Despite a marked slowdown in the national economy, many regions of Indiana continue to have a strong industrial real-estate market, thanks in part to a central location and financial incentives for businesses.
"The Indianapolis metropolitan area has emerged as a top-tier distribution location for corporate America," says Mike Curless, executive vice president at Lauth Property Group in Indianapolis, a full-service real-estate development and construction firm specializing in office, industrial and retail projects. Unlike in the past when Indianapolis was "viewed as a market that was 'in addition to' Chicago," says Curless, "we are now being viewed as a location 'in lieu of Chicago."
Geography and speculative building have fueled much of the area's growth, says Curless. Indianapolis is within a one-day truck journey of two-thirds of the nation's population, and has more interstates intersecting it than anywhere else in the U.S.
"Prospective companies entering the market often need distribution space in 60 to 120 days, which normally is not enough time to build a structure," he says. "Vacancies continue to shrink as large 'blocks of speculative bulk distribution space is absorbed."
Since the beginning of the year, there have been three significant transactions near Indianapolis, all exceeding 700,000 square feet. "The soft economy appears not to have had a negative impact," Curless says. One reason is because Indianapolis has traditionally been perceived "as an inexpensive place to do business. As the economy continues to soften across the country, this will become even more of an important factor" in attracting business.
The Hoosier industrial real-estate landscape comprises a combination of consumer-products companies, retailers and industrial-oriented firms, In February, TJX Companies Inc., parent company of T.J. Maxx and Marshalls, selected Eaglepoint Business Park in Brownsburg as the site of a national distribution center for its Home Goods Group. "We had a 396,000-square-foot building under construction," Curless relates. "TJX not only leased the initial 396,000 square feet, but asked us to double the size of the building." Completion is expected by mid-October.
John Phair, president of Holladay Property Services Midwest in South Bend, rates the Indianapolis industrial market an 8.5 on a scale of 1 to 10. "And in the South Bend area there is virtually no vacancy of consequence in our portfolio," he says. He adds that no one is building spec space in South Bend. "Until there is more clarity as to the future direction of the economy, people have played it very conservatively."
On the other hand, Phair says, Portage "has had a very active market, particularly for large projects ranging from 500,000 to 1 million square feet." In March, Holladay opened a 400-acre business park in Portage called AmeriPlex at the Port. "There are two buildings completed and another couple under construction" he says. DaimlerChrysler already has a distribution facility up and running at the park. Holladay also manages the AmeriPlex industrial park in Indianapolis, a four-phase, 1,500-acre complex just south of the Indianapolis airport, now in its fifth year.
Despite the slowdown in the auto/truck industry, Phair says, "we still have plenty of parts suppliers and original-equipment manufacturers that are producing significant output." He is also encouraged by the successive interest rate cuts by the Federal Reserve. "I think rate cuts have a much greater impact than any change in the tax system. Interest rates affect almost everybody, and on an immediate basis for those in the business world," he says.
"Steady" is how Larry Siegler, vice president at Precedent Commercial Development in Indianapolis, describes industrial real estate in Indiana, "We saw a slowdown last year. We had a lot of tire kickers, but we personally didn't complete a lot of deals," Siegler acknowledges. Stock market woes and talk of a recession contributed to the slowness. But this year "we're seeing a lot of those tire kickers becoming actual customers," he says.
Warehousing/distribution is where most of the growth is occurring. The hub is Indianapolis, with the spokes extending to Chicago, St. Louis, Louisville, Nashville, Columbus, Cincinnati and Detroit. "The local communities have been fairly supportive of tax abatements for economic incentives," Siegler says, singling out Plainfield, west of Indianapolis, as a community with a business-friendly environment. "Plainfield has grown incredibly over the past several years," he says. Greenwood and the Mount Comfort areas have followed suit.
