The Indianapolis industrial market just won’t quit! With one quarter remaining, the market is within one million square feet of breaking the previous record for construction in a single year
Construction continues to be the story of 2017. Completed construction more than doubled since last quarter to over five million square feet. Three million square feet came online in the third quarter alone! With six million square feet still under construction, it’s not a matter of if the record will fall, but rather by how much. Once all this construction comes online, 12.0 percent of Indianapolis’ industrial stock will have delivered in the past four years. This historic level of construction is applying more pressure to construction costs, which are up 3.3 percent year-over-year.
Leasing activity continues to hold steady with consecutive quarters of five million square feet. Several of these tenants will not move in until next year. This leads us to believe that net absorption will return to the five to seven million square foot range in 2018. The largest deal signed this quarter, and one of the biggest in recent years, was the leasing of the 1.1 million square foot former Pearson Education facility in Lebanon. This deal will provide a substantial boost to the market’s year-to-date net absorption total once the tenant occupies next quarter.
Sale activity ramped up this quarter. 17 transactions closed during the third quarter, representing 40.0 percent of transactions YTD. This sales volume occurred across both multiple property types and submarkets. This demonstrates the widespread appeal of the area to investors looking for a solid return on investment.
Expect new deal volume to slow next quarter as most large distribution center users already have operations up and running in time for the holidays. Look for these users to re-emerge with strong demand early in 2018. Download the latest Q3 report from the JLL Indianapolis research team.