Indianapolis Office Space for Rent
On the back of strong economic growth and industry diversification, the Indianapolis office space market is one of the country’s most dynamic. In addition to Anthem, Eli Lilly, and Simon Property Group, which anchor the market, Indianapolis has a robust economy to support growing businesses.
While finance and insurance, manufacturing, professional and business services, and education and health care, continue to be the dominant industries, Indianapolis continues to appeal to entrepreneurs and budding technology companies.
Indianapolis has an established reputation for producing outstanding talent, which has been and will continue to be a top priority for businesses. Add in a low cost of operating a business and a low cost of living and the growing demand for office space for rent becomes less surprising. Indianapolis has also expanded its supply of creative and co-working spaces, helping keep the city competitive with other major markets in the Midwest such as Chicago, Cincinnati, St. Louis, and Cleveland.
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Indianapolis Office Space | Lease Data and Trends
Despite vacancy rates climbing and new construction outpacing new leasing activity, the cost of office space in Indianapolis is on the rise. Most of the increase in average rents is because of new, Class A, high-end office buildings commanding higher asking rents.
In Indianapolis, office space for rent costs around $21 per square foot on average. Class A spaces have average asking rents around $23, and Class B spaces closer to $18.
Downtown Indianapolis and Carmel have the most inventory and highest lease prices. Across all building classes, Downtown Indianapolis office space costs $23 per square foot on average to lease, while Carmel’s asking rents are slightly higher.
What Brokers Say About Indianapolis Office Space for Rent
Indianapolis’ office space demand has grown on the back of a talented, educated workforce and low costs of living. This is best represented in Indianapolis ranking third in Glassdoor’s Best Cities for Jobs 2018 report, behind only Pittsburgh and St. Louis. The report ranked the 50 largest cities in the United States based on hiring opportunity, cost of living, and job satisfaction. The most frequently listed jobs posted in Indianapolis were for mechanical engineers, marketing managers, and truck drivers, indicating an array of skills in high demand.
Downtown Indianapolis is the anchor of the local economy, with nearly 43,000 jobs per square mile. The city’s central location and extensive highway and rail infrastructure have positioned Indianapolis as an important logistics center, home to 1,500 distribution firms employing more than 100,000 workers. Indianapolis International Airport is the sixth busiest in the world, in part because it is home to the second largest FedEx Express hub in the world. The airport handles more than 1 million tons and employs more than 6,000 professionals. Indianapolis is also a hub for CSX Transportation, and home to its division headquarters.
Growing Tech Presence in Indianapolis
Despite its blue-collar reputation, Indianapolis ranks among the fastest high-tech job growth areas in the U.S. Office space in Indianapolis houses more than 30,000 information technology-related jobs, with companies such as Angie’s List, Appirio, Formstack, SalesForce, Genesys, Infosys, and Ingram Micro leasing office space.
Several commercial real estate projects specifically cater to the tech industry, most notably Union 525, a 120,000 square foot flexible office and coworking space in an iconic, 120+ year old building located Downtown. New construction in the north suburbs has also attracted numerous tech companies, validating that there is tech interest beyond the city’s urban core.
Additionally, the town of Fishers is on track to unveiled the state’s first Internet of Things (IoT) lab in 2018, continuing Indianapolis’ momentum in the tech industry.
Indianapolis Office Space | Market Outlook
While the deindustrialization process will continue to bring some short-term pain, Indianapolis is well positioned to create and provide jobs for the future.
Indianapolis finished 2018 with its highest annual net absorption in three years. Class A office spaces led the way, while Class B posted its third consecutive year of occupancy loss. Despite the discrepancy, overall asking rents for office space in Indianapolis continue to rise.
Downtown Indianapolis office space leasing accounted for nearly half of the activity this year, thanks to ten of the city’s largest 15 deals taking place in the Central Business District. In total, Downtown Indianapolis total square footage leased increase 59% in 2018 vs the previous year. Two of the city’s largest law firms and four of the five major Downtown banks renewed their leases.
Future Indianapolis Office Space Outlook
While rents have risen the past few years, several large spaces are set to become vacant in the first half of 2019. This increase in vacancy with no clear indication that demand will increase may allow asking rents to drop, or for landlord concessions to become more prevalent and significant.
The Indianapolis commercial real estate market was one of few that remained stable during the Great Recession, so any upcoming softness in the market should not change much for local landlords or tenants.