Year-end predictions that speculative development would return to the modern bulk industrial market after a four-year drought appear to be coming true, with at least two projects preparing to break ground this spring and another in the works.
Chicago-based Verus Partners is laying plans for a 770,640-square-foot spec industrial building in Green Park at Airwest, a 175-acre master-planned business park along Ronald Reagan Parkway just north of Stafford Road. It would be the first development in Green Park. Tom Theobald, senior vice president and regional manager for Verus, said land for Green Park was assembled back in 2006, but the economic collapse that followed kept the project on ice until now.
Theobald said Verus hasn’t done a big spec project since 2006 or 2007, but now “market vacancy, absorption and rents all suggest a spec strategy can be supported in this market.”
Another groundbreaking could happen as soon as April on a 31-acre site near Perry and Stanley Roads in Plainfield. Kansas City-based Caymus Real Estate LLC closed earlier this month on the ground, where it hopes to build a 450,000-square-foot warehouse distribution center. Caymus, which is new to the Indianapolis market, worked with the local office of Colliers International on the land purchase and will retain Colliers to lease the space when it comes on line, possibly in December.
Andrew Morris, executive vice president of industrial advisory services at Summit Realty Group, confirmed through an associate that Atlanta-based IDI Corp. is putting together plans for a bulk distribution building in the 700,000-square-foot range in World Connect at Ameriplex, near Ameriplex Parkway and State Road 67. The exact square footage and timeline for that project are in flux.
By all accounts, the overall industrial vacancy rate for the Indianapolis market fell last year after positive net absorption of between five million and six million square feet. Colliers showed vacancy falling from almost 9 percent at the end of 2010 to just over 6.5 percent at the end of 2011. Cassidy Turley statistics show a vacancy rate as low as 4.7 percent at year end. CBRE said the 7.7 percent vacancy rate it reported at the end of the year marked the first time since mid 2007 that the industrial vacancy rate here has been below 8 percent.
Sean McHale, director of industrial services for Colliers, said Caymus and the other spec developers are merely reacting to the fact that “demand is strong and supply doesn’t exist.”
One of the market’s last bulk warehouse spaces of more than 500,000 square feet was in Franklin, where Best Buy last month vacated its 703,000-square-foot distribution center. But that space at 2001 Commerce Parkway is to be backfilled by Texas-based music wholesaler Anderson Merchandisers.
That property isn’t in the market’s industrial sweet spot, which has gradually shifted over the years from the Park 100 area on the northwest side to the southwest side near Plainfield and Indianapolis International Airport.
McHale said all of the new bulk industrial projects he’s heard about are in the southwest submarket, which is attractive because of airport and highway access and abundant land.
In spite of the tightening market for industrial space, rents have remained flat. Colliers statistics at year end showed average rents for new, large industrial leases were at $3.92 per square foot, just a penny higher than the previous quarter.