Tale of two downtowns: $9B set to be invested in projects, even as business district struggles with recovery

When Jason Shelley pulls into a parking garage each morning near the PNC Center just a block and a half off of Monument Circle, he rarely has to climb more than a few floors to find an empty space. It’s a stark difference, he said, from before the pandemic when he often had to circle all the way to the roof.

And later, when Shelley heads out for lunch, the sidewalks outside his office are often sparse, and some of his favorite restaurants are no longer in business.

“It’s a little sad,” said Shelley, executive director of the Indiana chapter of the American Institute of Architects. “There just doesn’t seem to be the consistent hustle and bustle that downtown used to have.”

But less than a mile east, along Massachusetts Avenue, the sidewalks are often swarming with shoppers and sightseers. A diverse collection of restaurants, from sushi houses to hot chicken joints, has continued to open along the corridor, which is now anchored by the $300 million Bottleworks District, a former Coca-Cola bottling plant transformed into office, retail and residential space. A second, $100 million phase is underway at Bottleworks with more office and retail space.

“We love Mass Ave and our corner of downtown—before, during and after the pandemic,” said Jennifer Dzwonar, managing principal at Borshoff, an advertising and public relations agency. Borshoff moved its offices onto Massachusetts Avenue 16 months ago from its former home a block away, above Needler’s Fresh Market on North New Jersey Street.

The contrast paints a picture of two downtowns and how they are recovering from a pandemic that emptied office towers, crippled retailers and sent a shock wave through the economy.

Many parts of downtown are thriving—particularly neighborhoods, where rents are rising, people have to stand in line for a lunch table, and investments are flowing.

Other parts—especially downtown’s central core, where many workers might come to the office only once or twice a week—are limping along, pockmarked by vacant storefronts, panhandlers and crumbling sidewalks.

“I think downtown is at a crossroads,” said Doug Noonan, professor in the O’Neill School of Public and Environmental Affairs at IUPUI. “I think Indy’s got potential to continue to strengthen the downtown and revitalize … but it’s not a foregone conclusion.”

All told, an eye-popping pipeline of nearly $9 billion in development is either underway or set to begin downtown in the next couple of years, including a $500 million convention center expansion with an adjacent hotel and a $300 million proposed redevelopment of the CSX building across Pennsylvania Street from Gainbridge Fieldhouse.

A couple of miles north, construction cranes hover over a sprawling, 44-acre footprint, where Indiana University Health is building a $4.3 billion hospital complex just south of the health care system’s century-old Methodist Hospital near Capitol Avenue and 16th Street.

And to the west, across the White River, on the grounds of the former General Motors stamping plant, Elanco Animal Health Inc. has started work on a $100 million headquarters campus to replace its current offices in Greenfield. Along the east bank of the river, Indianapolis-based Keystone Group is planning a $1 billion development that will include a soccer stadium, hotel and apartments.

And that list of projects doesn’t take into consideration much-anticipated redevelopments of Circle Centre Mall, the former Marion County Jail, a downtown heliport and several other sites still in their earliest planning stages.

Promising signs

But like countless cities across the country, Indianapolis is struggling to recover from the effects of the pandemic. The biggest challenge: the number of downtown workers who are spending more time working from home and other locations. Remote work is a benefit that many enjoy—even now demand—but it’s one that is shrinking the downtown office sector, a traditionally significant player in the downtown economy.

Yet there are promising signs. People are moving downtown in large numbers—the area’s apartment occupancy rate grew in 2022 to levels not seen since before the pandemic. Downtown has nearly 29,000 residents now, up from only about 15,000 in 2010. And developers expect to bring 900 more apartment units online this year—on top of 3,000 added over the past five years.

The tourism industry, too, is reporting a rebound, with hotel occupancy rates, conventions and meetings, and attendance at downtown museums and parks all rising last year, although still below pre-pandemic levels. Attendance at the Eiteljorg Museum of American Indians and Western Art, for example, climbed 53% last year, edging close to its 2019 total.

Large downtown law firms, which occupy nearly a million square feet of combined space, say they plan to remain in the heart of the city, even though some are shrinking their footprint to reflect the new reality of a hybrid workforce.

And some downtown workers say they’re starting to see a rebound in business lunch crowds, people walking along the Central Canal, and crowds at midweek Pacers and Indians games.

“It’s good to see so many people who want to hit a restaurant for a business lunch or breakfast,” said Charlotte Westerhaus-Renfrow, a professor of business law and management at the Kelley School of Business at IUPUI. “I’ve seen a resurgence of that.”

Hybrid is here to stay

But experts say the future of downtown can’t depend on the return of workers.

