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Real estate around the state.

Indianapolis may be overbuilt for now, but what about the rest of the state?


It may surprise some people, but the steel industry's slowdown during the 1980s may well be the Calumet Region's biggest impetus for new growth and development. Thanks to steel, the area has been forced to diversify. "We have been seeing a lot of the benefits of that," says Jeff Ban, marketing director for Gough & Lesch of Merrillville.

"I would say that a lot of the growth has been from approximately 1986 on," continues Ban. "We've seen a lot of action. We've had a lot of positive feedback."

Much influx into northwest Indiana is coming from Illinois. It's the Hoosier basics that are appealing-a lower cost of living, lower taxes and good schools.

And if families are migrating across the state line, their businesses can't be far behind. "You've got to get the rooftops there before you can get the businesses there," says Stan Wolucka, manager of the commercial division of Price Realtors, which has offices in Munster, Highland and Shererville.

"We're getting a lot of residential moving here, and they're also moving their businesses here," continues Wolucka. "It's been going on for a good 10 years," he says, noting that the pace has quickened in the last two years.

Wolucka estimates that the area's commercial vacancy rate is less than 5 percent or 6 percent of the finished space. But, he adds, there's quite a bit of building on speculation. "The two biggest growth areas that we have right now in the Calumet Region are the Merrillville area and Shererville," he explains.

Merrillville has been a fertile area for both commercial and residential development. Downtown Merrillville, especially, has had a surge in office-building construction, according to Wolucka. One project that is scheduled to open in February or March is The Williamsburg, a five-building, 120,000-square-foot office park that Gough & Lesch is developing. Another prominent downtown development is Cambridge Common, a 250,000-square-foot professional building.

Why the surge in Merrillville's popularity? Wolucka of Price Realtors attributes the growth to the city's first-class amenities, such as the Star Plaza. "It was a little Holiday Inn once and now it's a huge hotel and convention facility," says Wolucka. "It's something in the area that helps attract people."

While Merrillville may appear to be one of the most glamorous locations for commercial development in the region, there also is a lot of activity elsewhere. One such large-scale project is the East Chicago Enterprise Center, located in East Chicago just two miles from the indiana Toll Road.

The East Chicago center is a redevelopment project owned by a joint partnership between Crown Point-based Gough Construction Co., Inc., and The Prime Group, Inc., of Chicago. In 1988, the partnership purchased the 1 million-square-foot facility, which is currently 60 percent leased, according to Rich Parks, project manager for the center. Geared primarily toward heavy industry, the East Chicago Enterprise Center lists tenants such as Inland Steel Flat Products Company and Rubber Materials Handling, Inc., a tire recycling company.

Recently, the same partnership that owns the East Chicago center acquired the Hammond Enterprise Center. Just five minutes away from its East Chicago sister site, the Hammond center offers 600,000 square feet, 80 percent of which is leased. The Hammond site currently is undergoing redevelopment. Ameri Container, a manufacturer of shipping containers, will be the lead tenant.


While the powers that be decide the fate of a proposed new road connecting Indianapolis and Evansville, the city continues to develop adjacent to highway improvements that have been made during the past few years. The year-old Lloyd Expressway has created a wealth of opportunities for developers. That new interstate highway, and the entrance points along it, is creating a new belt of growth," says Jim McKinney, managing partner of Regency Associates, an Evansville-based real estate firm with interests nationwide.

Regency is getting a running start on the opportunities, and is developing a multiuse business park at the new interchange at Interstate 164 and the Lloyd Expressway. The company currently is building the infrastructure for Cross Pointe Commerce Center, a 183-acre office and industrial park.

But Cross Pointe won't just house computer crunchers and pencil pushers. The center's high-visibility location makes it an ideal spot for the planned ancillary services of hotels, restaurants and retail shops.

Cross Pointe's first tenant will be a $5.4 million, 60-bed psychiatric hospital, affiliated with Charter Medical Corp. of Macon, Ga. Construction of the hospital, to be built on eight acres, is slated for completion in 1990. Location of the hospital at Cross Pointe makes it likely that the center also will be home to one or two medical/professional buildings eventually.

