SUMMIT 2012 INDPLS MidYear Market Report

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SUMMIT 2012 INDPLS MidYear Market Report

  1. 1. INDIANAPOLISMETROPOLITAN MARKETANNUAL MID-YEAR REPORT 2012 www.SummitRealtyGroup.com
  2. 2. LAND RETAIL Dear Colleagues: OFFICE It’s midpoint of 2012 and there are many great things happening in our market and here at Summit INDUSTRIAL that we are excited to share. MULTI-FAMILY We recently held a “One Year Anniversary in our New Building” party. Even after settling in, HEALTHCARE we continue to be very proud of our new headquarters. CAPITAL MARKETS – Early this year, we opened our on-site fitness room. In many positive ways, this has been a CORPORATE SOLUTIONS game-changer workplace perk. Plus, workers in the adjacent buildings no doubt get a kick out of watching some of us run stair laps out on the fire escape. PROPERTY MANAGEMENT – And I have to include one of my favorite additions - the large-scale “Pennway” mural, PROJECT MANAGEMENT artistically depicting the rich history of our building. The mural is part of a Super Bowl 2012, “46 for XLVI” public art initiative - an innovative partnership between the city of Indianapolis and the Arts Council of Indianapolis to showcase 46 murals throughout the city. A warm REAL ESTATE EXPERTISE shout-out to muralist, Erik Pearson, a great artist and new friend of the firm. – We welcomed our first tenant and new neighbors - Ignition DG. An exhibit design agency headquartered in Bristol, UK, this is their first U.S. location. Summit’s Property Management division continues to grow in an impressive way. – Summit’s Property Management is now the 2nd largest third party property management service provider in the Greater Indianapolis area. The team currently manages more downtown office buildings than any other third party provider in the market. – Overall, we currently manage 7 msf in the Greater Indianapolis area including Plainfield, Bloomington and Anderson. Recent assignments include the 673,000-sf M&I Plaza in downtown Indianapolis and the 150,000-sf Metropolis office building in Plainfield. Additional key announcements: – Summit expanded our Investment Services platform - adding Matt Carlstedt / SRGC to the team. – On pages 4 and 6, check out the Top Lease Transactions for Industrial and Office. We’re psyched about Summit’s significant involvement in these top market deals. – And lastly, I’m honored to have been selected as the 2011 Indiana Commercial REALTOR of the Year and also inducted into Midwest Real Estate News “Hall of Fame”. I’m blessed to work in a field I truly love and with so many friends and colleagues whom I greatly respect. Front cover photo by Jim Nix. The entire Summit team extends a sincere thank you and positive wishes for a successful 2012. This report contains information available to the public and has been relied upon by Summit Realty Group on the basis that it is accurate and complete. Best Regards, Summit Realty Group accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information Bill Ehret, SIOR contained herein, and same is submitted subject to Chief Executive Officer errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. Copyright © 2012 Summit Realty Group. All rights reserved.2
  3. 3. INDY NUMBERS INDPLS MSA INDIANA U.S.POPULATION 2011 ESTIMATED 1.78 6.51 311.6 million million millionPOPULATION GROWTH SINCE 2000 16.6% 7.2% 9.6%UNEMPLOYMENT JUNE 2012 7.8% 8.0% 8.2%INDY RECOGNITION– Indiana has earned the top AAA bond rating by all 3 major credit rating agencies.– Indiana ranks 9th in Logistics employment and 10th in freight shipments by tonnage.