As the home of the renowned Indy 500 auto race, the Indianapolis market is no stranger to the sound of revving engines. But these days, talk of acceleration is increasingly focused on development occurring within the CBD.
At the start of 2018, Downtown Indy had more than 60 projects and $2.8 billion worth of investments in the pipeline through 2022, according to Downtown Indy Inc. The city is a classic example of urbanization fueling growth as both residents and employers look to locate Downtown.
Tech companies are leading the charge with tech sector jobs that have jumped by 66% over the past five years, according to the Indy Chamber. In fact, 29% of all tech jobs in Marion County are now located downtown. One of the most notable moves in the past two years is the decision by San Francisco-based Salesforce to locate its new Midwest regional headquarters in Indianapolis. The move brought 800 jobs, primarily in sales and software development.
Professional services also experienced a healthy expansion of 17% over that same period. Downtown is now home to 150,000 workers and an increasingly young population. The number of market rate apartments units downtown has doubled since 2010 with 28,000 residents and a forecast that the downtown population will reach 30,000 by 2020.
In 2017, Forbes listed Indianapolis as the 11th best city in the country for young professionals due in part to its low cost of living, starting salaries for young grads and low unemployment. The city also offers urban amenities that appeal to young urbanites, such as its BlueIndy car sharing service and 20-plus miles of urban bike paths.
Buyers Look for Opportunities
Indy also is on the short list of 20 cities still in the running to land Amazon’s North American HQ2. Even if the city isn’t successful in that bid, it is basking in the added national attention. Economic growth and the lure of higher yields compared to other metros has piqued interest from real estate investors and developers. According to Reonomy sales data, multifamily transactions in the Indianapolis metro surged to $1.8 billion in 2017, which was a big jump over the $1.3 billion in properties that traded the prior year. Investors have kept their foot on the gas in 2018 with an additional $1 billion in transactions that closed during the first half of the year.
However, investors are taking note of what could be some softening in multifamily fundamentals ahead due to robust development. Marcus & Millichap estimates that approximately 2,200 new units were delivered in 2017, which pushed vacancies above 6% and the metro is anticipating another 2,500 completions by the end of this year. One major project that opened earlier this spring is 360 Market Square. The 28-story tower includes 292 apartments and a new 42,000 sf Whole Foods.
Yet investors also are watching the long-term horizon with steady activity coming from people who are coming Downtown to live, work and play. According to Reonomy, office and retail investment sales combined totaled $2.7 billion last year, while sales have been more subdued in the first half with transaction volume just shy of $500 million.
Major Developments to Watch
Work is underway on the second phase of CityWay, which will add 402 apartments and 29,000 sf of office and retail space to the Delaware Street location. The first phase includes 250 apartments and a luxury hotel, and phase two is expected to be completed in late 2019.
Plans are in the works to redevelop the former Coca-Cola bottling plant at the 800 block of Massachusetts Avenue. Wisconsin-based Hendricks Commercial Properties is working to transform the 12-acre site into a mixed-use property with preliminary plans that include apartments, a boutique hotel, retail and office space along with a cinema and food hall. Work on phase one began in Q2, which includes a 136-room hotel and 246,000 sf of commercial space
GM Site Sells:
The IndyStar reported in April that Ambrose Property Group had completed its acquisition of a 103-acre site near Downtown that was once home to a General Motors plant. The developer has said it plans to build a $550 million project that includes apartments, offices, retail and a hotel.
Spike in Hotel Development:
Currently, there are 11 hotel developments in the pipeline, including a new 316-room hotel under construction that will be dual branded as a Hyatt Place and Hyatt House. Located at the intersection of South Pennsylvania and East Georgia streets near the Banker’s Life Fieldhouse, the 15-story project is expected to be completed in mid-2019.
There are dozens of public and private projects underway and proposed throughout the city that run the spectrum from very large mixed-use developments to smaller scale infill projects. For example, a new St’artUp 317 program is aimed at encouraging pop-up shops to fill some of the empty storefronts in Downtown and other urban neighborhoods. Combined, those various public and private initiatives across the city are translating to investment opportunities across a wide variety of sectors and price points for real estate investors.
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