The downtown apartment sector continues to perform exceptionally well despite a deluge of units hitting the market.
Occupancy in the central business district is a robust 95 percent, said Amy Burmeister, a multi-family broker at Summit Realty Group, during IBJ’s Thursday morning Commercial Real Estate and Construction Power Breakfast at the JW Marriott.
“We have absorbed everything we have constructed, so I think the outlook is good,” she told the audience of more than 600. “Even if the rate would drop to 92 or 93 percent, that is still phenomenal.”
The developer of one of downtown’s newest apartment projects, Pulliam Square, held a ceremonial ribbon-cutting Thursday morning to highlight completion of its first phase.
TWG Development constructed the five-story building at Delaware and New York streets with 145 apartments and about 13,000 square feet of ground-level retail space. TWG has razed the adjacent former headquarters of the Indianapolis Star to make way for 478 additional apartments and more retail space.
The project is just one of several that have been completed or have started construction during downtown's apartment boom. Between 2000 and 2012, nearly 2,000 new rental units were built, according to apartment brokerage Tikijian Associates, bringing the total number downtown near 4,700. Since then, more than 3,000 units have either come online, started construction, or set a start date by the end of 2015.
These new residents need services, Burmeister said. The influx might be enough to convince retailer Target to build a store on the Indianapolis Public Schools property along Massachusetts and College avenues where the old Coca-Cola plant stands, she said.
IPS is marketing the property, which many real estate experts think requires some combination of retail and housing development.
With continued apartment demand downtown, rents have increased. The average rental rate, spread across both market-rate and affordable-housing projects, stands at $926 per month, Burmeister said. New market-rate units downtown are averaging about $1.85 per square foot.
The downtown multi-family housing market is so healthy that condominium construction, largely absent since the housing downturn, is beginning to sprout up. One of the bigger projects is Milhaus Development LLC’s Park 10 at 10th and Broadway streets in the Chatham Arch neighborhood. The first of 84 units over five structures should be available in the fall.
“It’s a slow comeback,” Burmeister cautioned. “We still don’t have an easy vehicle for financing [large projects].”
That has led to a gap in supply for condos in the $250,000 to $500,000 range, she said.