– Indiana bumped up two spots, now ranking 6th of the 50 states in Business Climate. Site Selection Magazine 2011– Indianapolis MSA listed in Top 50 Hottest Cities in the Nation. Brookings Institute 2010– 12th largest City in the U.S.; 35th largest MSA – Estimated Population; 27th ranked MSA – Economic Strength. Policom 2012– CEOs rank Indiana 1st in the Midwest and 5th in the U.S. for “Best & Worst States for Business”, earning a 4 out of 5 rating in all 3 categories: Tax & Regulation, Quality of Workforce, and Living Environment. Chief Executive Magazine 2012– Conexus Indiana, the state’s Advanced Manufacturing and Logistics (AML) initiative, will launch its new high school-level AML curriculum in Fall 2012 at Hoosier high schools and career centers. The curriculum is designed to give Indiana students a head-start on careers in the state’s largest economic sector.– Indiana remains in the Top 10 States for Bioscience employment. It is one of only two states offering specialized bioscience employment in 4 of the 5 subsectors – Agricultural Feedstock & Chemicals, Drugs & Pharmaceuticals, Medical Devices & Equipment, Research, Testing & Medical Laboratories, and Bioscience Distribution. Indiana’s bioscience jobs have grown by 14% over the last decade, outpacing the national average of 6.4%. Batelle/Biotechnology Industry Organization (BIO) Report “State Biosciene Industry Development 2012”– Indiana received a Gold Shovel award in 2011 and Silver Shovels in 2010, 2009, and 2008 for Top Investment Projects, among states with population of 5 – 9 million. Area Development Magazine, Summer 2012– Site Selection Magazine recognized Indy Partnership as one of the Top Ten Economic Development Groups, citing its ability to create job growth and capital investment in the 9-county region. Site Selection Magazine 2011– Indiana is home to the 5th largest wind farm in the U.S. (the 4 largest are all in Texas) OTHER SOURCES: U.S. Census Bureau and U.S. Department of Labor Indiana Workforce Development Indiana Economic Development Corporation Develop Indy Conexus Indiana Summit Realty Group Research DepartmentSUMMIT REALTY GROUP l Cushman & Wakefield Alliancewww.SummitRealtyGroup.com 3
  4. 4. INDUSTRIAL VACANCY & ABSORPTION STATS ON THE GO The Indianapolis industrial market continued to make Y-O-Y impressive gains in Q2 2012. The overall vacancy rate for the Q2 2011 Q2 2012 CHANGE market stands at 6.7%, down from 7.5% just one quarter ago. Overall Vacancy 8.9% 6.7% A number of large leases in Q2 contributed to this drop in Manufacturing vacancy including: Prime Distribution’s lease of 412,000 square Avg. Net Rental Rate (psf/yr) $2.22 $2.03 feet (sf) in the South submarket, Henry Schein’s lease of 380,160 Warehouse / Distribution $3.07 $3.01 sf in the Northwest submarket, and Atkins Nutritional’s lease Avg. Net Rental Rate (psf/yr) of 211,500 sf in the East submarket, among others. Flex $5.78 $6.00 Avg. Net Rental Rate (psf/yr) With year-to-date leasing activity at 3.8 million square feet (msf), and outpacing the previous four years, this trend of steadily 2012 YTD LEASING ACTIVITY declining vacancy rates and positive absorption and is expected Submarket Distribution to continue. CBD NORTHEAST 3.1% 5.4% RETURN OF SPECULATIVE CONSTRUCTION SOUTH The steady decline in vacancy over the past six quarters has EAST 32.2% 11.5% not only led to an increase in investment sale activity, which currently stands at 3,001,733 sf sold to investors at mid- year, but also the return of speculative construction to the Indianapolis industrial market. A lack of large contiguous modern bulk space has spurred a new wave of speculative construction, which to-date includes SOUTHWEST 23.8% three buildings totaling over 1.8 msf already under construction with target delivery dates in Q4 2012. Largest of these is the EAST 11.5% 794,608-sf IDI World Connect Building 1 at Ameriplex. Next is the ProLogis 622,440-sf 445 Air Tech building. And lastly, the 450,000-sf VanTrust Project One Building. All three buildings are located in the Southwest