Q4 2022 Industrial Space Report: Indianapolis, IN
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 hosts some of the most popular single-day races in the world. Its lineup includes the Indy 500, Brickyard 400, and U.S Grand Prix Formula One race, making it “the racing capital of the world.”
Unemployment held relatively steady from Q3 to Q4, only increasing from 2.1% to 2.2%. This is well below the national average of 3.5%.
From 2021 to 2022, Indianapolis’ metro area had a 1.24% rise in population.
Indianapolis’s industrial real estate market saw overall positive performance in Q4 2022. New supply, net absorption, and rents all increased quarter-over-quarter.
General Area Overview & Demographics
Indianapolis, Indiana, has a population of 882,039 people. Most of the population (53.5%) is White, while 33.6% are African American or Black. Other racial or ethnic groups make up the remaining 12.9%, including Asian (4%), Hispanic (4%), and two or more races (4.8%).
The city is one of the most prosperous in the country, according to recent US Census Bureau data.
Indianapolis Attractions, Population, & Median Household Income
The median household income is $44,408, which is lower than the national median of $57,652. Regarding demographics, 28.2% of households have an income between $25,000 and $49,999 per year, while 17.1%, the highest earning group, makes over $150,000 annually.
The population is composed mainly of young adults; the average age in the city is 34 years old. Close to a third (29%) of the population is between the ages of 25 and 44, while 23% is between the ages of 45 and 64. There is also a significant youth population, with 19.5% aged 18 to 24 and 19.5% under 18.
The largest university in the city is Indiana University-Purdue University Indianapolis (IUPUI), which serves over 29,000 students. Other universities in the city include Butler University, Marian University, and Ivy Tech Community College of Indiana.
One of the major attractions in Indianapolis is the NCAA Hall of Champions. Other attractions include The Children’s Museum of Indianapolis, White River State Park, and The Indianapolis Motor Speedway, home of the iconic Indianapolis 500.
Summers are usually hot and humid, ranging from the mid-80s to low-90s. Winters in Indianapolis are cold and snowy, often dropping below freezing. December, January, and February receive an average of 8-9 inches of snowfall each month.
Summary of Indianapolis Industrial Real Estate Performance in Q4 2022
Overall industrial vacancy in Indianapolis increased from 5% in Q3 to 5.9% in Q4. Industrial vacancies in Indianapolis saw increases in every quarter of 2022, indicative of a national slowdown in the warehouse market.
The East and South submarkets had the most significant impact on the average vacancy, posting rates of 12.3% and 10.3%, respectively. These were the only submarkets with rates higher than the average.
All other submarkets were below the average, with rates as low as 1.1% in the CBD and 2.2% in the Northeast.
Direct net absorption rose quarter-over-quarter from 4.8 million to 5.3 million square feet. Over half of positive absorption occurred in the Southwest submarket, recording nearly 2.8 million square feet.
What are industrial rents like in Indianapolis?
Rental rates in Indianapolis trended upward in Q4 2022 from $5.17 to $5.32 per square foot. Northeast had the highest warehouse and flex space rents at $8.23 and $9.92, respectively.
East posted the lowest rents at $4.68 for warehouse space and $7.42 for flex space.
Purchase & Leasing Activity
Total sale volume increased quarter-over-quarter, rising from $450 million to around $900 million. However, this marks a decline when compared year-over-year, as Q4 2021 recorded over $1.5 billion in sales activity.
There were 4 million square feet of leasing activity in the fourth quarter of 2022. Northwest and Southwest accounted for more than half of that activity, while the CBD only had 27,000 square feet leased for the quarter.
Notable Industrial Real Estate Deals in Indianapolis in Q4 2022
There were several deals that took place for Indianapolis industrial real estate in Q4 2022:
- Chill Pharma Ten LLC purchased Whiteland 65 Logistics Center, accounting for 1.1 million square feet.
- MDH Partners purchased Franklin Tech Park accounting for 800,000 square feet.
- Deckers Brands leased 1 million square feet at Westpoint Business Park Building V.
- Geodis leased 1 million square feet at Sunbeam Four at I-70 West.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Indianapolis in Q4 2022
The construction pipeline grew by 8 million square feet, and about 9.8 million square feet came online in the fourth quarter.
Completions for 2022 recorded over 25 million square feet. An additional 25 million square feet of product remains in the pipeline.
Market Forecast for Indianapolis’ Industrial Real Estate Market
Indianapolis is quickly becoming a hub of industrial growth, with its inventory anticipated to exceed 310 million square feet by 2023.
The city has become a prime destination for businesses and corporations looking to secure warehouse space in the present or future.
The city’s industrial market also saw unprecedented demand in 2022, with a total absorption of 20.5 million square feet, more than double the industry’s historical average.
Given its central location and favorable business environment, Indianapolis should continue to see strong industrial growth over the next several years.
Takeaways for Industrial Real Estate Investors
Indianapolis should continue to see strong industrial real estate performance for years to come.
With rental rates increasing yet still remaining below the national average, Indianapolis industrial real estate could hold promising opportunities for interested investors.
Do your research, stay diligent, and happy investing.
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