Long after COVID restrictions were lifted, companies of all sizes have continued to allow their employees to work remotely at least a few days a week, resulting in lower daily foot traffic in areas that once swarmed with people. An IBJ survey of large employers shows that’s not likely to end, as companies increasingly accept hybrid schedules as the status quo.

The total number of times workers visited downtown offices last year was 38% lower than in 2019, according to Placer.ai, which calculated the figures using proprietary location intelligence from smartphones, laptops and other devices.

That means Indianapolis is unlikely to return to a time when more than 100,000 workers swarmed downtown daily.

How that will transform the look and feel of downtown in coming years remains largely unknown, although the work-from-home transformation and other economic impacts of the pandemic have already led to the closing of dozens of shops, bars and eateries, from Sahm’s Cafeteria in the OneAmerica Tower to Primanti Bros. in Circle Centre Mall.

Some economists say the shrinking office sector will continue to ripple through the economy, as workers spend less money on downtown parking, lunches and even drinks or a ballgame after work.

“This represents a potentially large negative shock to the demand for services in formerly highly occupied office centers and campuses,” said Michael Hicks, director of Ball State University’s Center for Business and Economic Research.

And some longtime small-business owners say those changes have left downtown wanting.

“I just think it translates to less energy overall,” said Jill Mendoza, president of IDO Inc., an interior design company with 15 employees at 601 N. Capitol Ave., just a few blocks from the Statehouse. “It does have a huge impact on the vitality of restaurants, stores, all those things.”

But even hybrid work creates an economic impact.

Borshoff, the advertising and public relations agency, has one of the most flexible hybrid work models, requiring employees to be in the office only six to eight days a month. Yet employees, when they come downtown, “still have breakfast meetings, lunch meetings, dinner meetings, drink—all of which tend to happen around downtown,” said Dzwonar, the firm’s managing principal.

A turning point

The pandemic-induced changes have pushed downtown to a critical moment.

“I think the pandemic obviously had an impact, and work from home obviously has an impact,” Taylor Schaffer, president of civic group Downtown Indy Inc., told IBJ. “But I also think that downtown really is in a pivot point, in terms of who downtown is for and how downtown operates.”

Schaffer said downtown’s booming residential base will be a major part of the way downtown reinvents itself. With so many multifamily housing projects recently completed—including the transformation of the former AT&T office tower into 220 Meridian and the brand-new Block 20 building next to the Athenaeum—and many more under construction, the city has an opportunity to embrace its regional center in a more robust manner.

To that end, Downtown Indy Inc. intends to use more than $3.5 million from the city’s federal American Rescue Plan allocation to “think about how we are responding to, caring for, maintaining, reprogramming and activating downtown 365 days a year, not just when we have the opportunity to host a major event.”

And there are plenty of challenges to respond to—most notably, a perception and sometimes reality that downtown is no longer the clean, safe and vibrant place it was before the pandemic and a weekend of violence in late May 2020 following the police killing of George Floyd in Minneapolis, an incident that led to social unrest in cities across the country.

Homeless people camp out in storefronts, on Monument Circle, below the Artsgarden and in other highly visible areas of downtown.

But an IBJ analysis of the city’s crime data from 2010 to 2021 found downtown is among the Indianapolis Metropolitan Police Department’s safest areas.

Violent incidents in the Mile Square were down in 2022 from the pandemic peak years of 2020 and 2021 in all categories except robberies, which were up 43%, from 56 to 80.

In the Mile Square, homicides dropped to four in 2022, from six in 2020 and five in 2021.

Across IMPD’s entire Downtown District, which stretches from 10th Street and Interstate 65 on the north to Morris Street on the south, and from the White River on the west to the I-65/I-70 leg on the east, violent crime as a percentage of all reported incidents increased from 2010 to 2021, up to 22% from 14%.

IMPD reported 15 total homicides and manslaughters in 2020 and 2021 in the Downtown District, more than it had in the previous nine years combined. Homicides dropped 16% citywide in 2022, but IMPD has not released a district-by-district breakdown.

Many in the region give downtown low marks for cleanliness and safety. “It feels far less safe, and there doesn’t seem to be a sense of pride,” said Patty Prosser, co-founder of The Center for Leadership Excellence, a leadership coaching firm, who lives and works downtown.

City officials say they are working to address the problems so downtown can rebuild its reputation and develop a new vision.

Mayor Joe Hogsett last year launched a “downtown resiliency strategy” aimed at strengthening the urban core with investments in housing, recreational public spaces and infrastructure upgrades.

“There’s no question that downtown is the economic engine that drives central Indiana,” Hogsett told IBJ.

