A city initiative that uses tax incentives to attract industrial development to a massive distribution park near Indianapolis International Airport is beginning to show results.
Atlanta-based Industrial Developments International Inc. completed construction of a 794,608-square-foot speculative building within the AmeriPlex Business Park in March and now plans to build a 460,000-square-foot building within the same complex.
IDI bought 26 acres this month to construct the second building there and has two more lots under contract, which ultimately would raise its presence at AmeriPlex to four buildings.
The IDI projects are the first to take advantage of the automatic 10-year real property tax abatement established in 2009 by the city of Indianapolis for World Connect sites at AmeriPlex, envisioned as a seven-building complex on 200 acres.
The World Connect project is expected to add about $84 million to the tax base over the 10 years. The abatement is estimated to save $13.2 million in property taxes over that span.
“You have to have a tax abatement to be competitive, or we wouldn’t be building,” said Doug Armbruster, senior vice president and regional managing director of IDI. “It’s just that important.”
South Bend-based Holladay Properties pursued the tax abatement that the city’s Metropolitan Development Commission approved in 2009. In exchange, Holladay is planning to invest $120 million in the World Connect development. The company says the investment could create 1,700 jobs with an average annual salary of $45,000.
City officials say the abatements are necessary to attract industrial development within AmeriPlex, which sits between Interstate 70 and Indiana 67, to stay competitive with neighboring Plainfield. Incentives offered by Plainfield and Hendricks County since Holladay developed AmeriPlex in 1998 have swayed industrial developers to build west of Indianapolis.
“With Hendricks County and the land over there, we needed to follow suit, and that’s what we did with World Connect,” said Deron Kintner, deputy mayor of economic development.
IDI started constructing the 794,608-square-foot spec building in May of last year, ending a four-year freeze on speculative industrial development in the Indianapolis area.
A wave of similar development has followed, with about 2.6 million square feet becoming available by the end of summer.
Chicago-based Verus Partners is constructing a 771,000-square-foot bulk warehouse building in GreenParke at Airwest Business Park in Plainfield, slated to be finished Sept. 1. And Kansas City-based VanTrust Real Estate LLC has completed a 450,000-square-foot spec building at Stanley and Perry roads, also in Plainfield.
In Boone County, a joint venture of Duke Realty and Browning Investments built a 600,000-square-foot warehouse, expandable to more than 1 million square feet. The building is in AllPoints at Anson in Whitestown.
Brokers say the market can support the speculative building spree largely because online retailer Amazon leased nearly 2 million square feet in 2011, depleting the market of available space. Amazon leased almost 926,000 square feet from Cabot Properties at 800 Perry Road and another 900,000 from Transpacific Development Corp. at 701 S. Girls School Road. It already had about two million square feet split between Duke's AllPoints at Anson and a ProLogis building at Airtech Park.
In addition, Hartz Pet Products early this year leased 622,440 square feet of spec space on Ronald Reagan Parkway, just north of Stafford Road, built by ProLogis and Browning.
The flood of available spec space pushed the industrial market's vacancy rate to 7.9 percent in the first quarter, up from 7.5 percent during the same period in 2012, according to a report by the local Summit Realty brokerage.
Andrew Morris of Summit is listing IDI’s space within AmeriPlex.
Armbruster of IDI declined to comment on interest from potential tenants. He said construction on the firm’s second building will begin when market conditions warrant it.
IDI is the only industrial developer so far to show interest in building at World Connect within AmeriPlex, said Chris Wilkes, senior vice president and partner of Holladay Properties, which developed the industrial park.
“That said, we’ve known IDI for a long time and think very highly of them,” Wilkes said. “Our discussions really have been centered on them only. In that sense, our plan seems to be working.”