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Real estate around the state.

Two major economic-development successes were the highlights on Indiana's commercial real-estate scene the past six months.

United Airlines last October announced it would build a $1 billion maintenance facility at Indianapolis International Airport. Along with some 6,300 jobs, United is expected to lure a host of support companies to the area that could bring another 11,000 jobs.

Mishawaka, meanwhile, will become the home of the state's newest Fortune 500 company when National Steel Corp. moves into its new corporate headquarters. The company wanted a headquarters location closer to its factories in Michigan, Illinois and Northwest Indiana. The Edison Lakes Corporate Park in Mishawaka proved to be the right place for National Steel.

Elsewhere in the state, those in the real-estate business describe the industry as a bit slower than it had been, perhaps, but far from recessionary disaster. Developers continue to plan new office parks and buildings, retail centers and industrial parks. And a number of major retailers have set their sites on expanding in the Hoosier state in the next year or two.

Following is a summary of some of the more significant commercial real-estate stories of the past half year.


Office space in the Merrillville area continues to grow, with the ground breaking in recent months of a new four-story office building west of the Radisson Star Plaza, says Stan Wolucka, manager of the commercial group at Price Realtors in Highland.

The development is called One Corporate Center, and the plan is to build another building once the first one fills. The first building's major tenant will be First National Bank of East Chicago. There is other office space in the area as well, Wolucka notes; nearby, the Twin Towers center has some space to offer.

Retail activity continues to quicken in Northwest Indiana, with the intersection of U.S. 30 and U.S. 41 the center of a fairly new hot spot. There, for example, a quarter-million-square-foot retail center developed by the Rosewood Group of Chicago and anchored by Wal-Mart Stores Inc. is filling up, with an Omni store opening last September, Wolucka says. The retail boom follows explosive housing growth in the Schererville area driven by a migration of Chicago-area residents seeking a lower cost of living.

And the industrial sector continues to be strong in Northwest Indiana; among the recent highlights is a new 35,000-square-foot pickle liquor plant in Burns Harbor, built by Magnetics International Inc. at a cost of $25 million. A large amount of industrial space remains available in the counties of Northwest Indiana. New industrial parks have sprouted, and vacant existing sites add even more options while keeping lease prices down.


The continued development of the Edison Lakes Corporate Park in Mishawaka is highlighted by the recent decision of National Steel Corp. to move its headquarters there from Pittsburgh. Construction is under way on a 115,000-square-foot headquarters facility, into which 380 employees will move when it opens later this summer.

"Our decision to move our company's headquarters from Pittsburgh to the Mishawaka/South Bend area was basically a business decision," says Kokichi Hagiwara, the company's chairman and CEO. "Two of our three steel mills will be within driving distance of our new headquarters, and nearly half of our customers are now located in the states of Indiana, Illinois and Michigan. It's simply good business to be located where we can best manage our mills and respond to the needs of our customers."

Such a high-profile development thrills Chris Davey, president of Cressy & Everett Commercial Co., developer of the 700-acre multiuse Edison Lakes. "It's a real coup for the community and a real shot in the arm for our park." It's also a challenge for the community, because of its fast-track nature. Cole Associates of South Bend had to generate a design quickly--even as earth was already being moved--and be flexible enough to make changes in mid-course as plans progressed.

Edison Lakes is now 20 percent to 25 percent developed, Davey says. Besides a flurry of activity at the National Steel site, this spring will see the opening of the first phase of what eventually will be a 120,000-square-foot medical facility. St. Joseph Hospital hopes to have an 18,000-square-foot outpatient surgery center ready by next month.

Meanwhile, a 40,000-square-foot office building opened in November in the park, and it is about 80 percent occupied, Davey says. Cressy & Everett also finished leasing the fifth and started building the sixth of nearly two dozen "drive-up" office buildings, smaller 6,000-square-foot units that can be marketed at lower rates because they cost less to build. Davey hopes to finalize a nearby hotel and restaurant project soon.

Vacancies are at a minimum in Edison Lakes, and the same holds true for the whole South Bend/Mishawaka area, notes Patricia Crowley, office and industrial specialist for the Holladay Corp. Of Holladay's projects, the one with the most space available is One Michiana Square in downtown South Bend, and it's only 10 percent vacant, she says.

