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Indianapolis office vacancy rates still rising

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Rising vacancy rates continue to plague the downtown office market, according to a midyear report from Indianapolis-based Meridian Real Estate.

The amount of available downtown office space has grown in recent months, from 19.3 percent at the end of last year to 22.2 percent in June.

“I would say that’s a pretty significant change over the last six months,” said Jeff Harris, president of Meridian Real Estate.

Even so, the market is beginning to show signs of stabilizing, he said.

One of the most encouraging examples is a 70,000-square-foot lease the owners of M&I Plaza signed with a civilian division of the U.S. Marine Corps. As IBJ reported in March, the Marine Corps Technology Services Organization plans to move from Kansas City, Mo., in two phases starting this summer and finishing up in January 2011.

The 10-year, $20 million deal for four full floors of the 28-story building will push the city’s sixth-largest office tower from a woeful 30-percent occupancy rate to about 50 percent.

Conversely, the state of Indiana continues to downsize its downtown office footprint by consolidating agencies at its government center and reducing outside office space, the report said.

Roughly 2.8 million square feet of downtown office space is vacant, out of a total inventory of 12.7 million square feet. That's like having two-and-a-half empty buildings the size of Chase Tower, downtown's largest office complex.

Faring just as poorly is Keystone at the Crossing, near the Fashion Mall. The vacancy rate in that submarket increased by nearly 4 percentage points, to 27.3 percent. Landlords at Keystone are being extremely aggressive to maintain current tenants and attract new ones, the report said. Building owners are increasing concessions and lowering rents, and in some cases, even offering free rent for a period of time.

Keystone is among the worst of the 10 submarkets Meridian Real Estate tracks in central Indiana. Only three other areas are faring worse: the east/southeast submarket, which reaches from Beech Grove to north of 56th Street and has a 43.3 percent vacancy rate; the northeast region, which extends from 56th Street to Allisonville Road and vacancy rate of 28.5 percent, and Greenwood, with 28.3 percent of office space vacant.

Vacancy in the North Meridian Street corridor extending to Carmel, where several new office buildings have been constructed in recent years, also grew, from 19.5 percent at the end of last year to 21.1 percent in June.

“Typically, this submarket accounts for a fair volume of leasing activity; however, that has not been the case lately,” the Meridian Real Estate report said.

AT&T has indicated it will terminate its lease at the Parkwood Crossing office complex at Meridian and 96th streets and American Family Insurance, also located at Parkwood, is exploring other options, the report said.

Overall, vacancy rates grew in nine of the 10 submarkets tracked by Meridian Real Estate. The midtown submarket from 16th to 56th streets is the only one in which vacancy rates fell, from 15.1 percent at the end of last year to 9.7 percent in June. That is among the smallest areas, however, accounting for just 16 buildings and 990,000 square feet of office space.

Though Harris at Meridian Real Estate expects vacancy rates to stabilize, he’s not predicting significant growth in occupancy anytime soon.

“Companies are learning how to make money with fewer employees,” he said. “Typically, that translates into not needing as much office space.”

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  • If You Build It
    I'm sure if anyone dares to question the wisdom of bringing more office space to the market right now, the Carmel mayor's office will surely say they are wrong. TIF's don't work if there is nobody there to pay the taxes.

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  1. If I were a developer I would be looking at the Fountain Square and Fletcher Place neighborhoods instead of Broad Ripple. I would avoid the dysfunctional BRVA with all of their headaches. It's like deciding between a Blackberry or an iPhone 5s smartphone. BR is greatly in need of updates. It has become stale and outdated. Whereas Fountain Square, Fletcher Place and Mass Ave have become the "new" Broad Ripples. Every time I see people on the strip in BR on the weekend I want to ask them, "How is it you are not familiar with Fountain Square or Mass Ave? You have choices and you choose BR?" Long vacant storefronts like the old Scholar's Inn Bake House and ZA, both on prominent corners, hurt the village's image. Many business on the strip could use updated facades. Cigarette butt covered sidewalks and graffiti covered walls don't help either. The whole strip just looks like it needs to be power washed. I know there is more to the BRV than the 700-1100 blocks of Broad Ripple Ave, but that is what people see when they think of BR. It will always be a nice place live, but is quickly becoming a not-so-nice place to visit.

  2. I sure hope so and would gladly join a law suit against them. They flat out rob people and their little punk scam artist telephone losers actually enjoy it. I would love to run into one of them some day!!

  3. Biggest scam ever!! Took 307 out of my bank ac count. Never received a single call! They prey on new small business and flat out rob them! Do not sign up with these thieves. I filed a complaint with the ftc. I suggest doing the same ic they robbed you too.

  4. Woohoo! We're #200!!! Absolutely disgusting. Bring on the congestion. Indianapolis NEEDS it.

  5. So Westfield invested about $30M in developing Grand Park and attendance to date is good enough that local hotel can't meet the demand. Carmel invested $180M in the Palladium - which generates zero hotel demand for its casino acts. Which Mayor made the better decision?

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