submarket. NOTABLE NEW LEASE TRANSACTIONS Mid-year 2011 – Mid-year 2012 These speculative projects, along with ongoing build-to-suit BUILDING SUBMARKET TENANT SF construction for companies such as Vance & Hines, Regal * 800 S Perry Rd Southwest online retailer 925,800 Beloit and Helmer, further showcase the attractiveness of the * 700-716 Airtech Pkwy Southwest RR Donnelley 799,344 business climate in Indianapolis, as well as the peace of mind 2001 Commerce Pkwy South Anderson Merchandisers 703,496 that the state’s economic stability can offer companies looking * 760 Commerce Pkwy South Prime Distribution 412,000 5445 Guion Rd Northwest Henry Schein 380,160 to relocate. 600 S Perry Rd Southwest Jacobson Warehouse Co. 333,566 * 1551 S Perry Rd Southwest GENCO (sublease) 308,620 OUTLOOK * 700 Commerce Pkwy W South GENCO-ATC 292,500 Ongoing interest in the favorable economic climate of the * 3023 N Distribution Way East Atkins Nutritionals, Inc. 211,500 Indianapolis market continues to attract both investors and * 909 Whitaker Rd Southwest Smart Warehousing, LLC 190,440 business owners looking for the best and most fiscally sound 2516-2548 Airwest Blvd Southwest Apotex 156,590 environment to run their businesses. As net rents continue * 850 N Graham Rd South KYB America, LLC 153,748 to increase, and with no foreseeable let up in demand for * 2800 Airwest Blvd Southwest Thermal Structures, Inc. 141,028 modern warehouse/distribution space, it is anticipated that 1105 E Northfield Dr Northwest Life Science Logistics (expansion) 132,000 2525 N Shadeland Ave East Fresh Warehouse 128,000 more speculative construction will likely break ground before 7900 Rockville Rd Southwest Jacobson Warehouse Co. 124,377 the end of 2012. 595 Perry Rd Southwest Hanzo Logistics (expansion) 106,875 4760 Kentucky Ave Southwest Sunshine Manufacturing 105,800 5345 Decatur Blvd Southwest Rolls-Royce Corporation 81,759 * denotes Summit brokered transaction4
  5. 5. Q2 2012 INDUSTRIAL SUBMARKET STATISTICS NORTHWEST NORTHWEST TOTAL INVENTORY 48,504,997 SF NORTHEAST VACANCY RATE 6.1% AVAILABLE SF 2,962,444 SF YTD ABSORPTION 599,535 SF 86th Street NORTHEAST Meridian St Keystone Ave TOTAL INVENTORY 18,358,564 SF VACANCY RATE 9.3% vd Bl AVAILABLE SF 1,710,087 SF d or YTD ABSORPTION 211,790 SF nf Bi EAST TOTAL INVENTORY 35,977,995 SF VACANCY RATE 8.0% AVAILABLE SF 2,863,005 SF YTD ABSORPTION 214,312 SF SOUTHWEST EAST CBD TOTAL INVENTORY 23,916,281 SF CBD VACANCY RATE 12.4% AVAILABLE SF 2,956,095 SF YTD ABSORPTION 285,952 SF SOUTH TOTAL INVENTORY 18,548,672 SF Indianapolis International SOUTH VACANCY RATE 6.7% Airport AVAILABLE SF 1,236,381 SF YTD ABSORPTION 763,709 SF SOUTHWEST TOTAL INVENTORY 67,997,265 SF VACANCY RATE 3.9% AVAILABLE SF 2,624,309 SF YTD ABSORPTION 1,315,380 SF OVERALL INDIANAPOLIS INDUSTRIAL MARKET YTD OVERALL TOTAL MARKET INVENTORY OVERALL VACANCY RATE TOTAL AVAILABLE SF NET ABSORPTION 213,303,774 SF 6.7% 14,352,321 SF 3,390,678 SFOverall Vacancy and Net Absorption include both direct and sublease space being marketed as vacant.Tracked statistics include Marion and surrounding counties in roughly a 25-mile radius around downtown Indianapolis.Industrial statistics include single & multi-tenant buildings with minimum 15,000 rentable square feet (rsf).Overall Vacancy and Net Absorption include both direct and sublease space being marketed as vacant.SUMMIT REALTY GROUP l Cushman & Wakefield Alliancewww.SummitRealtyGroup.com 5
