Commercial Real Estate News / General CRE / Q3 2022 Multifamily Report: Indianapolis, IN

Q3 2022 Multifamily Report: Indianapolis, IN

Published: 03-12-23 Category: General CRE

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Indianapolis is home to an innovation sector that is rapidly expanding.

In Q2 2022, over $166 million was invested in area tech companies alone. With that level of investment comes jobs, creating demand for Indianapolis multifamily units.

It?s projected that employers will increase staff by 1.3% in 2022.

The city?s population increased by 0.7% throughout 2021, while the national average was only 0.1% during that period.

Economic turbulence has created a slight decrease in hiring velocity for many companies. Still, Indianapolis is set to be a good place for families looking to stay in the area or relocate to it.

General Area Overview & Demographics

Indianapolis, Indiana has a population of around 868,000 people and is the most populous city in the state. The city is located in Marion County but also encompasses parts of several surrounding counties. As of 2019, the median age for residents of Indianapolis was 36.4 years old, with about 47.4% male and 52.6% female.

The city?s population is diverse, with various racial and ethnic backgrounds making up its residents. According to the 2019 U.S. Census data, 55% of the population identified as white non-Hispanic, while 28% identified as black or African American, 10% Hispanic or Latino, 5% Asian American, and 2% Native Hawaiian and Other Pacific Islander or Alaskan Native American.

Regarding educational attainment in Indianapolis, 68% have obtained their high school diploma or GED, while 28% hold a bachelor?s degree or higher from an accredited university or college. Overall, the median household income for Indianapolis is $52,752 per year.

There are a variety of popular attractions for visitors and residents alike. One of the most iconic places to visit is the Indianapolis Motor Speedway, which annually hosts the world-famous Indy 500 race. The Indianapolis Museum of Art is also a popular destination and features an extensive collection of artwork from renowned international artists.

Summary of Indianapolis Multifamily Real Estate Performance in Q3 2022

The 2021 calendar year brought an unprecedented flurry of multifamily investment activity, which continued early into this year.

After a year of unexpected multifamily investment in 2021, rising interest rates have mildly decelerated transaction velocity. Nonetheless, there is ongoing activity with mid and lower-tier properties.

This activity has been driven by a 15% price increase for multifamily real estate in Indianapolis, creating bid wars and bringing the average price per unit to over $109,000.

Due to these pressures, Class B and C units changed hands more frequently.

What are multifamily rents like in Indianapolis?

In Q3 2022, Indianapolis multifamily rents increased by 0.9% after trailing throughout Q2.

While rent growth was ahead of the national average, the average asking rent in Indianapolis sits at $1,200, while the national average is around $1,720.

Renter-by-choice assets reached rents as high as $1,530 per month, while the renter-by-necessity group increased to $1,050 per month.

Purchase & Leasing Activity

Q3 2022 Multifamily Report: Indianapolis, IN

Indianapolis? multifamily properties have recorded $1.7 billion in sales year-to-date. This is over double when compared to the same period last year.

Of those sales, 70.5% were accounted for by renter-by-necessity assets, while the remaining 29.5% were assets in renter-by-choice.

Renter-by-necessity units reached $107,450 per unit, while renter-by-choice increased to $270,200 per unit.

Overall, since the end of 2021, the average price per unit has increased to $124,500, an over 21% increase. However, this figure is well below the national average of $217,200.

All the top submarkets for all sales were in urban locations, making up nearly 90% of sales.

Notable Multifamily Real Estate Deals in Indianapolis in Q3 2022

Several notable deals and leases occurred for multifamily real estate in Indianapolis. These include:

Morgan Properties acquired The Boardwalk at Westlake for $136 million;
Olive Tree Holdings acquired The Life at Harrison for $39 million; and
Ripe Alternatives acquired Jameson Apartment Homes for $37 MM.

These are among other notable sales transactions and leases.

New Multifamily Real Estate Development Activity in Indianapolis in Q3 2022

There were 7,100 units under construction by mid-Q3 2022, most of which were renter-by-choice, making up over 80% of the pipeline, while a little over 10% of the units were targeted for affordable communities.

Q1 through Q2 of 2022 brought four properties that totaled around 930 units, a slight decrease from the 1,020 units delivered in the same period in 2021.

Though completions are only 0.5% of existing inventory, construction activity is increasing, with development beginning on 4,180 units across 17 properties. This marks a 161% increase year-over-year.

As of mid-Q3, another 1,070 units are expected to be delivered by the end of 2022.

Market Forecast for Indianapolis? Multifamily Real Estate Market

If the uncertain economic headwinds level out, it?s expected that Indianapolis will perform well going into 2023.

Rent, occupancy, sales, population, and employment were all seeing upward trends, but the economy has caused many employers to decelerate their hiring velocity to hedge against concerns.

With the end of 2022 expected to bring clarity on where that stands, hiring velocity will likely resume, thus returning the Indianapolis multifamily market to a strong performance.

Takeaways for Multifamily Real Estate Investors

Regardless of the economy, it?s only a matter of time before multifamily real estate in Indianapolis returns to a positive trend.

With a thriving job market, population growth outpacing the national average, and sales prices below the national average, the market may be positioned for investors looking for a new entry.

Do your due diligence and invest wisely.