Record Setting Employment Numbers Results in Increasing Market Activity

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Mike Cagna
Senior Research Analyst

Presently, the U.S. is experiencing its most consistently strong employment gains since the 1990’s. Locally, employment numbers within the Indianapolis metropolitan statistical area are recording setting! According to the most recent data released by the U.S. Bureau of Labor Statistics, Indianapolis’ total labor force reached its highest level ever this month (1,017,467) and also set a new historical high in terms of total employment (972,126) for the second consecutive month. Meanwhile, the Indianapolis unemployment rate continues to hold steady at 4.5 percent, 80 basis points below the national average.

The office market has long been tied to employment numbers since increased hiring by companies leads directly to the need for more office space. With local hiring at an all-time high, the Indianapolis office market is poised to see increased activity for the remainder of 2015 and well into 2016. Investors, both foreign and domestic, clearly see this value-add opportunity as eight significant office investment transactions have already closed this year. These deals encompass more than 2 million square feet of office space at a value of nearly $150 million.

Meanwhile, the market is already seeing an increase in tenant demand. Currently, there are more than 200 active users in the market looking for approximately 3.6 million square feet of office space. With this level of activity, we can expect the office vacancy to drop back below 17 percent by the end of the year and continue to lower into next year.

All this is due to the fact the Indianapolis remains in the good part of the economic cycle as it pertains to commercial real estate. There is still an extraordinary and accommodative monetary policy and stable prices. The private sector remains strong with potential room to grow for consumers and housing. While risk factors are evident, including the Federal Reserve potentially increasing the interest rate for the first time since 2006, they are not yet acute. As a result, the probability of recession remains low throughout 2016 with moderately increasing probability in 2017 and beyond.

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