The most recent vacancy figures she has are 9 months old, and they show office vacancies of 14 percent in South Bend and 18 percent in Mishawaka. Things have improved since then, she says. "Our absorption has looked up considerably in the past six months. We need new product, and we need to convince lenders of that."

A dark spot on the retail scene is May Department Stores Co.'s decision to close the L.S. Ayres & Co. store at Scottsdale Mall in South Bend. The company says the store, as were a number of its other Indiana locations, was losing money. In addition to dismay, the move has raised some controversy; the mall's owner says Ayres' lease requires it to stay open until a replacement tenant is found.


Some of the most noteworthy commercial real-estate happenings in the Fort Wayne area have been in the retail sector, note Barry Sturges, partner with Sturges, Griffin, Trent & Co.

A 110-acre mixed-use development called Cross Creek is taking shape on Lima Road on the city's north side. It's one of at least two Fort Wayne spots where Meijer Thrifty Acres plans to build giant "hypermarts," roughly 200,000-square-foot stores that are about one-third grocery store and two-thirds general merchandiser. Construction should begin in about a year. Meijer also is eyeing a site along Indiana 14 in southwest Fort Wayne, Sturges says.

Also at Cross Creek, Sturges' company is developing a 225,000-square-foot home-furnishing shopping center. "The concept is to bring together those retailers that work in the home-furnishings area," he explains. "It could be a lighting store, bath fixtures, carpeting, draperies, paint, furniture. It'll make it one-stop shopping for people." That center could open later this year or in early 1993. Cross Creek also will house restaurants and some office and warehouse space.

As is South Bend, the Fort Wayne retail picture is losing one major department store. L.S. Ayres' store at Southtown Mall is the victim of declining profits.

The office and industrial sectors have been relatively quiet, Sturges says. There is not a lot of office vacancy in downtown Fort Wayne, he notes, with more space available in the suburbs. Talk of new downtown office space has been fairly quiet since Lincoln National Corp. in 1990 quit talking about building a new building for itself.


The Purdue Research Park in West Lafayette continues to fill with businesses seeking to be near Purdue University. And the development pace could quicken with the completion of a fiber-optic connection between the campus and the industrial park giving businesses better access to Purdue computing facilities and networks.

While the research park appeals mainly to companies whose research and development efforts would benefit from proximity to the university, Stan Mithoefer, director of real estate for Purdue Research Foundation, notes that supporting businesses also are eyeing the park.

Meanwhile in the Muncie area, the real-estate slump has been a relative no-show. "This can be attributed to the Delaware County Chamber of Commerce, local government, financial institutions and the real-estate industry pulling together as a team to build and diversity Muncie's economy," reports Todd Camesasca, president of ADM Real Estate Inc. in Muncie. "We are now reaping the fruits of everyone's labor."

ADM reports continued strong demand for industrial properties. Federal Express has located in the Muncie Industrial Centre, an unnamed out-of-state manufacturer is considering locating in 72,000 square feet in Muncie, and ADM is planning a 50,000-square-foot speculative industrial building.

The retail scene also has seen continued strong activity. Meijer Thrifty Acres has purchased a site along Indiana 332 to build one of its giant grocery/discount stores, and Camesasca expects several other retailers to follow Meijer into the Muncie market. One already has contacted ADM with a build-to-suit proposal for a 20,000-square-foot store.

Financial institutions also are making noteworthy moves in the Muncie real-estate market. ADM, for example, is helping to develop one bank branch, and another is locating in existing space. Camesasca expects 1992 to see the development of several other build-to-suit offices for financial institutions.

Near Muncie, in Daleville, the nation's fifth-largest commercial freight trucking company is moving in. Burlington Motor Carriers said last month it would move its headquarters from Texas to the small Delaware County town, where it already had a regional operation near Interstate 69 and Indiana 67. It will construct a $1.5 million, 20,000-square-foot addition by next year to house the offices and some 170 additional workers.


The city's biggest real-estate news in recent months centered on one of its biggest pieces of real estate, the Indianapolis International Airport. United Airlines plans to build a $1 billion maintenance facility at the airport, and the U.S. Postal Service will expand its hub there.

Those announcements in late 1991 are expected to generate more positive news throughout the next several years, as other firms set up shop to support the airport facilities. Real-estate brokers expect most of the activity to take place in the southwest quadrant of the city, where the airport is located, as well as in adjacent Hendricks County.