  6. 6. OFFICE VACANCY STATS ON THE GO Vacancy rates continued their downward trend in the first half Y-O-Y of 2012. Overall vacancy for the Indianapolis market stands at Q2 2011 Q2 2012 CHANGE 21.1%, down from 22.3% a year ago. Overall vacancy is down, CBD Overall Vacancy 20.3% 21.3% year-over-year, in 8 of the 12 submarkets. Notable changes were seen in the two largest Suburban submarkets, Keystone Suburban Overall Vacancy 23.1% 21.1% Crossing and the Meridian Corridor, where overall vacancy CBD Class A $22.55 $20.31 rates fell to 17.8% and 19.7% respectively Q2 2012, down from Direct Asking Rents (psf/yr) 22.5% and 21% Q2 2011. Suburban Class A $19.20 $18.53 Direct Asking Rents (psf/yr) For the Keystone Crossing submarket, a combination of low overall vacancy, high direct average asking rates, and 2012 YTD LEASING ACTIVITY steady leasing activity has led to the construction of the first Submarket Distribution speculative office building in the Indianapolis market since 2008. OTHER SOUTH 2.2% The 3-story, 80,700-square foot (sf) class A building, by local 3.4% CASTLETON developer Sourwine, will begin construction Q3 2012 and is 7.4% CBD scheduled for delivery Q2 2013. 28.3% KEYSTONE CROSSING LEASING & ABSORPTION 8.7% Although 2012 leasing activity is not yet at the same level as first half of 2011, the trend of consistent improvement remains steady. One major factor in this trend is the re-emergence I-69 / SHADELAND of the CBD. The CBD, which had fallen behind suburban 11.9% submarkets in the previous two years, accounted for 28.3% of year-to-date leasing activity for the entire market. This activity makes it the strongest performing submarket in the MERIDIAN NORTHWEST CORRIDOR Indianapolis MSA through mid-year 2012. Contributing to this 15.5% 22.6% strong performance is the sub-lease of three floors totaling 60,000+ sf to multiple tenants at the PNC Center. As this space is absorbed over the coming quarters, overall vacancy rates will continue to trend downward. NOTABLE NEW LEASE TRANSACTIONS Mid-year 2011 – Mid-year 2012 Large leases signed in previous quarters have been absorbed BUILDING SUBMARKET TENANT SF in the first half of 2012, contributing to the lowered vacancy 9200 Keystone Crossing Keystone Crossing State Farm 88,408 280 E 96th St Meridian Corridor Travelers Insurance 55,113 rates in many submarkets. Some of these include: State Farm 6335-6345 Castleway Ct Castleton IU Health 34,638 with more than 80,000 sf in the Keystone Crossing submarket; PNC Center CBD Kronos 31,725 Travelers Insurance with 55,113 sf in the Meridian Corridor; 9480 Priority Way W Dr Keystone Crossing Magnolia Health Systems 30,009 and Kightlinger + Grey’s lease of 23,537 sf in the CBD. 9998 Crosspoint Blvd 1-69 / Shadeland Stanley Convergent Security 26,000 * 8415 Allison Pointe Blvd Castleton Comcast 23,785 OUTLOOK 1 Indiana Square CBD Kightlinger & Gray, LLP 23,537 The Indianapolis office market is poised to make larger gains 11611 N Meridian St Meridian Corridor Liberty Mutual 23,507 * 8440 Allison Pointe Blvd Castleton DuCharme McMillen & Assoc 22,163 in the 2nd half of 2012 than it did in the first. Activity has * PNC Center CBD FinishMaster (sublease) 21,996 been consistent, and is expected to pick up as the US economy * 1320 City Center Dr Meridian Corridor Fresenius Medical Care 21,673 continues to stabilize. The consistent positive trends in the * 250 W 96th St Meridian Corridor David A. Noyes 20,068 market are likely to further increase investor interest, and 7333 W Washington St Airport Ivy Tech Community College 19,615 suggest that a pick-up in activity will be seen in the coming 111 Congressional Blvd Meridian Corridor Shepherd Insurance 18,964 quarters. * 250 W 96th St Meridian Corridor David A. Noyes (sublease) 18,812 3600 Woodview Trace Northwest National American University 17,914 8900 Keystone Crossing Keystone Crossing T2 Systems 17,801 4040 Vincennes Cir Northwest GexPro 17,7896 * 135 N Pennsylvania St CBD General Electric 16,644 * denotes Summit brokered transaction
