Indianapolis' pandemic warehouse boom fades

Warehouse leasing is falling fast after a pandemic-era e-commerce boom filled the Central Indiana landscape with millions of square feet worth of massive industrial buildings.

Why it matters: A three-year flood of industrial deals by the likes of Amazon and other major players brought thousands of jobs and speedier-than-ever package delivery to the region.

State of play: Now, though, industrial deals are slowing, raising questions about how long it will take to fill some of those long, one-story buildings you see along roadways.

By the numbers: Net absorption, a real estate measure of physical space occupied, is around 8 million square feet so far this year.

• That's less than half the pace of last year's record-breaking 20 million square feet, per commercial real estate brokerage JLL.

Between the lines: Warehouses are moving on a track somewhat opposite to white-collar workplaces.

• When offices went dark in 2020, distribution centers sprang to life to meet the demand of shoppers turning to apps instead of stores.
• Now, as people fall back into patterns, large retailers see less urgency to add distribution sites.

What they're saying: "Indy was a darling over the last three years. And now, because everybody loved Indy, they jumped into Indy and now we are overbuilt," said Brian Seitz, an executive managing director for JLL.

Yes, but: Indianapolis is uniquely well-positioned to weather a warehousing slowdown for all the reasons that made it hot in recent years.

• Nearly half of the U.S. population is within a day's drive of Indianapolis, which makes it an attractive hub for large retailers.
• Rent prices are attractive because of business-friendly tax structures and flat land that makes for cheap building costs.

One recent example: Walmart in June opened a 2.2 million-square-foot fulfillment center on 204 acres at 5259 W 500 N. in McCordsville, a high-tech behemoth with more than 1,000 workers, a sign of how the nation's largest retailers view Indianapolis.

The bottom line: "By and large, the rental rates, the fundamentals of the market are still strong," Seitz said. "We just had a lot of capital that needed to be placed over the last couple of years."