The downtown office market is in a period of transition with no fewer than five large tenants shopping for space.
“It’s still a tenant’s market,” said Rich Forslund, an office broker at Summit Realty Group. “There’s enough vacancy and competition that it’s a good time to be out there looking.”
The five tenants are:
-Baldwin & Lyons, an insurance company that occupies 80,000 square feet in Landmark Center, 1099 N. Meridian St. Baldwin & Lyons is looking for the same amount of space it occupies now and is looking at existing space downtown and in the suburbs. The insurer would also consider a build-to-suit space, said Forslund, who is representing Baldwin & Lyons.
-Bingham Greenebaum Doll, an original tenant in the 24-year-old Market Tower building at 10 W. Market St. Bingham occupies 105,000 square feet and is believed to be committed to staying downtown. A spokesman for the law firm would only say that the firm is exploring all its options.
-The Indiana State Department of Health, which occupies 160,000 square feet—almost all of the office space—at 2 North Meridian, a building owned by John Goodman at the northwest corner of Washington and Meridian streets. “We’re trying hard to retain them,” said Forslund, who handles leasing for the building.
-Gannett, the owner of The Indianapolis Star, which announced over the summer that it wants to sell the series of buildings at the northeast corner of New York and Pennsylvania streets that the newspaper has occupied since 1907. Gannett, which is represented by CBRE, is evaluating all options for the newspaper but is likely to need about 80,000 square feet of space.
-Ice Miller, one of the city’s largest law firms, which has 160,000 square feet over multiple floors at the One America tower. Multiple sources said Ice is likely to renew its lease at One America, where it has leased space since the building opened in 1982. Cassidy Turley handles leasing for the tower.
Those are big numbers in any building, Forslund said, speaking of the space requirements of the five tenants. The standard floor size in a high-rise office building downtown is about 20,000 square feet.
Mike Corr, a broker at Jones Lang LaSalle who, along with JLL’s Jake Sturman, is representing the Department of Health in its search, said the number of tenants shopping for space is mostly a function of big lease expirations all hitting at once.
But those expirations come at an opportune time for tenants, he said, who are more likely to want a different kind of space than they wanted five or 10 years ago. Collaborative work spaces are more common, and tenants are becoming more efficient. Law firms, for example, are downsizing law libraries to reduce space needs, Corr said.
Lease expirations downtown often lead to tenants shifting to competing buildings, said John Vandenbark, an office broker for CBRE who is representing Bingham Greenebaum Doll in its search. “It becomes musical chairs.”
That’s due in part to the limited number of options for big tenants, Vandenbark said.
Summit’s Forslund agreed that trading tenants between buildings isn’t uncommon here, but clients who opt for build-to-suit space could alter that dynamic, he said.
Baldwin & Lyons, for example, could go that route, possibly aligning with a developer to create up to 110,000 square feet, which would give the insurer room for expansion down the road. “Baldwin sees nothing but growth in their future,” he said.
Whether growing or shrinking, tenants are more likely now than they were a few years ago to have a handle on their future space needs, Forslund said. In the midst of the recession, tenants hedged their bets by doing short-term renewals of between one and three years, he said. He expects the current crop of tenants to execute seven to 10-year leases, a return to traditional lease terms.