Downtown Indy office vacancies climb as suburbs post record occupancy gains

Companies in downtown Indianapolis and other major U.S. cities don't require as much office space these days.

Why it matters: The pandemic triggered a fundamental shift in how people work. But some parts of our metro are bucking the trend.

The latest: National vacancy rates hit a record high in the first three months of the year, per data Moody's shared exclusively with Axios.

By the numbers: 21% of the office space across 79 markets in the U.S., mostly cities, was vacant in the first quarter — up from 17% in 2020.

• Even after a strong push by employers for employees to return to the office, workers spend about a quarter of their workdays away from the office — compared to 7% in January 2020.

Zoom in: After adding 244,000 square feet of occupancy to close out 2025, Indianapolis' central business district lost 203,000 square feet in the first three months of 2026, per JLL.

• Most of that loss came from IU Health vacating its office space at Landmark Center as services are consolidated to the new medical campus being built along 16th Street.

Yes, but: The Indy suburbs had a very different quarter, posting occupancy growth of 357,000 square feet, per JLL.

• That's more than the suburbs added in all of 2025 and marks the strongest single-quarter of growth since 2018.
• Carmel's growth came about when Republic Airways moved from Indy's northwest side to a $200 million corporate headquarters along North Meridian Street.
• In Keystone, growth centered on multiple tenants taking occupancy of at least 10,000 square feet in office parks including Lakefront at Keystone, Keystone at the Crossing and Woodland Center.

What's next: Mike Cagna, senior research manager for JLL, said downtown should see gains soon as the city's embrace of office conversions continues.

• "This quarter, work began to convert the top seven floors of Capital Center South Tower into a Moxy Hotel by Marriott. Later this year, Circle Tower will undergo a similar conversion to an AC by Marriott," he said in a statement.
• "These two conversions will remove nearly 200,000 square feet of vacant office space from the market."

State of play: Although the return-to-office trend was real, plenty of people still work remotely or on hybrid schedules.

• That means office spaces have shrunk — continuing a pre-pandemic shift in which employers leaned toward collaborative workspaces, with fewer cubicles and personal offices, Moody's says.

Follow the money: The slowing labor market and questions over how the AI transition will shake out are also holding back demand for offices.