2019-07-10_DTZ戴德梁行_Office_Q2_2019_Indianapolis_5页_627kb

Indianapolis Office Market Q2 2019 Summary

Core Content

The Indianapolis office market in Q2 2019 showed continued positive momentum, characterized by stable employment, low vacancy rates, and rising rental rates. Despite a slower pace of leasing compared to previous quarters, the market remained strong with a focus on attracting talent through commercial real estate.

Key Economic Indicators

• Indianapolis MSA Employment: Increased by 0.8% from Q2 2018, reaching 1.08 million jobs.
• Indianapolis MSA Unemployment: Remained at 3.3%, lower than the national rate of 3.6%.
• Total Non-Farm Employment: Up by nearly 9,000 jobs in Q2 2019.
• Labor Shortages: Becoming a challenge due to record low unemployment, prompting the use of commercial real estate for talent recruitment.

Market Overview

• Total Market Vacancy: Stood at 15.5%, below the 10-year historical average of 17.8%.
• Direct Net Absorption: 11,203 sf, marking the 21st consecutive quarter of positive absorption.
• Leasing Activity: Total of 506,000 sf, with over 350,000 sf from new leases.
• Submarket Performance:
  • Keystone: Led with 37,037 sf of positive net absorption due to the Inkel lease.
  • Downtown: Showed significant absorption with 34,227 sf.
  • North/Carmel: Experienced negative absorption (-57,001 sf), likely due to the large vacancy from Pearson's departure.
  • Fishers: Positive absorption with 5,769 sf, driven by a new lease for Flexware.

Market Trends

• Rental Rates: Continued to rise, with the total market gross asking rent reaching $20.16 psf/year, up by $0.88 year-over-year.
• Class A Space: Average gross asking rent increased by $0.75 from Q2 2018 and $0.32 from Q1 2019.
• Construction Activity: Eight projects under construction, totaling over 759,000 sf, with four expected to be completed in 2019.
• Speculative Projects: Two speculative buildings under construction, with more planned once preleasing begins.

Key Lease Transactions

Key Sales Transactions

Outlook

• Rental Rates: Expected to continue rising due to increased tenant demand for building amenities and updates.
• Vacancy and Absorption: Despite low vacancy and rising rents, leasing activity is strong, with a majority of new leases.
• Construction Projects: Four projects totaling over 436,000 sf are forecasted to be completed in 2019, including one speculative and three build-to-suit developments.

Methodology

Cushman & Wakefield's quarterly market estimates are based on a competitive inventory of office properties in Central Indiana. This inventory excludes older buildings or those requiring substantial renovation. Vacant space is defined as immediately or imminently available, and figures are subject to revisions based on additional data.

New Statistical Series

In Q2 2018, Cushman & Wakefield Research conducted a comprehensive review of the office market and transitioned to a new data series to ensure data integrity.

Building Characteristics

• Class A: High-quality, well-located buildings with premium rents and amenities, typically constructed after 1980.
• Class B: Average-quality buildings with fair to good finishes, suitable for a wide range of tenants.
• Class C: Functional space offered at below-market rents.
• Existing Office Inventory: Includes competitive buildings but excludes those with over 85% owner-occupied, government, retail, industrial, medical, or educational use. Medical buildings are included if they are solely for medical occupants.

Conclusion

The Indianapolis office market in Q2 2019 maintained a robust performance, with positive net absorption, rising rents, and a strong leasing environment. The market is experiencing a tightening labor supply, which is influencing demand for commercial real estate. Construction activity is on the rise, with several projects expected to be completed in 2019, and the competitive inventory continues to be a key factor in market dynamics.