The United deal saw Indianapolis win out over finalists Denver, Louisville, Ky., and Oklahoma City. Lured by local and state incentives approaching $300 million, United will construct a 3-million-square-foot maintenance center beginning in the summer, with completion foreseen in 1994. More than 6,000 people will be hired to work on the airline's fleet of Boeing 737s, and analysts predict support companies will hire nearly twice that number of people once the facility is in operation.

The postal hub deal was worth $67 million; it will permanently replace a temporary Express Mail sorting facility that currently employs about 470. The new hub will add about 200 to the payroll and require construction of a 273,000-square-foot building. The official developer is Eagle Air Hub Realty Inc., an entity formed by DeMars Haka Development Corp. Other major players include R.W. Armstrong & Associates Inc., Geupel DeMars Inc. and Geupel Construction Inc.

"I think it's a very positive development for Indianapolis," says Michael McKenna, vice president at CB Commercial in Indianapolis, "both United and the postal hub, which has been kind of overshadowed by United. They also could have a positive effect on population growth."

Another major deal was signed in December, when the Wisconsin Toy Division of Value Merchants Inc. leased 425,000 square feet of the former Chrysler complex on the city's east side. The company will operate a distribution center in the space, which includes about 40 percent of the Chrysler plant, according to F.C. Tucker Co.

Such news is welcome in the industrial sector, which saw a large volume of space put on the market in 1991 through corporate contractions, consolidations and bankruptcies. By the end of the year, 10.1 million square feet of industrial space was available, according to the F.C. Tucker Co. Inc. But the outlook is expected to improve in 1992, with increased absorption and a smaller amount of space added to the market.

Both absorption and construction of office space slowed dramatically in Indianapolis as 1991 progressed, and by the end of the year area-wide vacancy stood at 21.9 percent, up from 21.4 percent a year earlier, according to F.C. Tucker Co. figures.

The overall downtown office vacancy rate was 20.1 percent. The continuing move of state of Indiana offices into the new state office building created a number of vacancies, particularly in Class B and Class C buildings downtown. Class A vacancies were down, in fact, but Class B vacancies skyrocketed and Class C vacancies edged upward because of move-outs. Downtown vacancy rates were hardly impacted by construction, because there simply wasn't that much construction. The new 70,000-square-foot Science and Technology center downtown was one of the few exceptions, according to CB Commercial Co.

A couple major downtown office buildings changed hands near the end of 1991, and McKenna expects the trend to continue in 1992. Citicorp, the primary lender involved in developing the Bank One Center, took possession of the building from its developer and majority owner, Galbreath Co. of Columbus, Ohio.

Office construction slowed in the suburbs as the year progressed, and stopped altogether in some areas. Nevertheless, an oversupply of office space remained, with the suburban office vacancy rate registering 23.4 percent.

Perhaps the most high-profile retail accomplishment of recent months was the pouring of the first concrete for the downtown Circle Centre Mall last October. The city and developer Melvin Simon & Associates inked development agreements in late September, and the city then began building underground parking garages for the $1 billion mall. The only bad news: L.S. Ayres & Co. announced it would not be a part of the mall, and later decided to close its downtown store.

Several major retail chains continue to make moves in the Indianapolis area. Cub Foods, in addition to opening a Meadows shopping center store, plans a new store on the northwest side as well. Wal-Mart is building a couple new Sam's Club locations, and Venture Stores will take over spots vacated by Hill's department stores.

Meijer Thrifty Acres is solidifying plans for its entry into the Indianapolis market with at least three stores. "Meijer, it appears, is going to make a big splash," McKenna says, noting that the company may open as many as five stores simultaneously. And the Parisian department store chain will move into Indiana in a 150,000-square-foot addition at The Fashion Mall at Keystone at the Crossing.

John Kite, vice president of Kite Development Corp., finds the real-estate outlook hopeful, though he says to expect big deals to take a while. He points to the new 450,000-square-foot headquarters for Logo 7 Inc.--which his company, Browning Investments and Greenwalt Development Inc. are developing at Post 70 Commerce Park. It's a major development that will boost the park's future, but it took a couple of years and a lot of patience to solidify. "Things take a lot longer than they did, so you need to have staying power."