  7. 7. Q2 2012 OFFICE SUBMARKET STATISTICS NORTHWEST MERIDIAN CORRIDOR CARMEL I-69 / SHADELAND TOTAL INVENTORY 3,993,296 SF TOTAL INVENTORY 6,390,580 SF TOTAL INVENTORY 678,212 SF TOTAL INVENTORY 2,598,651 SF VACANCY RATE 21.2% VACANCY RATE 19.7% VACANCY RATE 25.5% VACANCY RATE 21.5% AVAILABLE SF 847,253 SF AVAILABLE SF 1,260,942 SF AVAILABLE SF 173,102 SF AVAILABLE SF 559,529 SF YTD ABSORPTION -171,486 SF YTD ABSORPTION 150,381 SF YTD ABSORPTION 12,745 SF YTD ABSORPTION 131,927 SF KEYSTONE CROSSING NORTHWEST MERIDIAN NORTH/ I-69 & TOTAL INVENTORY 4,099,762 SF CORRIDOR CARMEL SHADELAND VACANCY RATE 17.8% AVAILABLE SF 728,805 SF KEYSTONE YTD ABSORPTION 110,484 SF 86th Street CASTLETON TOTAL INVENTORY 2,200,535 SF CASTLETON VACANCY RATE 26.4% vd d Bl AVAILABLE SF 580,850 SF or YTD ABSORPTION 10,238 SF nf Bi EAST MIDTOWN MIDTOWN Keystone Ave TOTAL INVENTORY 1,380,229 SF VACANCY RATE 8.3% Meridian St AVAILABLE SF 113,890 SF YTD ABSORPTION -1,501 SF WEST EAST TOTAL INVENTORY 691,527 SF VACANCY RATE 20.7% CBD AVAILABLE SF 142,993 SF YTD ABSORPTION 0 SF AIRPORT SOUTH CBD TOTAL INVENTORY 10,650,901 SF Indianapolis International VACANCY RATE 21.3% Airport AVAILABLE SF 2,266,898 SF YTD ABSORPTION -142,184 SF SOUTH TOTAL INVENTORY 1,443,500 SF VACANCY RATE 21.0% AVAILABLE SF 303,187 SF YTD ABSORPTION 12,527 SF OVERALL INDIANAPOLIS OFFICE MARKET AIRPORT TOTAL INVENTORY 969,835 SF YTD OVERALL TOTAL MARKET INVENTORY OVERALL VACANCY RATE TOTAL AVAILABLE SF VACANCY RATE 26.4% NET ABSORPTION AVAILABLE SF 256,290 SF 36,067,619 SF 21.1% 7,613,005 SF 117,749 SF YTD ABSORPTION -867 SFOverall Vacancy and Net Absorption include both direct andin roughly space being marketed as vacant. Indianapolis.Tracked statistics include Marion and surrounding counties sublease a 25-mile radius around downtownOffice statistics include multi-tenant buildings with minimum 15,000 rentable square feet (rsf).Overall Vacancy and Net Absorption include both direct and sublease space being marketed as vacant. WEST TOTAL INVENTORY 970,591 SF VACANCY RATE 39.1% AVAILABLE SF 379,266 SF YTD ABSORPTION 5,485 SFSUMMIT REALTY GROUP l Cushman & Wakefield Alliancewww.SummitRealtyGroup.com 7
  8. 8. CAPITAL MARKETS CENTRAL INDIANA NOTABLE INVESTMENT SALES – INDUSTRIAL The Central Indiana investment markets have seen steady Mid-year 2011 – Mid-year 2012 activity in the first half of 2012. Modern bulk industrial remains PROPERTY SF the most active product type. However, sellers of office are KPJV Distribution – 5 Building Portfolio 2,128,822 beginning to realize the benefits of increased interest in the Anderson Merchandisers Building, Franklin IN 703,496 Central Indiana market. Generally, buyers have been attracted Park 100, Building 56 300,000 to a healthy positive spread on yields when compared to first AllPoints at Anson, Building 14 280,000 tier markets, in combination with increasingly attractive debt 7250 E 90th Street 89,000 terms. INDUSTRIAL The industrial market has remained strong through the first NOTABLE INVESTMENT SALES – OFFICE half of 2012 as investors continue to view Central Indiana Mid-year 2011 – Mid-year 2012 as a stable market providing attractive yields at a cost basis BUILDING SF significantly below the most competitive markets across the Chase Tower (under contract) 1,057,877 country. Specifically, institutional investors and publicly traded 111 Congressional Blvd 177,957 REITs continue to target modern bulk distribution centers, Haverstick 1 & II 77,984 which has led to continued cap rate compression. The modern Pennwood 1 & II 71,892 bulk product overall vacancy rate is 6.8%. Coupled with the declining cap rate environment, developers have begun, or are in the final stages of, planning speculative bulk developments. Medium distribution and flex have not yet seen the same investor interest. Those product types have yet to experience INDIANAPOLIS 400 ROLLING 12-MO. TOTAL QUARTERLY VOLUME OFFICE the same level of cap rate compression, causing owners to hold SALES 350 assets and focus on improving overall performance. Sales