Throughout the center's many upcoming phases, Regency will pay careful attention to preserving a serene, campus-like environment, replete with lots of lakes and open spaces. Development at Cross Pointe will span several years, and will occur on a case-by-case basis. "It has been farmland, obviously, so we will probably see some soybeans in there until we build," says Judith Rueger of Regency.

While Evansville's perimeters are quickly filling with construction crews, the city's downtown-where most office space currently exists-lists a vacancy rate of nearly 14 percent, according to the Central Business District Office Survey.

"Ten years ago or so, there was an undersupply in the office market," says David Matthews, an Evansville real estate appraiser. It is Matthews' firm, David Matthews Associates, that conducts the annual office space survey.

Once the city's undersupply of space was recognized, Evansville became a victim of overbuilding-a natural reaction to real-estate market fluctuations, according to many in the industry. "We tended to overbuild the office market," says Matthews. We ended up with a lot of vacant office space downtown."

While some of the traditional downtown office space users remain firmly planted-such as Southern Indiana Gas and Electric Co., banks, government agencies and attorneys-Matthews predicts that some industries eventually will leave the area. Some coal companies that previously absorbed a lot of downtown office space have moved their operations to Kentucky, according to Matthews.

The solution to Evansville's surplus space downtown is much the same as elsewhere: Bring fresh blood into the area. "What we need to do is attract people to Evansville from the outside," emphasizes Matthews. "It would be nice to see maybe an insurance company or an airline come into Evansville."

Although Matthews does not keep running figures on the city's industrial space, he estimates that the industrial vacancy rate is lower than downtown's office rate. "These seem to be in pretty good balance," he explains.

Evansville's retail real-estate market recently has seen several large new projects become available for lease. Regency has two new retail projects that have come on board recently. Village Commons, located off the Lloyd Expressway, and University Village, located near the University of Southern Indiana, are two of Evansville's four new shopping centers.

"Those four shopping centers opening up within the last 12 to 18 months has caused the vacancy factor in Evansville to jump to a small degree," explains Regency's McKinney. Previously, he says, a large need for retail space existed in the city, particularly on the west side. "There had not been any contemporary shopping center development there (on the west side) in 10 years," he says.


The bronze glass of Fort Wayne's new Standard Federal Plaza mirrors some big changes in the city's facade. It reflects the change in Fort Wayne's Main Street, which not so long ago was a dreary entrance into town. The long-in-vogue bombed-out look was an eyesore epitomizing the state of the city's economy. No longer. There's development aplenty.

Northern Indiana Public Service Company is building a two-story office across from the Performing Arts Center. Down the street is the three-story building constructed by the law firm of Snouffer, Haller & Colvin.

But it's the Standard Federal Plaza, completed last fall, that transformed the skyline. When the regional offices of International Business Machines Corp. decided to move downtown from the suburbs, Standard Federal was suddenly 70 percent leased.

The building introduces a new, formidable player to the commercial construction game in Fort Wayne: Kirco Realty & Development Ltd. of Bloomfield Hills, Mich., working with Keenan Associates.

Keenan Associates had control of the west corner of East Main Street and Barr Street, opposite Friemann Square. The park, the Performing Arts Center and the Fort Wayne Museum of Art made the site too enticing for Kirco to pass up. The marriage of money and know-how runs deeper, though.

The partnership, which is developing a suburban office park in southwest Fort Wayne, is planning to turn the former home of Standard Federal Bank, across the street from the Allen County Courthouse and the City-County Building, into another significant presence. "I would hope we could see something there in 1990," says Alan M. Kiriluk, president of Kirco.

Kirco also is eager to broaden its new frontier. "Obviously, we want to do another project downtown. We think there is a need," Kiriluk says. "I consider it a relatively tight market. There are no gaping holes in the buildings."

That could start to change by March. Lincoln National Corp., which employs 4,000 in Fort Wayne, anticipates a need for more space by 1993 and has to decide soon whether to begin building. Lincoln currently has employees in its three downtown buildings. The company also recently leased space in Pointe inverness Office Park in southwest Fort Wayne, and is taking over space in its own buildings that it had been leasing to other companies.

"Typically in a downtown area, you have growth in existing firms. That is where the majority of growth comes from," says William R. Martin of Commercial Realty Co., the leasing agent for the Standard Federal Plaza. Such has been the case in Fort Wayne.

