COVID-19 continues to be a burden on the office market across the Midwest, and Indianapolis’ market is no exception.
Colliers in its latest Indianapolis office report said that the city’s downtown office market saw a big quarterly jump in vacancy rates during the first three months of this year. The office vacancy rate in downtown rose from 16.5 percent at the end of the fourth quarter of 2020 to 17.6 percent at the end of the first three months of this year.
At the same time, average asking rents were basically flat, increasing but only by 0.9 percent.
And the future of the office market here and across the country remains murky. Most companies will require employees to return to the office, but several large employers are giving their workers the option to work remotely, either on a part-time or full-time basis.
Salesforce, which occupies a significant portion of its namesake tower in downtown Indianapolis, is a good example. In February, the company announced that most of its employees nationally would have the option to work flexibly, coming into the office one to there days a week.
Colliers in its report said that it is too early to predict the effects of decisions like this on the downtown Indianapolis office market. There is, though, plenty of uncertainty remaining in this market.
There are some bright spots in the Indianapolis office market, though. Colliers pointed to the region’s north suburban submarkets, which saw the most activity in the first months of 2021. Healthcare-related companies have been especially busy in these areas, Colliers said.
That includes iA, a pharmacy automation company that signed a 12,272-square-foot lease in Keystone at the Crossing. Asking rents in that building are still at a healthy $30 FSG, one of the highest in the market.
Overall, asking rents in Class-A north suburban properties continue to climb to record levels, although the pace of this climb has slowed since the COVID-19 pandemic hit. There are currently four owner/occupant construction projects underway for local headquarters buildings in the north suburban region, including First Internet Bank, Zotec Partners and SEP.
Since the pandemic began, office markets across the country have seen an increase in sublease space. Indianapolis is no exception. Colliers reports that sublease availability has more than doubled in the past year.
In the first quarter of the year, Salesforce put its 86,776-square-foot Gibson Building space in the CBD on the market, while STANLEY Security offered up a 52,000-square-foot portion of its location in Fishers, Indiana.