Multifamily O Indiana

The commercial action in Indianapolis? It's downtown

The commercial action in Indianapolis? It's downtown,ph01
The Bottleworks District is a $300 million, 12-acre mixed-use development in Indianapolis on the northeast end of Massachusetts Avenue.

People want to live in downtown Indianapolis. And that demand is providing a significant boost to the multifamily market in the center of this key Midwest city.

For proof, look at the first quarter 2019 Indianapolis multifamily report recently released by Berkadia. According to Berkadia, residents have leased 3,271 apartment units in the Indianapolis area – much of these in the downtown – since March of 2018. That’s a big increase from the 1,826 units absorbed during the preceding 12-month period.

Builders are reacting to this demand, delivering 16,300 new apartment units in the Indianpolis metropolitan area since the beginning of 2013. Of this total, 2,790 have been added in the last four quarters

And that’s just the start of the good news for this sector. Berkadia reported, too, that occupancy rose 40 basis points on a year-over-year basis, hitting 94 percent in March. The average effective apartment rent in March in the Indianapolis metropolitan area rose to $885 a month, up 4.1 percent from the same month a year earlier.

What’s behind this rising demand for apartment units in Indianapolis? Chris Bruzas, director with the Indianapolis office of Berkadia, pointed to several reasons.

First, the economy in Indianapolis is a strong one. The metropolitan area offers plenty of jobs, many in the high-tech industries that are in demand today. At the same time, the entire state of Indiana is one that is friendly to businesses. This makes it easier for developers to build apartment projects here.

Then there’s the strength of Indianapolis’ downtown. Bruzas said that the area has become a fun place for both singles and families. There are plenty of restaurants and shops. It’s easy to find entertainment in the center of the city. The NFL’s Indianapolis Colts and the NBA’s Pacers play in downtown stadiums, too. This brings even more people to the center of the city on game days, Bruzas said.

All these reasons have combined to send the Indianapolis multifamily market on a hot streak that is showing no signs of cooling.

“One word to describe the multifamily market here is strong, and it seems to be getting even stronger,” Bruzas said. “Over the last three years, it’s continually picked up across the board, from ‘60s-built value-add properties to new construction. There’s been a complete shift over the last five years from local ownership to regional and national buyers, which is a good reflection on Indianapolis in general.”

As evidence of Indianapolis’ reputation as a hub for growing businesses, Bruzas points to Salesforce. The company’s name adorns the tallest building in downtown Indianapolis. And the Indianapolis office is the largest for the company outside of its base in San Francisco.

“That says a lot about Indianapolis,” Bruzas said.

Affordability has played an important role in the growth of downtown Indianapolis, too, Bruzas said. The closest major city is Chicago. Apartment rents in Indianapolis are about two-thirds of what they are in Chicago.

People who move to Indianapolis, then, benefit from that lower cost of living while being able to take advantage of nearly the same job opportunities they’d get in a bigger city, Bruzas said.

“People want to live in downtown Indianapolis,” Bruzas said. “The Millennials graduating from any of the big colleges nearby, Indiana, Purdue. They are going to downtown Indianapolis or the Carmel/Fishers area. The 55-plus-year-old crowd are selling their homes and renting downtown. They like going to the games and having a Whole Foods within walking distance. So they’re selling the big house that is 40 minutes away from downtown.”

What amenities are these renters looking for? Bruzas said that the greatest amenity apartment owners can offer remains location. Developers are willing to pay extra for land in downtown Indianapolis. That’s because that location in the center of the city remains the most attractive perk for potential renters.

“Given where the Millennials and retirees are moving, that downtown location is what is going to get someone in the door of your apartment building,” Bruzas said. “The dog washes, pools, community centers and those other amenities are attractive. But they are not as important as the location.”

Bruzas only expects more activity in downtown Indianapolis. The center of the city is already attracting a steady stream of boutique restaurants and shops. The Whole Foods store that opened at 320 E. Market St. in downtown has helped, too. The 40,000-square-foot store gives downtown residents a fully-stocked grocery store within walking distance.

There is plenty of new development coming to the Indianapolis market, too. The Bottleworks mixed-use project at College and Massachusetts Avenue in the city is a good example. This $300 million, 12-acre mixed-use development will feature a 136-room West Elm Hotel, a movie theater with eight screens, retail space, apartments and condominiums. Hendricks Commercial is developing the project.

“We don’t have sexy beaches or California weather,” Bruzas said. “But we are affordable and we have a lot of good jobs in Indianapolis. You walk around downtown Indianapolis and you don’t see a lot of vacant retail ground space available. If it is there, it doesn’t last long.”