By Graham Summers
Jones Lang LaSalle
Surprisingly, we are already nearing the halfway point of 2014, and the commercial real estate market continues to move in a positive direction in most submarkets. Here is a breakdown per submarket based on JLL’s second quarter statistics and market intel:
The downtown market continues to be generally weak in terms of activity and occupancy. Most high-rise buildings have several full floor vacancies, and we haven’t seen positive absorption on an annual basis for several years. This is attributed to tenants playing “musical chairs”, and simply shifting from one building to the next at a similar size. Additionally, trends have shown tenants moving to the suburbs to be in closer proximity to employees and several large law firms getting more efficient with their space by downsizing. On a positive note, the residential development in downtown is encouraging, and the revitalization of areas like Mass Ave. and Fountain Square will hopefully drive people and the economy upwards in the area.
Total Inventory: 12,981,050 SF
YTD Net Absorption: 9,410 SF
Vacancy Rate: 18.4 percent
Class A Asking Rent: $19 to $27 PSF
Class B Asking Rent: $14 to $18 PSF
This submarket moves strong to weak as you move south to north on the I-465 loop, starting at 71st St. and moving towards College Park. Class A product like Woodland Corporate Park and INTECH have seen solid activity, while most Class B product closer to Michigan Road continues to struggle with below market occupancy levels. Interactive Intelligence, which is situated in Duke’s Woodland Corporate Park, continues to have a positive impact on the submarket, as they recently announced a 112,000 square foot expansion and new building.
Total Inventory: 3,945,399 SF
YTD Net Absorption: -47,733 SF
Vacancy Rate: 23.1 %
Class A Asking Rent: $18.50 to $21 PSF
Class B Asking Rent: $13.50 to $16 PSF
Apart from the obvious headache that is the US 31 construction project, which is slated to re-open around Thanksgiving 2014, this submarket continues to be very hot. There are only a couple large vacancies remaining, and buildings like Meridian Plaza and 550 Congressional that were once in receivership, are now with stable ownership groups. Generally, tenants can expect to see building upgrades, but also rising rental rates and decreasing concessions. I wouldn’t be surprised if we saw a spec construction announcement soon, perhaps at Parkwood West by Duke Realty, but that is only a projection!
Total Inventory: 7,402,591 SF
YTD Net Absorption: 55,150 SF
Vacancy Rate: 13.1 %
Class A Asking Rent: $17.50 – $22.50 PSF
Class B Asking Rent: $15 to $17 PSF
Like North Meridian, large vacancies are scarce and activity is hot. The Precedent office park (1.1 million SF) just went under contract with LIM, a new owner to the market, and Woodfield Crossing was purchased by Neyer Properties in late 2013. Sourwine’s new building, 8335 Keystone Crossing, continues to moderately improve its occupancy levels, and recently stole Blackboard for about 15,000 sf from INTECH Park in the Northwest submarket. Like North Meridian, tenants can expect to see owners pushing rental rates and decreasing concession packages.
Total Inventory: 3,951,502 SF
YTD Net Absorption: -557 SF
Vacancy Rate: 15.3 %
Class A Asking Rent: $18 to $23.50 PSF
Class B Asking Rent: $16.50 to $18 PSF
Castleton and the I-69 corridor remain steady, but have been traditionally quiet compared to the two submarkets to the west. The area is appealing to employees in the Fishers area, but for those in Carmel or south, dealing with traffic on Allisonville Rd. and I-69 is a common concern. Local developer Edgeworth Laskey is nearing completion (June 2014) of its second Class A spec building in the corridor, Two Concourse, which will hopefully attract several large, high credit tenants to the market.
Total Inventory: 3,430,316 SF
YTD Net Absorption: 3,340 SF
Vacancy Rate: 21.2%
Class A Asking Rent: $17 to $21 PSF
Class B Asking Rent: $15 to $17.50 PSF