Indianapolis office market staves off death spiral
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Downtown Indianapolis office vacancy is hovering around 22%. Photo: James Black/Icon Sportswire via Getty Images
The Indianapolis office market is showing life.
Driving the news: Net absorption — a key metric measuring newly occupied offices, minus new vacancies — exceeded 200,000 square feet in the second quarter, the most since early 2018, per commercial brokerage JLL.
- JLL counted more than a dozen new leases in that period larger than 10,000 square feet.
Why it matters: New leases offer hope that Indianapolis can transition into a post-COVID economy without falling off an office cliff.
The big picture: U.S. office vacancy is reaching historical highs, forcing cities such as San Francisco, where one-third of offices are empty, to contemplate wholesale reinventions.
By the numbers: Indianapolis-area offices are roughly 22% vacant, with downtown faring about the same as the overall market, per JLL and Cushman & Wakefield.
- The market vacancy rate has averaged about 17% over the past 10 years.
- Occupancy rose in two areas, Fishers and along North Keystone Avenue, but both still have overall vacancy rates above 20%.
What they're saying: "I think things will improve," Gordon Hendry, the managing director of HRE Advisors, told Axios. "There are a lot of things we have going for us that other cities don't. We have a real diversity in our economy with our convention business and our sports business."
- Downtown Indianapolis has avoided San Francisco's struggles, in part, because the city has regained most of its pre-COVID convention business, Hendry said.
- He pointed to new high-end office construction coming to the Bottleworks District and the future Elanco Animal Health headquarters as signs that Indianapolis is staving off a death spiral.
What we're watching: Downtown gets most of the attention, because that's where lost foot traffic is most noticeable, but the suburban office vacancy rate is higher at 23.5%, with the North Meridian Street and Carmel area at 18.3%, per JLL.
- Openlane, formerly known as KAR Auction Services, listed 125,000 square feet of its brand-new Carmel headquarters last year — and in May leased it to CNO Financial Group, demonstrating both the challenges and opportunities as some companies downsize and others shop for amenity-rich spaces.
The bottom line: The Indianapolis office market isn't healthy — vacancy is above the national average of 19%, per JLL — but it's also not catastrophic.
- As remote work upends offices, avoiding worst-case scenarios counts as a win.