Industrial O Indiana

Activity up, challenges remain for Indianapolis industrial

Activity up, challenges remain for Indianapolis industrial,ph01

Rising demand from ecommerce users and consumers who want their online orders to show up at their doors faster than ever are both boosting the industrial sector in the Indianapolis market.

That’s the gist of the Indianapolis mid-year industrial report recently released by Avison Young.

According to Avison Young, the area’s industrial market posted a low direct vacancy rate of 4.8 percent as the middle of 2018. The challenge? There isn’t enough modern industrial space available to meet the demand of prospective tenants.

Providing this space could be difficult. Avison Young says that higher construction costs and a shortage of skilled labor make building new warehouses and distribution centers a costlier proposition.

“There are some growing concerns regarding the market’s continued momentum over the past several years and how it could affect the balance of 2018 and beyond,” said Sean McHale, principal in the Indianapolis office of Avison Young.

The Indianapolis market experienced its 25th consecutive quarter of positive absorption in the second quarter of 2018, with Avison Young reporting that about 1.8 million square feet of space was leased during this time.

As of mid-year, 4.1 million square feet of industrial space is currently under construction in the market. Three significant spec projects also came online: a 630,000-square-foot building developed by Molto Properties in the Ameriplex development; a 912,000-square-foot building, also in Ameriplex, developed by IDI; and a 440,000-square-foot project developed by Exeter Property Group in Whitestown, Indiana.

The largest industrial leases of the second quarter include 440,314 square feet to Arcbest Corporation in Whitestown, 369,499 square feet to Kuehne & Nagel in Whitestown, 357,000 square feet to Clorox in Plainfield and 240,000 square feet to Quaker Nutrition Bars in Mount Comfort in the region’s East submarket.

Despite this solid activity, Avison Young officials does warn of upcoming challenges to the sector.

“Labor shortages are becoming an issue for manufacturers and distributors throughout the country, but Indiana is working to provide effective training and aggressive incentive offerings to attract workers and companies to the state,” McHale said, in a statement. “There are also other initiatives that companies can pursue to secure the workers they need and local municipalities are becoming more strategic in their approach to job retention and attraction.”