Office O Indiana

Companies gobbling up large swaths of space in Indianapolis office market

Companies gobbling up large swaths of space in Indianapolis office market,ph01

Larger users are driving the Indianapolis office market this year. And it’s a trend that doesn’t look ready to change anytime soon.

That’s the message from Colliers International in its second quarter Indianapolis office market report.

According to Colliers, the Indianapolis-area office vacancy rate fell slightly in the second quarter to 15.8 percent. That figure is still up from the end of 2018 because of high negative absorption in the first quarter of this year.

Leasing activity, though, has been strong so far this year, up 8.3 percent from last year at this time. At the same time, office asking rents have been increasing, up 3.3 percent from last year.

In the Central Business District, asking rents have risen 6.6 percent on a year-over-year basis to $22.79 a square foot. Colliers says that this increase has been driven in part by new owners investing capital in their office space and pushing up rents throughout the rest of the CBD.

One of the bigger moves in the CBD? Large user TradeRev, an online auction firm, filled two floors in the Century Building downtown. That space formerly housed Salesforce.

Large users have made a major impact in the North Suburban Indianapolis office markets, according to Colliers. In the second quarter, State Auto moved into 29,989 square feet in Hamilton Crossing, Inktel took 21,054 square feet at Keystone at the Crossing and eHealth subleased 56,276 square feet at Lakefront in Keystone.

The demand in this market is causing office rents to grow. Popular suburban submarkets such as the I-69/Shadeland corridor, Meridian Corridor and Keystone Crossing are seeing year-over-year asking rent growth ranging from 4.9 percent to 5.7 percent.

The most significant sale in Indianapolis during the second quarter was Equus’ disposition of the Keystone at the Crossing office park to ORA Advisors and M&J Wilkow. The joint venture, which entered the Indianapolis office market in 2018, now controls 11.5 percent of the suburban market’s Class-A office space.

The future? It looks steady. Colliers said developers entering the Indianapolis market are largely planning to build 30,000- to 60,000-square-foot office buildings, with most of these tied to nearby new developments such as the Yard and Nickel Plate District in Fishers. These urban makrets in suburban locations are helping to boost rents throughout the office market, Colliers said.