by Total $ (mil) 300 250 OFFICE 200 The office investment market is beginning to show signs of 150 recovery, with a significant increase in the number of projects 100 being brought to market over the first half of the year. Investors are slowly re-entering the Central Indiana office market in 50 hopes of taking advantage of the attractive spreads between 0 Q1 09 Q1 10 Q1 11 Q1 12 going-in yields and the low interest rate lending environment. Specifically, the Indianapolis CBD has been active with the sale of Chase Tower and a multitude of properties expected to trade in the 3rd quarter including Circle Tower, Capital Center, INDIANAPOLIS 500 ROLLING 12-MO. TOTAL QUARTERLY VOLUME and the Farris Building to name a few. INDUSTRIAL 450 SALES 400 Sales by Total $ (mil) 350 300 250 200 150 100 50 0 Q1 09 Q1 10 Q1 11 Q1 12 Sales Graphs Source: Real Capital Analytics8
  9. 9. MULTI-FAMILYOVERVIEW NOTABLE MULTI-FAMILY SALES – YTD 2012The Indianapolis multi-family market finished the first half PROPERTY GRADE # UNITSof 2012 with an uptick in occupancies and rental rates – Lakes of Carmel A 324typical after the seasonal dip Midwest owners have become Ashgrove B 57accustomed to. Atypical is the velocity at which the rental Brockton B 284market strengthened – a notable 2.1% growth over this time Oak Lake at Crooked Creek B 216last year, coupled with rent growth. This growth, combined Piccadilly B 54with the number of new units delivered over the past 24 months, Hillcrest Woods B- 384enables us to paint a very positive picture of the Indianapolis Cold Springs Manor C 109rental market. Red Mill C 164 Vineyards at Apple Creek C 198The downtown rental market continues to dominate overall,due to an under supply of product, significant job growth and agrowing student population at the IUPUI campus. Occupancy AVERAGE QUOTED RENTS – MARKET WIDEin the downtown market continues to tighten, with “A” and “B” $690 $695grade properties averaging 96%. Despite seeing the majority $695 $683of new multi-family construction, the north submarket remains $685 $675 $677strong. $675 $659 $665The transaction market was fairly active during the second half $655 $645of 2011, with the majority of the year’s $200 million trading $645during that time. While transaction volume during the firsthalf of 2012 was (<$90 million), it is likely we will see similar $635or slightly more activity in Q3 and Q4. As in 2011, “B” and $625“C” grade properties continue to dominate the Indianapolis 2006 2007 2008 2009 2010 2011 Q2 12transaction market as investors become increasingly anxiousto churn equity and lenders push out REO product as well as AVERAGE OCCUPANCY RATES – MARKET WIDEassets requiring recapitalization. 94% 93%OUTLOOKThe future of the Indianapolis apartment investment market 92%remains positive due to favorable debt markets, rent and 91%occupancy trends and relative affordability in comparison 90%to other midwest markets. These factors have contributed 89%significantly to a large group of new investors to the marketand we expect this trend to continue. 88% 89% 90% 92% 90% 91% 92% 93% 87% 2006 2007 2008 2009 2010 2011 Q2 12 STATS ON THE GO PROPERTY COUNT 632 AVERAGE RENT PER SF BY CLASS TOTAL UNITS 122,529 $1.00 $0.93 $0.95 AVERAGE UNITS / PROPERTY 198 $0.90 AVERAGE OCCUPANCY RATE 92.1% $0.85 AVERAGE YEAR BUILT 1974 $0.80 $0.75 $0.75 $0.68 $0.70 $0.65SUMMIT REALTY GROUP l Cushman & Wakefield Alliance $0.60 CLASS A CLASS B CLASS Cwww.SummitRealtyGroup.com 9