The biggest real-estate occurrence in Bloomington is designed to create more development news down the road. A new enterprise zone has been established on the near-west side, with the hope of stimulating reinvestment and creating jobs for zone residents.

Enticements the zone brings include a variety of tax benefits designed to improve the cash-flow positions of businesses in the zone, notes Scott Owens, broker/owner of Owens Bryan & Reed Realty in Bloomington. Also benefiting from tax breaks will be people who live and work in the zone. Within Bloomington's new enterprise zone, the biggest current development is the new distribution center being constructed for Thomson Consumer Electronics, a 633,000-square-foot warehouse that will distribute some 27 million electronics products annually.

Much of the other Bloomington commercial real-estate activity is in the retail sector, Owens says. The Wininger/Stolberg Group, for example, recently won approval for a retail strip center along the Indiana 45/46 bypass at Kinser Pike on the north side of the city. And, Owens adds, completion of major road improvements along the Indiana 37 bypass on the city's west side should spark new commercial interest there.

Real-estate developers continue to show interest in the area around College Mall on Bloomington's east side, though many residents feel the area is nearly saturated, Owens says. The city recently rejected one recent proposal to construct a large retail center anchored by Wal-Mart on a 112-acre parcel near the mall.

The Columbus real-estate scene in recent months has been what Chuck Corbin of Breeden Realtors calls a bit slow, but many communities would kill for the activity he reports.

Cummins Engine Co. currently is renovating a large piece of idle real estate, its Walesboro plant in southern Bartholomew County, for the manufacture of its B-Series midrange engines. The company is investing $200 million to reopen the 600,000-square-foot plant, which will employ about 500 when it opens later this year.

The Columbus area has two new industrial parks that are beginning to fill up. Star Container Corp. bought the first lot in the 150-acre Marketplace Industrial Park at Interstate 65 and U.S. 31, where it is constructing a 50,000-square-foot plant to make glass jars. And developers have sold about a third of the 45 acres in Progress Park at U.S. 31 and Lowell Road, a medium-industrial park featuring lots ranging from one-half acre to one acre.

In the existing parks, activity is strong as well. NTN Driveshaft just completed a 250,000-square-foot addition to its automotive-parts plant in the Woodside South industrial park at Interstate 65 and Indiana 58. Also at Woodside South, Indiana Metal Coatings Co. will begin operations soon in a 30,000-square-foot building.

Nearby at the Woodside Business Center, Toyota Industrial Equipment Manufacturing recently completed a 100,000-square-foot distribution center to complement its Columbus-area forklift manufacturing plant. Also just completed is a 35,000-square-foot manufacturing facility operated by Turbine Engine Support, which makes parts for gas turbine engines. Area businesses in the midst of expanding their facilities include M.C. Aluminum Co. and Impact Forge.

The retail picture in the Columbus area is more subdued these days, as some new shopping centers fill up. The past few years have seen the construction of roughly 1.5 million square feet of new retail space in the area, including the Manufacturers Marketplace outlet mall in nearby Taylorsville, which essentially is full, and the Fair Oaks Mall and Wal-Mart Center, both of which still have some vacancies left to fill.


The downtown office picture in Evansville is firming up, reports Bill Reiners, commercial property manager for Citizens Realty & Insurance, with fewer properties vacant than in many downtown areas.

The overall downtown office vacancy rate stands at about 13 percent, Reiners says, referring to statistics compiled by David Matthews Associates. The sector with the largest vacancy is class B, with a 20 percent rate, while the class A rate is reported to be 10 percent. Meanwhile, downtown office rental rates have remained steady for quite some time, Reiners says, running anywhere from $7 to $15 per square foot. Concessions such as free rent are rare, and always have been, he says.

Work continues on a new 48,000-square-foot office building near the Ohio River. International Business Machines Corp. will be the major occupant, though a fair amount of the building will be leased to other tenants.

The retail sector is seeing some change, meanwhile. Two Hill's department stores have vanished, but as in some other areas of Indiana where Hill's has closed, the Venture Stores chain is making plans to take over the vacant locations this spring. A vacancy remains at Washington Square in Evansville, following the departure of L.S. Ayres last month.
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Title Annotation:Commercial Real Estate; Indiana
Author:Kaelble, Steve
Publication:Indiana Business Magazine
Article Type:Industry Overview
Date:Feb 1, 1992
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