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Developer pegs Plainfield for spec office building: Local real estate brokers question potential demand

August 18, 2008

Now a developer is banking on a new roadway and airport terminal to attract office tenants, although some brokers familiar with the area aren't sold on the idea.

The local office of Chicago-based Verus Partners LLC finished purchasing 200 acres along the east side of the Reagan Parkway and plans to build a 60,000-square-foot, two-story speculative office building.

Verus' mixed-use office and industrial park is called GreenParke at Airwest and could be ready for occupancy by next summer. Infrastructure work should be completed in October and construction could commence by the end of the year, said Tom Theobald, a senior vice president and regional partner of the developer.

GreenParke would sit across from AirTech Park, a 4.7-million-square-foot industrial park developed by Browning Investments and ProLogis.

"What the [Plainfield] market has not had is a Class A suburban office building," Theobald said. "With the relocation of the terminal, we feel like there will be a lot of demand for Class A office space."

The $1.1 billion midfield terminal at Indianapolis International Airport is set to open Nov. 11 and is southwest of the existing facility. Patrons will access the new terminal from Interstate 70 near the parkway interchange, which should spur office development in the area, Theobald said. Verus' office park is three to four miles from the midfield terminal.

The area surrounding the airport is somewhat of an anomaly, in that most metropolitan airports have a supporting office submarket nearby. The Indianapolis airport's proximity to downtown, nary a 10-minute drive, has dampened any demand for west-side office space, however.

In fact, the headquarters of Brightpoint Inc., built for the former Galyan's Trading Co., is one of the few office complexes in Plainfield, and that was designed for a single tenant. Yet, Theobald is confident the new terminal, farther from downtown than the existing one, will create demand for another office submarket. Verus has yet to line up any tenants.

A tough sell?

But is the west side and Plainfield ripe to become the next frontier for office development? Doubtful, say some brokers.

"It won't be in our lifetimes," said John Robinson, executive vice president of locally based Meridian Real Estate. "There's not the [residential] rooftops."

Corporate executives who live between Zionsville and Geist are unlikely to drive that far to work every day, argued Robinson, who expects the new terminal to generate some excitement for the area. What he envisions, though, is single-story office development with the potential for showroom space.

Research from the local office of Colliers Turley Martin Tucker indicates 80 percent of suburban office inventory is north of 71st Street. Any speculative office development outside that area, in today's tight economic and lending environment, would be "pioneering," said Darrin Boyd, a broker at Colliers.

In Fishers, for example, where office demand historically has been high, it's taking 14 to 18 months to get buildings 80-percent occupied, he said.

"There can be niche locations where demand for medical and general office space can be high," Boyd said, "but spec office development in these unproven areas can be challenging."

Indeed, the suburban occupancy rate in the second quarter stood at 80.5 percent, a decline from 82.6 percent the same time a year ago, according to a recent Colliers report. In contrast, the downtown occupancy rate in the second quarter climbed to 85.7 percent from 84.1 percent the same time last year.

John Vandenbark, first vice president at the Indianapolis office of CB Richard Ellis, is a bit more bullish on the Verus project, giving it a lukewarm endorsement.

"It won't completely take off in the next five years," he said, "but on the other hand, you start to establish a beachhead and developers will build."

Highway could help

The Reagan Parkway on which Verus will build GreenParke at Airwest so far extends about three miles to Road 200 North, where Duke Realty Co. and Browning Investments are building Allpoints Midwest. The joint venture is a 920-acre park that last year netted a 1.2-millionsquare-foot lease with locally based Prime Distribution Services Inc.

Jennifer Burke, a senior vice president at Duke, said Plainfield is less of a priority than other areas in and around Indianapolis where it has developed office buildings and Duke has no plans for the west.

Yet, Ellis thinks the bulk distribution and industrial sectors Plainfield drew through an attractive formula for property tax abatements ultimately will need supporting office space.

Cinda Kelley, executive director of the Hendricks County Economic Development Partnership, concurred.

"We're seeing more and more leads coming in and interest in office space on that side of the county," she said. "It's the right time, and the interest is there."

When finished, the north-south Reagan corridor will connect interstates 70 and 74 through Plainfield, Avon and Brownsburg. It eventually could connect to I-70 on the east side of Indianapolis from an extension into Boone County.

Verus, which came to Indianapolis in 2005, has two developments in Whitestown: a 624,000-square-foot, $20 million spec distribution and office building at 5100 S. Indianapolis Road, and 175 acres under option for future development about a mile south of the building.
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