"IBM is the first major (new) tenant to the downtown area," says Martin. "We went along for 20 years without much expansion in office buildings. it makes you wonder where the demand is coming from. it must he internal growth."

But there's not much room at the inn. Fort Wayne National Bank building is full. So are the Lincoln Tower,the Commerce building and the Paine Webber building, according to Martin. The Summit Bank building is close to 100 percent occupied. "Right now, it's fairly tight," emphasizes Martin.

"Who would have thought two years ago that downtown would be totally leased up?" asks Barry Sturges of Sturges Griffin Trent & Co. of Fort Wayne. "Like anything else, the economy can change all that. That's why they call it risk in our business."

In 1988, Sturges' firm assumed management of the old Anthony Wayne Bank building, then 37 percent occupied, for Summit Bank. Summit improved the building by remodeling the lobby and sprucing up common areas. Tenants were given liberal allowances for individual face-lifts. Today, the building is 95 percent full, reports Sturges.

"It's relatively tight on space (downtown)," agrees David J. Arnold, vice president of the commercial division at Northill Corp. "I hear a lot of positive things about people needing space downtown. There's a healthy demand and the supply looks like it could be bolstered."

Office space in the central business district lists a vacancy rate of less than 7 percent, including the space at Standard Federal Plaza.

Kiriluk says he also likes the climate around other parts of Indiana. "We're looking at other cities. I see growing opportunities in Indiana," he says. "I think Indiana is going in the right direction," he continues, citing the reasonable tax rates as one enticement for industry.


Last year, the predictions came to be reality. The final tallies have been made, and Indianapolis' office vacancy rate for 1989 hovers right around 25 percent-for both suburban and downtown space.

Indianapolis probably is at its peak off ice vacancy rate for the foreseeable future, according to Mike McKenna, vice president of Coldwell Banker in Indianapolis. Coldwell's annual office space survey shows that the city's most dramatic increase in available space occurred-to no one's surprise-downtown.

Of course, the abundance of downtown space didn't spring up overnight. As new projects such as the First Indiana Plaza came on line in 1988, that year's vacancy rate rose from the mid-teens to slightly more than 20 percent. "Over the past two years we've added virtually 30 percent more space downtown," says McKenna.

With the opening in 1989 of both the 300 N. Meridian building and the Bank One Center, Indianapolis added approximately 1.3 million square feet to its list of available downtown space. The 300 N. Meridian building, a development of Browning Investments, Inc., accounts for nearly 350,000 square feet of that new space. It is the Columbus, Ohio-based John W. Galbreath and Company's new Bank One Center that adds the mammoth remainder. At 48 stories, Bank One Center is the state's tallest office building. It adds 1.1 million square feet of office space, plus a host of retail space.

Take a 25-minute drive on Meridian Street north of Indianapolis' Monument Circle, and the abundance of suburban space becomes apparent. Development along virtually every compass point of Interstate 465, the city's outer loop, has been feverish for the past several years. Hence, 1989's suburban vacancy rate doesn't jump nearly as dramatically as does the downtown rate. Coldwell Banker shows a 25.3 percent vacancy rate in the city's perimeters-up from the low 20s that was seen the previous year.

While the vacancy rates are roughly equivalent downtown and in the suburbs, there are some big differences between the two areas. One difference is the amount of square footage. Downtown-with its 2.5 million square feet of vacant space-lists only half as many square feet of available space as the suburbs. But offsetting that discrepancy is the fact the suburbs are absorbing space twice as fast as downtown, according to David Goodrich, president of the commercial/industrial real estate division of F. C. Tucker Company, Inc. He admits, though, "it's still a tremendous amount of space."

Another big difference between downtown and the suburbs: Most of the companies that are relocating in Indianapolis are opting for the green grass of the suburbs. The reasons for that choice are many.

"They're not going to come downtown and pay very expensive parking rates when they can park for free in the suburbs," says Goodrich. To the cost of parking downtown add steeper rents and a longer drive time (for most people), and the suburbs become even more attractive for certain companies.

A consistent contingent of down-towners will always exist, however. Many companies need the immediate access to the state's courts, banks and government offices. "The downtown area has historically been a financial and legal center and that has not changed," says Jim Bremner, president of Revel Companies, Inc., in Indianapolis.

