Distribution holds promise for Central Indiana

December 22, 2008

A new report shows that, despite a sluggish national economy, the Indianapolis area should continue to attract industrial businesses and distribution centers next year.

The 2009 commercial real estate forecast compiled by Grubb & Ellis Harding Dahm & Co. suggests that the industrial market could represent one positive in what is otherwise expected to be a bleak year for commercial real estate.

"I'd say it's among the brighter spots," said Scot Courtney, a principal with Grubb & Ellis. "I think clearly Indianapolis' continued desirability as a national distribution hub is to a point offsetting some of those other trends in the market."

The report predicts that industrial businesses will be most attracted to Boone County, the southwestern market near the new Indianapolis International Airport and to areas surrounding Mount Comfort on the east side.

Those sites all offer plenty of land, plus access to infrastructure and labor, Courtney said.

Other commercial sectors, such as retail, likely won't fare as well.

"It's going to be interesting," Courtney said the of the retail market. "I don't think we've seen the full impact of the fallout yet."

For retailers, the first two quarters of the year will be critical, he said. That's when firms will fight for sales and decide whether they can justify keeping stores open. Strong concepts will survive, while other retailers may be forced to retrench.

Areas that traditionally weathered downturns — Castleton is one example, Courtney said — may see an increase in vacancies. Regional shopping centers may also take a hit, since they traditionally catered to consumers looking to spend discretionary income.

Problems in retail may be more pronounced than in other sectors, Courtney said, because the sector has been on an upswing since the early 1990s.

"Retail has not been affected over the past couple of downturns," he said.

In the office market, the low point could come halfway through 2009, when the "after shocks" of the current economy become apparent, the report notes.


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