes to industrial, most of the new construction in Indianapolis was speculative, Cohoat said. And like other new construction in the area, the developers of this space weren’t struggling to find occupants.
Why has the Indianapolis market been so strong for so long? Cohoat says that developers understand the demand – much of it fueled, of course, by ecommerce – that is out there today for modern bulk facilities. They aren’t wasting time, then, on bringing these facilities to the market.
“Because space is being absorbed so quickly, if you have the land, you want to build on it,” Cohoat said. “You’re not just going to sit on it.”
This isn’t to say that the Indianapolis industrial market doesn’t face challenges. The biggest? Labor. It can be tough to find the skilled labor necessary to work in distribution and warehouse facilities today, especially as ecommerce users continue to demand more space.
To attract workers, then, employers are getting more creative with their industrial space, making it friendlier to workers.
“Ecommerce requires such heavy employee counts,” Cohoat said. “Employers then are wondering what amenities they can offer to attract workers. Should they put AC in their warehouses? What can they do to make their break rooms more attractive places? They are looking for a differentiator, something to persuade employees to work for them instead of their neighbor next door.”
Despite the continued labor issues, Cohoat does see a positive future for the Indianapolis industrial market. That’s partly because the cost of living is reasonable in the Indianapolis market. It helps, too, that Indiana is viewed as a state led by a pro-business government.
Then there’s the city’s location in the middle of the country.
“We are at the crossroads of America,” Cohoat said. “So we always get a lot of industrial activity here. At the same time, we are very competitive when it comes to pricing, the cost of labor and our tax climate. All those different components help us.”
Some big new projects are hitting the Indianapolis area now. Not all of them, of course, are industrial. The Bottleworks mixed-use project at College and Massachusetts Avenue in Indianapolis is a good example. The $260 million development by Hendricks Commercial will feature a 136-room West Elm hotel, a movie theater with eight screens, retail space, apartments, condominiums and a movie theater.
Hendricks is calling the development Bottleworks because it is being built on the site of a former Coca-Cola bottling plant.
Cohoat says that the Bottleworks project will serve as a catalyst for development in downtown Indianapolis.
Then there is FedEx, which is developing a $259 million distribution center in Greenwood, Indiana. This center, when complete, will employ about 450 employees. The new facility would be 608,000 square feet.
“Greenwood is already seeing a lot of new development,” Cohoat said. “This FedEx development will only further the growth down there.”