"The people who are downtown are those who need to be downtown," agrees F. C. Tucker's Goodrich. Some high-tech firms, he says, just seem to prefer to locate in the suburbs. That's not to fault the efforts of either the city or the indianapolis Economic Development Commission, he says. "I don't think that the city is doing anything wrong," says Goodrich, adding that he sees nothing else that either it or the IEDC can do to attract newcomers to locate downtown.

Consensus says that the downtown space will fill slowly. It is the normal expansion of existing companies that will account for absorption in the near future, according to Revel's Bremner. "You're seeing it slightly tighten up," he says. Bremner adds, though, that something less than a 10 percent vacancy rate would be healthy for developers. "I would safely say it'll be the mid-1990s before we'll see a reasonable balance downtown," says Goodrich. "I'd say we've got a three- to five-year inventory before we need more space."

Industrial space is one product line currently running in tighter supply than downtown office space. "The hottest product out there is industrial property," says Bremner. There are enough alternatives in industrial properties for the next few years, he says, though vacancies are soaking up rapidly.

"The product that's probably in the best balance is the industrial park," agrees F. C. Tucker's Goodrich. "Nationally, indianapolis is recognized as a good distribution point.

The one thing I see is a shortage of is large bulk warehouses in central Indiana," continues Goodrich. His company increasingly has calls for bulk warehouses, he says, but not much to show prospects. "That's a very expensive building to build on a spec basis," he explains.

Although the abundance of Indianapolis' downtown space might suggest that developers are taking a breather, they're not. Plans for downtown's Circle Centre Mall, a $1 billion public-private venture between the city and Melvin Simon & Associates, Inc., promise to keep nearly all of the area's developers and construction crews busy.

It is on Circle Centre's success that some observers pin hopes for Indianapolis' future. The success of the mall is critical to the future of downtown indianapolis," says Goodrich. The city needs it to attract people to live downtown, he explains, citing Chicago's Michigan Avenue as a kindred example. Indianapolis also needs people who regularly shop downtown, he says, "not just conventioneers who come in on the weekends. We're making progress, but really we've got to get over the next hurdle."


In mid-1988, South Bend listed an off ice vacancy rate between 3 percent and 5 percent. The 1989 figure for the vacancy rate in downtown South Bend has risen to 11 percent, according to research by Project Future, the economic development agency for South Bend. While the downtown rate has doubled, much opportunity still exists there for developers.

The area's convenient access to Detroit, Chicago and Indianapolis make it a prime target for regional warehousing, shipping and headquarters facilities. Donald Cressy of Mishawaka's Cressy & Everett Commercial Co., Inc., realized the potential long ago.

Cressy is developing Mishawaka's Edison Lakes Corporate Park, the region's first suburban office park. The multiuse park is located along the Grape Road corridor. Plans for the park, which broke ground in 1988, include offices, hotels, restaurants and retail and residential space. The office park alone is slated to cover 300 acres. Plans are for all work on the infrastructure to be complete by the end of this year.

The park currently has seven office buildings, says Cressy, with plans for a couple more to break ground this year. Some of the tenants include: Unisys Corp., The Juhl Advertising Agency and the headquarters for Burger Services.

On the southeastern edge of Mishakawa, The Holladay Corporation recently has completed renovation of the Byrkit Avenue Business Center, an office and industrial center. The 500,000-square-foot mixed-use facility was completed in September. Byrkit is now 85 percent leased, according to Patt Crowley, director of marketing for Holladay.

Recently, Holladay also has completed construction of the Memorial Skyway Plaza, a 50,000-square-foot medical office building that is connected to by a skywalk to Memorial Hospital of South Bend. The plaza's first tenant moved in last August. "At this point we are 33 percent leased," says Crowley, noting that the building hasn't even held its grand opening yet.

If office vacancy rates in the South Bend/Mishawaka region are low, the industrial rates there are even lower. "It's like 97 percent occupied, overall," says Crowley.
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Title Annotation:Indiana real estate market
Author:Church, Melinda; Margolis, Jay
Publication:Indiana Business Magazine
Date:Feb 1, 1990
Previous Article:Like fathers, like sons: Cressy & Everett.
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