Josh Caruana, regional manager with the Indianapolis office of Marcus & Millichap Real Estate Investment Services, points to pent-up demand as part of the reason why commercial real estate activity has picked up somewhat in Indianapolis this year.
But he points to other reasons for why he expects commercial activity to rebound even more dramatically in the net 12 to 18 months in this key Midwest city.
“People are tired of being on the sidelines,” Caruana said. “A number of people are sitting on cash. There is still some uncertainty in the marketplace and in Washington right now, that’s true. But with borrowing costs being at all-time lows, the leverage opportunity for investors right now is significant.”
Caruana said that apartment sales in the central portion of Indiana are on the rise these days. Multi-family assets remain a desired asset for a broad spectrum of investors, he said, both those on the private and institutional sides.
In the retail sector, investors are interested in best-in-class multi-tenant single-tenant net-leased properties.
Investors working the Indianapolis market haven’t suffered the same kind of losses as have investors in other areas of the country, Caruana said. Because of this, they aren’t quite as stingy with their dollars today.
“While Indianapolis was definitely impacted by the economic downturn – who wasn’t? – the last two-and-a-half years and everything that happened in them haven’t been quite as bad here,” Caruana said. “We didn’t experience the same severe downswing that the coastal markets did. A number of investors here have fared reasonably well.”
In his position at Marcus & Millichap, Caruana oversees both Indianapolis and Cincinnati. Caruana says that he is receiving calls from more out-of-area investors who are targeting these cities.
Part of the reason is that the supply and demand here is unbalanced in investors’ favor. But there’s a bigger reason, too: Investors across the country are chasing after core assets, the safest havens for their dollars. A number of those core assets have already been acquired in primary markets such as New York City, Los Angeles and Washington D.C.
Investors are now looking for core assets in reasonably priced markets. And one place they are looking is Indianapolis, Caruana said.
“Those investors are looking at secondary or even tertiary markets to have the same access to grounded core real estate assets,” he said. “They are looking here to find those assets at slightly better pricing than they’ll find elsewhere.”
It’s because of this that Caruana has hope for the Indianapolis commercial real estate market. He says he expects to see an increase in deal velocity during the next 12 to 18 months.
“We recently listed a 15-property retail portfolio for a developer,” Caruana said. “They are located in secondary or tertiary markets. We have received multiple offers on all the assets, and all are under contract or are moving toward contract. These are well-positioned, well-priced assets with grounded fundamentals. That’s what investors are looking for, and there are many of these types of assets in Indianapolis.”
