IBJNews

Suburban office market turns in strong first quarter

Back to TopCommentsE-mailPrintBookmark and Share

The year is off to a good start in the suburban office market, where net absorption was the highest in five years, chipping away at what has been a chronically high vacancy rate.

In the downtown market, absorption was essentially flat, contributing to a slight increase in the vacancy rate.

The suburban multi-tenant office market saw net absorption of around 225,000 square feet. That’s the best number since the fourth quarter of 2006, when tenants soaked up 292,000 square feet, according to the Indianapolis office of CBRE. By CBRE’s count, the suburban vacancy rate fell a full point since the end of last year, from 21.2 percent to 20.2 percent.

Cassidy Turley’s first quarter report showed even stronger numbers: absorption for the quarter of 244,000 and vacancy falling from 21.4 percent at the end of last year to 19.9 percent. A year ago at this time, the numbers told a very different story. Vacancy was 22.5 percent, and instead of soaking up space ,overall occupancy fell by 37,000 square feet.

Several factors contributed to the good first quarter, brokers said.

“Tenants are becoming healthier financially and some are deciding to expand,” said David Moore, an office broker for Cassidy Turley.

He said that’s a switch from what had become all too common since 2008:  businesses failing and vacating their space. Moore said the numbers are also helped by the lack of any new construction in recent years.

Almost all of the suburban action is taking place on the north side in the Keystone submarket, where absorption was 104,000 square feet for the quarter, and in the North/Carmel submarket, where absorption was 89,000 square feet.

Among the largest recent deals was State Farm’s 90,000-square-foot lease at 9200 Keystone Crossing.   

If absorption remained at the same level over the next several quarters, champagne corks might be popping, but that won’t be the case, Moore said. “The market still has a ways to go.”

Landlords aren’t likely to regain the upper hand in rent negotiations any time soon, but some are in a better position than others. The owners of certain iconic properties, such as the Chase Tower downtown and certain Keystone at the Crossing office buildings, have a little more leverage with tenants, said Mary Beth Kohart, vice president of CBRE’s office services group.

Kohart said no single industry is leading the recovery in the suburban market. Insurance companies, tech firms and health care tenants are all playing a role, she said, noting that health care tenants are just as likely these days to rent space in the general office market than in the medical office market, which is tracked separately.
 
In the downtown submarket, vacancy ticked up to 17.7 percent in the first quarter compared with 17.6 percent at the end of last year, according to both CBRE and Cassidy Turley.

A handful of downtown tenants are shopping in the suburban market for space, said Moore, but he doesn’t see a trend of users moving away from downtown.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Kent's done a good job of putting together some good guests, intelligence and irreverence without the inane chatter of the other two shows. JMV is unlistenable, mostly because he doesn't do his homework and depends on non-sports stuff to keep HIM interested. Query and Shultz is a bit better, but lack of prep in their show certainly is evident. Sterling obviously workes harder than the other shows. We shall see if there is any way for a third signal with very little successful recent history to make it. I always say you have to give a show two years to grow into what it will become...

  2. Lafayette Square, Washington Square should be turned into office parks with office buildings, conversion, no access to the public at all. They should not be shopping malls and should be under tight security and used for professional offices instead of havens for crime. Their only useage is to do this or tear them down and replace them with high rise office parks with secured parking lots so that the crime in the areas is not allowed in. These are prime properties, but must be reused for other uses, professional office conversions with no loitering and no shopping makes sense, otherwise they have become hangouts long ago for gangs, groups of people who have no intent of spending money, and are only there for trouble and possibly crime, shoplifting, etc. I worked summers at SuperX Drugs in Lafayette Square in the 1970s and even then the shrinkage from shoplifting was 10-15 percent. No sense having shopping malls in these areas, they earn no revenue, attract crime, and are a blight on the city. All malls that are not of use should be repurposed or torn down by the city, condemned. One possibility would be to repourpose them as inside college campuses or as community centers, but then again, if the community is high crime, why bother.

  3. Straight No Chaser

  4. Seems the biggest use of TIF is for pet projects that improve Quality Of Life, allegedly, but they ignore other QOL issues that are of a more important and urgent nature. Keep it transparent and try not to get in ready, fire, Aim! mode. You do realize that business the Mayor said might be interested is probably going to want TIF too?

  5. Gary, I'm in complete agreement. The private entity should be required to pay IPL, and, if City parking meters are involved, the parking meter company. I was just pointing out how the poorly-structured parking meter deal affected the car share deal.

ADVERTISEMENT