Duke Realty Corp.'s $125 million Parkwood West development well may be the new trendsetter for future office complexes along the burgeoning north-side Meridian Street corridor.
One West, a five-story, 186,000-squarefoot Class A office building, is the first of three structures rising from the Parkwood West project at the northwest corner of Meridian and 96th streets.
The upscale design as well as the added amenities that include a parking garage-rare in the suburban market-could become the rule instead of the exception. As prime locations along the corridor, such as the 25-acre Parkwood West site, continue to increase in value, developers may consider garages instead of expansive parking lots to maximize their investment.
"There's always the possibility," said Jeff Henry, managing principal and an office market expert at the local office of St. Louis-based Colliers Turley Martin Tucker. "Whether parking garages make the final decision for a tenant, I'm not sure they typically do. But people will put them up if they think they will make their building more competitive in the marketplace."
What is impressive about One West is that it was fully leased just two weeks after its completion in September, despite a pricey rental rate. The cost of $23.50 a square foot is $2 higher than what the majority of Class A space commands in the submarket, according to third-quarter market statistics from the Indianapolisbased Summit Realty Group.
Carmel-based Bridgestone Firestone Diversified Products LLC's lease of 166,500 square feet at One West was the largest office deal completed in the city in the third quarter. The company will vacate 92,000 square feet of space in Duke's Parkwood Crossing complex east of Meridian Street in February. Oak Brook, Ill.-based McDonald's Corp. will take the remaining 18,700 square feet at One West.
Having just two tenants in a building that size is unusual, said Jeff Harris, executive vice president of the local Meridian Real Estate brokerage. Developers often try to accommodate existing tenants who have outgrown space and, in this case, moving into a brand-new building likely proved enticing, Harris said.
"Between the style and level of finishes, and the construction and location, that's the nicest Class A office building available in the market," he said. "Duke's probably getting a premium on the rates, but I think that is being created by the location and the value of the product."
The parking garage and lavish lobby finishes, as well as the expensive price of the property, contributed to the higher lease rate, said Jennifer Burk, senior vice president of Duke's Indiana office group.
Yet, the company concluded the market warranted a development boasting more benefits than usual, she said.
"The covered parking is an added amenity that we can offer in what we consider to be the most upscale office park in the city," Burk said. "Architectural details are a step above [those in] many of our other buildings, and so are the rental rates."
Duke built One West speculatively on land it purchased in 1999. Construction on the remaining two buildings in the park will begin once the company determines market conditions are right, said Burk, noting there is preliminary interest from potential prospects.
When completed in three to five years, Parkwood West will extend west to Spring Mill Road and contain three buildings forming a U-shape around a courtyard. The middle building will run parallel to Interstate 465.
Two upscale restaurants are slated to open in the development, one of which is expected to sign an agreement soon, Burk said. A second parking garage also will be built.
Building garages and converting lots to office buildings could be in Duke's offing, in certain instances, said Burk, including at Parkwood Crossing.
"I think it could happen," she said. "We don't have plans to do that, but we're looking at that kind of concept, as land becomes more scarce across the United States."
Parkwood Crossing opened in 1990 and has grown to include nine three- to sixstory buildings stretching east across College Avenue and totaling nearly 1.3 million square feet of office space. The last building, Nine Parkwood Crossing, opened in early 2006.
Bridgestone's exodus from the Two Parkwood building shouldn't cause Duke much concern, real estate experts said. They suspect the space should be leased relatively quickly.
That's despite more than a half-million square feet of office space opening along North Meridian, including the first building of Parkwood West.
Sacramento-based Panattoni Development Co. has 180,000 square feet at 111th and Pennsylvania streets. Locally based Lauth Property Group has 135,000 square feet at Meridian Corporate Plaza Three. And Minnesota-based Opus North Corp. is developing a 106,000-square-foot park at 126th Street.
About 96 percent of Duke office space along the corridor is occupied, Burk said. Collectively, the occupancy rate in the area is 82.6 percent, according to the latest figures from Summit.