  10. 10. HEALTHCARE The healthcare sector remains one of the fasting growing business AVERAGE RENTAL RATES segments within central Indiana. Naturally, this has also driven OVERALL FULL SERVICE $20.00 growth in the underlying real estate serving this sector. Major $19.50 $19.22 hospital systems continue to control the bulk of construction, with $18.42 large scale projects in the works at Exit 10 in Fishers submarket $17.57 $17.52 $17.45 $17.37 $16.90 $16.64 $16.53 $16.42 $16.24 $16.19 and in Greenwood area, South submarket. While no speculative $15.84 $15.00 $15.14 $14.72 buildings are coming out of ground, there has been continued $14.62 $14.29 $13.79 demand for medical office space and new pre-leased buildings are $12.48 under construction. $10.00 Corresponding with the two high growth markets previously mentioned, Fishers and South submarkets also bring in the highest $5.00 average full service rental rates. The rates for the remaining submarkets were relatively consistent across the board, which speaks to the strong and stable healthcare market. Overall, rental rates remain steady and are historically slow to fluctuate. We do $0.00 not foresee any changes within these rates in the short term. Leasing activity was primarily clustered in the north-oriented submarkets as well as the South submarket. Activity in the South 2012 YTD LEASING ACTIVITY was mainly due to growth and expansion of the St. Francis Hospital Submarket Distribution FISHERS system. While activity in the northern markets consisted generally WEST 3.3% 4.1% MERIDIAN EAST of practices consolidating, the leasing of the medical office buildings 5.0% CORRIDOR 17.8% near both the IU Health & St Vincent North campuses, and the SW HENDRICKS growth of the hospital systems as they bring many practices back 5.8% onto their campuses. The relatively low leasing activity in the Fishers submarket is a bit misleading, as demand has far outpaced CBD 7.9% supply. CARMEL 16.6% The big question looming over this sector is what the new healthcare NORTHEAST reform will mean to medical office real estate. Speculation spans 9.7% the entire spectrum – from an increase in demand due to the additional number of insured, to the continued growth of the NORTHWEST SOUTH 13.9% 15.9% hospital systems which could lead to a reduction in the demand for independent medical office buildings. While specifics are unclear at this point, healthcare reform will surely cause both hospital SUBMARKET AVAILABILITY systems and private practices to reexamine their business models. 600,000 Any adjustments could potentially limit funds available for medical office space, as well as affect rental rates of medical office buildings 500,000 AVAILABILITY RENTAL RATE 512,951 controlled by hospitals. 478,918 456,805 400,000 We anticipate the healthcare real estate market to remain steady 400,550 over the next six months while the outcome of the Fall election 300,000 is decided. 2013 however, will definitely be a year of change as 279,435 the market attempts to reposition itself in the changing healthcare 244,475 227,882 200,000 landscape. 166,026 100,000 118,944 94,809 010
  11. 11. BLOOMINGTONMARKET OVERVIEW STATS ON THE GOAs a university town with several growing industries, Bloomington’s AVERAGEeconomy has been somewhat insulated from but not entirely OVERALL PSFimmune to the economic downturn. Nonetheless, its economy INVENTORY VACANCY RENTis showing signs of a recovery. There is significant infrastructure Industrial 9.8 msf 7.9% $4.68investment underway, including the rebuilding of the SR-46 Bypass,major improvements to Walnut Street, the re-opening of West Office 2.4 msf 11.3% $12.023rd Street, and the impending connection of I-69. As a result, the Medical Office 631,844 sf 5.0% $13.35market is primed for change, growth, and investment. Multi-Family 11,894 units 3.3% $0.96MULTI-FAMILYThe strongest product in the Bloomington market remains multi-family. The occupancy rate on the approximately 12,000 unitstracked by Summit is over 96%. Downtown rental rates average$1.46 per square foot (psf). To date, the market has largely beendominated by local players. However, new projects like Georgia-based Ambling Company’s project on 11th Street may signal a shift. MULTI-FAMILY HISTORICAL OCCUPANCYOld National Bank is in the process of divesting prime parcels on 97%Kirkwood which will likely feature a large housing component. 