"I'm seeing controlled spec building," Siegler conveys. "There has been orderly growth." For instance, the Precedent South Business Center in Greenwood is a 450-acre industrial park, which is completing one spec building at a time. Since opening two years ago, the park is about 50 percent sold. "With the interest rates coming down and the business environment picking up, we envision a continuing firmness in the industrial/warehouse distribution sector of the economy," Siegler says.
Dave Arnold, partner at Miller Valentine Group in Fort Wayne, characterizes the greater Fort Wayne area as "steady." "In 2000 there was a visible slowdown in the number of prospects, compared to 1999 and the few prior years," he says.
Since the beginning of the year, things have been picking up. "Companies had been delaying decisions," he says. "While the economy is not as robust as we would like, some inventory adjustments have already been made." He expects continuing confidence throughout the year, but very little spec building.
In 1998, Miller Valentine Group began leasing Expressport, a 112,000-square-foot industrial building near the Fort Wayne airport. Today, the complex is completely filled. "We currently have about 65 percent of our tenants on long-term lease. However, we're still trying to obtain long-term leases on the remaining 35 percent short-term leases," Arnold explains. Tenants are primarily in distribution and light manufacturing, including off-site record storage, medical device distribution and a paper-form producer.
In conjunction with the city of Fort Wayne, Miller Valentine recently created an additional 100-acre business park on the north side of the city. Summit Park II will open in May. "These are lots being developed for sale," Arnold says. "We have a client who is under contract right now for the first lot. We also have a healthy prospect list, but it is clearly not as robust as it may have been two years ago.
"The market has been very strong since year-end 2000, and 2001 continues to be strong," says Jay Archer, senior vice president for Indiana industrial at Duke-Weeks Realty Corp. in Indianapolis. "Occupancy remains good and the pipeline is relatively solid. I think we're going to weather any overall economic downturn."
As consolidation in distribution continues, Archer says, "we have the opportunity to attract a lot of major facilities here locally," adding that the cost of capital is as low as it has ever been for a company to commit to a facility.
Pearson Education, an international book publisher, is in the process of nearly doubling its space from 576,000 square feet to just over 1 million square feet at the 700-acre Lebanon Business Park, northwest of Indianapolis. Space is being used primarily for distribution. "Through acquisitions, companies like Pearson Education are combining facilities to reduce overhead, yet still serve customer needs," Archer emphasizes.
The Muncie market appears not as strong; instead, "we've held our own," says Steve Maines, president of ADM Commercial Real Estate Inc. in Muncie. One bright spot is the large Save-A-Lot warehouse distribution center that recently relocated to Park One/332, a new 300-acre industrial park situated at the junction of SR. 332 and I-69, about six miles west of downtown Muncie.
Southwestern Indiana is "still very much on an upswing," says Ken Newcomb Jr., vice president at Tucker Commercial Services, a division of F.C. Tucker/Huber Realtors in Evansville. He lists the robust local economy, low interest rates and industry moving into the area as auspicious signs.
"Toyota recently announced it is going to double the size of its new pickup truck plant (between Princeton and Evansville) to accommodate the manufacturing of its new minivan," Newcomb says. AK Steel also opened a steel manufacturing plant in Rockport not long ago.
"We're seeing an influx of new industrial and commercial parks, predominately east and north of Evansville," Newcomb says. The new Vanderburgh Industrial Park, or VIP for short, is an example of different entities working effectively together. The Evansville Industrial Foundation and the Vanderburgh County government are jointly developing the 250,000-acre park. "It is now open and has all the amenities, including rail."
Two lots in the park have already been sold and construction is scheduled to begin in May on two buildings, Newcomb says. "We're currently negotiating with a large manufacturer to relocate to VIP as well."
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|Title Annotation:||Indiana industrial real estate market, analysis|
|Comment:||Still Building.(Indiana industrial real estate market, analysis)|
|Publication:||Indiana Business Magazine|
|Article Type:||Statistical Data Included|
|Date:||Jun 1, 2001|
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