Underlying Value: Industrial Land

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LandSurveyer

By Steve Schwegman
Executive Vice President
JLL Indianapolis

The market for industrial land is hot again in Indianapolis … and the activity isn’t limited to Plainfield.

When comparing market-to-market rents, one of the most important variables is land cost. You can build a building virtually anywhere with very little difference in material and labor costs. Land, on the other hand, can’t be replicated and varies tremendously based upon location — especially land within an established business park, next to an intermodal yard, near a port, adjacent to a parcel shipping hub, etc.

There are a record number of developers and real estate investors currently determined to create and grow their land positions around Indianapolis. These folks have realized that controlling land is the best (and sometimes, only) way to compete. Additionally, there is a lot of money in the capital markets earmarked for real estate. The competition among investors drives down the returns for already-occupied facilities. So the equity then turns its attention to land and speculative development which has the potential for higher returns.

The result of this dynamic, aside from happy land sellers, is:

  • An overall increase in land prices,
  • land trades and development in submarkets that have been dormant for years,
  • a diversification of the development “players” in the market and
  • a subsequent increase in required rents for premium land sites.

Overall, the activity in land acquisition is a positive trend for both the investment and occupier markets. Over the next five years, I believe we will see more development take place in submarkets outside of Plainfield and there will be a noticeable difference in rents; more so than in the past.

For more information, please contact us.

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