96%OFFICEOverall vacancy rate for office stands at 11.3%, down from 12.9% 95%just one year ago. Newer companies entering the market include 94%California-based Coupons.com and Virginia-based Cigital. Thelargest recent transactions have been relocations: Employment 93%Plus moved into 21,363 sf in the Finelight Building on Liberty Driveand IU Health leased 8,000 sf at Johnson Creamery downtown. 92%Investment sales activity is also showing renewed signs of life. 93% 94% 95% 93% 96% 96%The Author Solutions single-tenant building sold at slightly over a 91% 2006 2007 2008 2009 2010 201110% cap rate and an IU Health medical building sold at ± 8% caprate. Meanwhile, the City of Bloomington is planning a mixed-usedevelopment in the downtown Showers Furniture Factory area, atwelve acre assemblage recently purchased from IU.MEDICAL OFFICE OFFICE VACANCY AND RENTAL RATESMedical office product remains strong with overall vacancy downto 5.0%. New construction continues with the IU Health building 16% VACANCY RATE RENTAL RATE $14.00on Clarizz plus a senior housing project on Moores Pike. Expectchanges in medical related real estate as practice groups realign 14% $13.50and healthcare reform changes the landscape. 12% $13.00 10% $12.50INDUSTRIALThe industrial market is performing well. Overall vacancy rate 8% $12.00has bumped down to 7.9%, improving from 8.4% mid-year 2011. 6% $11.50Over the last few quarters, 18 industrial properties were leased or 4% $11.00sold. Upland Brewery opened a new 35,761-sf brewing facility onProfile Parkway and Circle Prosco purchased a 49,056-sf building 2% $10.50 11.3% 12.9% 11.9% 14.5% 5.1%on Curry Pike. Sunrise Greeting will vacate its 168,000-sf facility 0% $10.00 OVERALL DOWNTOWN EAST WEST MEDICALon Vernal Pike year-end. Asking rental rates remained stable acrossall product types – manufacturing, warehouse, and flex.SUMMIT REALTY GROUP l Cushman & Wakefield Alliancewww.SummitRealtyGroup.com 11
  12. 12. 2012 MID-YEAR REPORT Summit Realty Group takes great pride in the accuracy and completeness of our commercial real estate research. Our Research Team continually compiles property and transactional data; verifies information via actual field surveys as needed; and updates our extensive, proprietary data platform. This data is critical to the success of our brokers and clients. With our culture of shared knowledge among our brokerage team, each specializing in one of the product types we report on, Summit’s research platform is second to none. Summit’s Research Team provides statistics, trend analysis, and forecasting of the overall market and submarkets. We provide clients with both standard and customized analysis to meet specific needs, both from an overall market aggregate perspective or for a specific project/building purpose. And via the Cushman & Wakefield platform, we have access to research data of all major U.S. and global markets. — INVENTORY DATABASE – BUILDINGS & LAND — AVAILABILITY DATABASE – LEASE, SUBLEASE, SALE — TRANSACTION COMPARABLES – LEASE & SALE — TENANT & STACKING PLAN DATABASE — CONSTRUCTION & DEVELOPMENT TRACKING — DEMOGRAPHIC & GEOGRAPHIC ANALYSIS — MARKET COMPARATIVE ANALYSIS — CUSTOMIZED, PROJECT / SITE SPECIFIC ANALYSIS — DEMOGRAPHIC & GEOGRAPHIC ANALYSESOffice | Industrial | Land | Retail | Multi-Family | Capital Markets | Corporate SolutionsProperty Management | Project Management | Global Supply Chain Solutions | Valuation ServicesEconomic Incentives Procurement | In-house Market Research | Marketing / Graphic Designwww.SummitRealtyGroup.com 241 North Pennsylvania Street Indianapolis, IN 46204 317.713.2100

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