The Precedent Cos. is preparing to build a 100,000-square-foot office building in its namesake office park near 96th Street and Keystone Avenue, several local real estate experts said, further evidence of the north-suburban market's recovery.
The building would mark the first new speculative office construction in the park since the mid-1990s, just before Indianapolis-based Precedent sold the park's 19 buildings with 1.1 million square feet of office space to Philadelphia-based Berwind Property Group Inc. in 1998. That sale didn't include 18 vacant acres retained by Precedent.
If, as expected, Indianapolis-based independent insurance agency M-J Insurance Inc. takes about 40 percent of the new building for its headquarters, it would also prove right predictions that tenants might be willing to follow Precedent to a new building. Company subsidiary Precedent Real Estate Services had continued to lease and manage Berwind's buildings, but Berwind and Precedent parted ways this spring.
Locally based Colliers Turley Martin Tucker took over leasing and management at the park April 1. Although CTMT has a proven reputation for client service, some tenant representatives predicted clients might want to maintain their long-term ties to Precedent's team.
M-J's 30,000-square-foot lease on the south side of the lake at Precedent expires in mid-2006, said Darrin Boyd, a CTMT principal and senior vice president of office sales and leasing. Boyd is part of the team that took over leasing and management at Precedent in April. He said M-J hasn't given official notice it intends to leave when its lease expires.
The park's overall vacancy rate is about 10 percent, considerably less than the 18-percent vacancy rate for the Keystone submarket overall. The largest open space in the park is about 17,000 square feet, Boyd said, leaving options limited for large tenants looking to relocate within the park.
"That makes it a decent time for Precedent to try to kick off a new product," Boyd said.
Officials with Precedent and M-J declined to confirm plans for a new building. Precedent President Randy Aikman in January indicated the company was then considering starting on a new building based on improving market conditions and more prospects for tenants in the 15,000- to 30,000-square-foot range.
The company has acreage for three buildings of 80,000 to 100,000 square feet, Aikman said then. The bulk of Precedent's acreage is in the southwest corner of the park near Interstate 465, where the new building would be built. The company also owns seven acres closer to 96th Street.
M-J Insurance is the city's third-largest independent insurance agency, with $203 million in premiums written in 2003, according to IBJ research. The company has 130 local employees and an office in Phoenix.
Precedent may be considering a joint venture with another developer for the new building. That developer is rumored to be Indianapolis-based Kite Realty Group Trust, but Kite Chief Operating Officer Thomas K. McGowan declined to comment on the prospect of a joint venture with Precedent.
Kite in recent years has focused on retail, but maintains a handful of office buildings in its portfolio.
If Precedent's building gets off the ground, it will be the latest in a string of north-suburban office buildings. Indianapolis-based Duke Realty Corp. is well under way on Nine Parkwood near 96th and Meridian streets, and locally based Lauth Property Group Inc. has announced plans to begin work late this year or early next year on Intech Three on the northwest side.
Confidence in the north-suburban market is so strong that Opus North Corp. is planning to break ground late this summer on a 106,000-square-foot speculative office building on North Meridian Street at Carmel Drive. John Cumming, the local director for Minnesota-based Opus North, said the company will begin construction regardless of pre-leasing activity. Opus North has controlled 24 acres at the site for most of the last five years, but hasn't had enough faith in the local office market before now to start construction on the building.
"Our office market has gradually improved over the last year or two," Cumming said. "We think our site is even better now because of the development that's occurred around it. The economy is decent and improving. ... The vacancy rate is down and there's not as much sublease space on the market."
Even so, there's no shortage of available space in the suburban market, said John Robinson, executive vice president of locally based Meridian Real Estate. Rather, the trend for new office construction is being driven more by a demand for new construction, he said.
"Larger tenants for long-term leases are looking for new construction," Robinson said. "The majority of [northsuburban] buildings have begun to show their age."
Landlords, including Berwind, are sprucing up buildings constructed in the 1980s or early 1990s. However, tenants can still find larger and more open floorplates in new construction than in existing buildings in the Keystone and Meridian corridors, Robinson said.