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Turnaround may be in offing, observers say

August 14, 2008

Companies are quietly planning expansion projects despite woes that continue to unfold in housing, finance and other hard-hit industries, Indianapolis-area economic development officials say.

The officials' experiences differ, but a couple of them contacted in a spot check say requests for information from expansion-minded companies are becoming more common, and another says activity hasn't fallen off significantly.

That suggests companies foresee the economy turning around and want to be positioned to act on their plans when the timing seems right.

"The pipeline of projects we're working on today is more active than it was a year ago," said Ron Gifford, president of Indy Partnership, the not-for-profit that markets the Indianapolis area.

Dan Theobald, executive director of Shelby County Development Corp., said, "They're not writing checks, but there are a lot of lookers."

Ongoing declines in house sales, bank layoffs and other dreary news dominate headlines. Yet, other industries are faring better, and companies in those sectors are shopping for opportunities.

Gifford said Indy Partnership is on track to field 25 percent more serious inquiries this year than in 2007.

Gifford wonders if activity last year was tempered by the credit crunch, which would limit companies' ability to finance expansions and make this year's activity seem stronger.

Another possible explanation is that the Indianapolis area is attractive to industries looking to expand.

The region has gained a number of new warehouses as companies look to take advantage of central location and minimize fuel expenses for trucks, he said.

Interest also remains strong in life sciences, one of the region's core strengths due to assets including Eli Lilly and Co. and the Indiana University School of Medicine.

Moreover, property and labor are less expensive in the Indianapolis area than many other areas of the country, Gifford said. That's attractive at a time companies are looking to pinch pennies.

Theobald said activity was quiet until about two months ago. Then contacts began pouring in and stayed strong.

Much of the interest is coming from commercial developers wanting to build projects that can be easily changed between office and light manufacturing, he said. Retailers also have stepped up inquiries.

"Within a year, when this thing breaks loose, they're getting ready to jump," Theobald said.

Jeff Burt, who has been president of the Hamilton County Alliance for 16 years, said activity has remained strong. Through July, the Alliance received 60 leads of potential expansions, down slightly from last year but still robust considering the weak national economy.

Burt agrees that companies are continuing to lay groundwork for expansions. However, executives now often take 150 days to make decisions rather than the 90 that was typical last year.

Burt suspects companies are being cautious about making capital investments during the slow times.

Based on his observations, the economy won't turn around until at least the first quarter of next year, Burt said, and won't rebuild a big head of steam until 2010.

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