2019-07-10_DTZ戴德梁行_Office_Q4_2018_Indianapolis_5页_428kb

Indianapolis Office Market Summary Q4 2018

Core Content

The Indianapolis office market experienced continued growth in the fourth quarter of 2018, driven by strong economic fundamentals and robust leasing activity. The market posted its 19th consecutive quarter of positive net absorption, totaling 142,120 square feet, with year-to-date (YTD) net absorption reaching 434,907 square feet, making 2018 the second-highest total in the last decade. The total market vacancy rate fell to 15.4%, a 4% decrease from the previous year, while gross asking rents increased to $19.75 per square foot (psf), up by 8.5% over the past year.

Main Economic Indicators

• Indianapolis MSA Employment: Increased from 1.06M in Q4 17 to 1.08M in Q4 18.
• Indianapolis MSA Unemployment: Rose slightly to 3.3% in Q4 18 from 3.2% in Q4 17.
• U.S. Unemployment: Decreased to 3.7% in Q4 18 from 4.1% in Q4 17.

Despite the slight increase in local unemployment, it remains below the national average, indicating a healthier labor market in Indianapolis. The Professional and Business Services sector added 2,700 jobs quarter-over-quarter (QOQ), and the Financial Activities sector added 1,400 jobs QOQ, contributing to the overall positive job growth.

The Consumer Confidence Index reached an 18-year high in October 2018, reflecting strong consumer demand and a positive outlook for employment. Additionally, S&P Global Ratings upgraded Indianapolis's long-term property-tax-secured bond rating, citing its strong economic and financial performance.

Market Overview

• Net Absorption: Reached 142,120 square feet in Q4 18, with YTD net absorption of 434,907 square feet.
• Vacancy Rate: Dropped to 15.4%, a 4% decrease from the previous year.
• Leasing Activity: Surpassed previous quarters, totaling nearly 900,000 square feet in Q4 18.
• Gross Asking Rents: Increased to $19.75 psf/year, up by $0.22 from Q1 18.

The market's positive absorption and tightening vacancy suggest that rental rates will continue to rise as landlords capitalize on the scarcity of available space. Construction activity also remained strong, with 639,470 square feet under construction, contributing to future supply and potentially influencing rent trends.

Submarket Performance

Downtown emerged as a desirable office location, with the four largest transactions of the quarter, including PNC Bank's 108,697-square foot renewal. The Class A market had an average asking rent of $22.18 psf, while Class B and Class C had $17.62 and $14.98 respectively.

Key Lease Transactions

Key Sales Transactions

Methodology & Data Series

Cushman & Wakefield's quarterly estimates are based on a competitive inventory of office properties, excluding older or heavily renovated buildings. The inventory is subject to revisions, and vacant space is defined as space available immediately or imminently after the quarter. Sublet space is not counted as vacant. The new data series was introduced in Q2 2018, enhancing data integrity and accuracy.

Conclusion

The Indianapolis office market is showing strong economic and market fundamentals, with positive net absorption, tightening vacancy, and rising rents. The market is expected to continue its growth trajectory in 2019, supported by the city's economic resilience and favorable leasing conditions. The Class A market, in particular, is performing well, with high-quality tenants and premium rents. Overall, the market is well-positioned for continued expansion.