2019-07-10_DTZ戴德梁行_Office_Q1_2019_Indianapolis_5页_431kb

Indianapolis Office Market Q1 2019 Summary

Core Content

The Indianapolis office market experienced a strong start to 2019, marked by positive net absorption and rising rental rates. The market continued its momentum from the previous quarter, with key developments across various submarkets and notable lease and sale transactions.

Economic Indicators

• Indianapolis MSA Employment: Increased by 2.3% from the beginning of 2018, reaching 1.07 million in Q1 2019.
• Indianapolis MSA Unemployment: Rose to 3.3% in Q1 2019, still below the national rate of 3.8%.
• U.S. Unemployment: Decreased to 3.8% in Q1 2019 from 4.1% in Q1 2018.

The office-using job sector showed consistent growth over the last 12 months, with the Professional and Business Services sector leading the YOY growth (5,800 jobs) and the Education and Health Services sector showing the strongest quarterly job addition (around 300 jobs).

Market Indicators

• Total Market Vacancy: Increased to 15.4% in Q1 2019 from 14.0% in Q1 2018, with a forecast of a decline.
• Net Absorption: Reached 113,796 square feet in Q1 2019, marking the 20th consecutive quarter of positive absorption.
• Under Construction: Increased to 724,470 square feet in Q1 2019, indicating ongoing development activity.
• Average Asking Rent: Rose to $19.77 per square foot in Q1 2019 from $19.15 in Q1 2018, with a forecast of potential stabilization if leasing activity slows.

Market Overview

• The Indianapolis office market is showing healthy signs, with strong leasing activity and positive net absorption.
• Downtown led the market with 69,824 square feet of net absorption, attributed to the lease commencement of Carrier Corporation.
• Kronos renewed 42,575 square feet at PNC Center, marking the largest transaction of the quarter.
• The four largest transactions were spread across different submarkets, indicating a balanced and healthy market.

Outlook

• The Indianapolis office market is expected to maintain strong investment activity, with several major office parks on the market or under contract.
• Gross asking rents are anticipated to continue rising due to tightening vacancy rates and increased capital demands.
• A potential leveling off of rent growth may occur if leasing activity slows in the coming quarters.

Market Trends and Submarket Performance

• Downtown: 13.4% direct vacancy rate, with a positive net absorption of 69,824 square feet.
• Midtown: 14.7% direct vacancy rate, with a slight negative net absorption of -1,006 square feet.
• North/Carmel: 13.4% direct vacancy rate, with a negative net absorption of -11,040 square feet.
• Keystone: 14.0% direct vacancy rate, with a positive net absorption of 7,837 square feet.
• Fishers: 29.9% direct vacancy rate, with a positive net absorption of 3,896 square feet.
• Northeast: 14.3% direct vacancy rate, with a positive net absorption of 3,353 square feet.
• East: 11.5% direct vacancy rate, with a positive net absorption of 3,242 square feet.
• South: 9.9% direct vacancy rate, with a positive net absorption of 2,400 square feet.
• West: 22.8% direct vacancy rate, with a positive net absorption of 14,267 square feet.
• Northwest: 19.5% direct vacancy rate, with a positive net absorption of 21,023 square feet.

Key Lease Transactions

• 101-115 W Washington St.: 42,575 sq ft renewed by Kronos in Downtown.
• 9200 Keystone Crossing: 42,128 sq ft leased by Wiley Publishing in Keystone.
• 501 N Pennsylvania Pkwy: 24,752 sq ft renewed by The Hartford in North/Carmel.
• 9800 Crosspoint Blvd: 23,261 sq ft leased by 1stSignature Lending in Fishers.

Key Sales Transactions

• 151 N Delaware & 251 E Ohio St.: 608,054 sq ft sold for $30,750,000 ($48/sf) by Mission Peak/Gershman Partners & Citimark in Downtown.
• Allied Solutions HQ: 142,000 sq ft sold for $31,600,000 ($222/sf) by Ambrose Property Group/Tryperion in North/Carmel.

Methodology and Data Series

• Cushman & Wakefield's market statistics are based on a competitive office inventory, excluding older buildings or those requiring substantial renovation.
• The inventory is subject to revisions due to resampling and includes only space that is available immediately or imminently after the end of the quarter.
• The data series was updated in Q2 2018 to ensure data integrity and accuracy.

Building Classifications

• Class A: High-quality, well-located buildings with premium rents and amenities.
• Class B: Average-quality buildings with fair to good finishes, suitable for a wide range of tenants.
• Class C: Functional space at below-market rents, catering to budget-conscious tenants.

Conclusion

The Indianapolis office market remains robust, with strong net absorption, increasing vacancy rates, and rising rental rates. The market's diversity across submarkets and the continued investment activity suggest a healthy and resilient environment.