An Indianapolis Downtown Inc. study downplays concerns the downtown housing market might become overly saturated with apartment units.
IDI commissioned the survey by the Indiana University Public Policy Institute to get a better grasp on the future of downtown living. The urban core has seen a massive boom in multi-family development as market dynamics have shifted in recent years to support renting instead of buying.
Between 2000 and 2012, nearly 2,000 new rental units were built, according to apartment brokerage Tikijian Associates, bringing the total number downtown to about 4,700. But within the next three years, 3,500 additional units are expected to become available.
If the new units are all occupied, the study estimates that they would increase the downtown population by about 5,300 people. But that won't tip the market to the oversaturation point.
“Assuming current trends continue, there’s way more evidence to suggest downtown can support future demand,” said Drew Klacik, a senior policy analyst at the institute.
One of the strongest indicators: The downtown vacancy rate hit a 12-year low last year of 3.5 percent, while rents per square foot increased from a low of $1.12 to $1.24.
Also, the study compared the city to similar regional markets such as Des Moines, Iowa, and Milwaukee and found that Indianapolis had a particularly low percentage of downtown workers who also lived downtown. That suggested downtown Indianapolis could eventually add as many as 5,000 downtown workers to the rolls of its residents.
National studies are finding fresh demographic populations interested in living in downtowns: millennials, those 30 and younger, and empty-nesters over 50. The study cites a recent Wall Street Journal report that 88 percent of millenials want to live in a downtown area.
The IDI study found that downtown Indianapolis is attracting residents from outside Marion County, and not simply redistributing its own denizens. According to data shared by developers of recently built complexes, 38 percent of their residents had moved from other states and had household annual incomes of $90,807. The median age of these residents was 30.
Another 26 percent of the residents arrived from other Indiana counties and earned annual household incomes of $81,042. The median age of the oldest resident in these households was 27.
Most of those arriving from outside the Hoosier state are emigrating from Midwestern cities such as Chicago, Cincinnati, Dayton, Louisville and Milwaukee, Klacik said. And many have jobs in such well-paying sectors as life sciences, education and business.
Klacik said he polled 10 developers who provided him proprietary information for the study. One of those, TWG Development LLC, has several housing developments in the works downtown, including 800 N. Capitol, the American Building and the neighboring Indianapolis Star building.
“They’re coming from out of the county,” Joe Whitsett of TWG said of the new arrivals. “But one day that won’t be true, if we’re not careful. So I think a slowdown is coming and things will pull back a little.”
Because the downtown housing developers aren’t publicly traded, they’re risking their own wealth to build instead of shareholder money, so they’re likely to be more cautious about over-building, Klacik said.
For IDI, the analysis helps the not-for-profit with its mission to market downtown, said President Sherry Seiwert, who arrived at IDI in August 2012.
“I thought it was a good time to gather data on downtown,” she said. “It benefits IDI and helps to inform us with the direction of our organization.”
The housing study coincides with another, broader analysis of downtown called Why Downtown Indianapolis Matters, also undertaken by the IU Public Policy Institute.
The eight-page study, for instance, says that 30 percent of all downtown workers have college degrees, while 57 percent have completed some college. Compared to the rest of the state, only 18 percent of Hoosiers have bachelor’s degrees and 44 percent some college education.
Together, the two studies will be part of a Dec. 3 announcement in which IDI is planning to share results of its Velocity campaign.
IDI kicked off Velocity in the spring and held a series of neighborhood roundtable meetings to gather public input about downtown and surrounding neighborhoods. The plan is expected to cover a wide range of topics influencing quality of life, including housing, economic development, transportation, public spaces, and the arts.