He pointed to the billions of dollars of investments in the city’s projects pipeline—including the $500 million Indiana Convention Center expansion and hotel, the $100 million Elanco corporate headquarters, and the $250 million Elevator Hill office, housing, retail and entertainment district on the old Angie’s List site just east of the I-65/I-70 leg—as game-changing developments.

“The totality of the level of investment in development and economic revitalization and recovery, I think, is astounding,” said Hogsett, a Democrat who is running this year for a third, four-year term. “I think the next five years could be perhaps the most exciting five years in our city’s history.”

Developers remain bullish

Overall, dozens of development projects are under construction or in the pipeline, including hotels, apartments, hospital expansions and retail-entertainment districts.

Some are planned for what’s traditionally been the central office area, including a $175 million redevelopment of the block that includes the Indianapolis City Market and the Gold Building. The joint venture by Citimark and Gershman Partners is expected to create more than 400 apartments as well as retail space.

At Pan Am Plaza, Kite Realty Group Trust is planning to build a $300 million Signia by Hilton hotel that will connect to new convention center meeting and ballroom space. And Chicago-based The Gettys Group is spending $54 million to convert the former King Cole office building at 1 N. Meridian St. into a Motto-branded Hilton hotel.

But many of the biggest projects are spread out over a sprawling area that city officials call the Regional Center, a 6-1/2-square-mile area that extends from 16th Street on the north (plus a narrow strip a couple of blocks on either side of Meridian Street up to 30th Street) to Interstate 70 on the south, and a little past the White River on the west to the I-65/70 leg on the east.

Within that area, developers are planning IU Health’s massive hospital expansion south of Methodist Hospital, Keystone’s Eleven Park on the site of the former Diamond Chain Co. and the expansion of the Bottleworks District.

All that investment will doubtless boost local restaurants, retailers and suppliers as it ripples through the region. But it is unlikely to flow evenly throughout downtown.

Noonan of IUPUI’s O’Neill School said the areas of downtown most likely to thrive are those anchored by large institutions, such as IU Health, IUPUI, Eli Lilly and Co. and other prosperous employers. “Those would be the ones that I would look at as good bets,” he said.

Developers say they remain cautiously bullish about downtown.

Phil Bayt, an attorney who represents Herb Simon-backed Boxcar Development LLC, the group that has announced plans to build apartments and hotel rooms on the former CSX site, said he’s encouraged by the amount of investment activity downtown.

He expects it to “transform downtown not only back to the vibe that it had before [the pandemic] but really to something even better.”

But to keep that momentum moving, downtown needs more people. It would help if companies found ways to bring more workers downtown, he said, and more people living downtown helps, too.

Bayt isn’t alone in his assessment. Jim Crossin, vice president of development for Indianapolis-based Flaherty & Collins Properties, said his firm has “a little bit of nervousness over how slow workers have returned to downtown.”

But, he added, “We’re pleasantly surprised that the multifamily market is doing so well—it’s sort of evened out, even though the workforce hasn’t returned as much as we’d like.”

Flaherty & Collins owns multiple downtown properties, including 360 Market Tower, Axis, Lockerbie Lofts and Millikan on Mass. And while it doesn’t have any downtown projects under construction now, it has submitted bids or proposals for redevelopment of several city-owned parcels, among them a parking lot north of Old City Hall.

The city’s Department of Metropolitan Development has not yet chosen a partner for the Old City Hall project, one of many it’s managing as it works to unload property it no longer needs.

That’s in part the result of the 2022 opening of the Community Justice Campus in the Twin Aire neighborhood, a couple of miles southeast of downtown. That moved Marion County’s jail and courts out of downtown, which is creating opportunities for developers on the east side.

“Obviously, the demand shows that there is interest in downtown, both living and investing here, so that’s something very positive that we’re trying to ride,” said Rusty Carr, interim director of the DMD.

“We see downtown is still rebounding, with folks who want to invest billions of dollars here,” Carr said. “And I think we’re at the point where we understand our opportunity to also kind of take advantage of the momentum and really set the course” for those properties.

He and others with the city, including Deputy Mayor Scarlett Andrews, have predicted that office space will continue to play a role in some renovations and new construction projects in the city’s core. But they expect much of the development coming down the pike to focus on residential space or entertainment offerings.

Mall remains a mystery

One of the most obvious examples of downtown’s changing dynamics is the decline of Circle Centre Mall as a retail center. The mall, which opened to much fanfare in 1995, was built as a public-private partnership at a cost of $319.5 million.

But after a strong early run as a center of downtown commerce, the mall lost its anchor stores and many of its key smaller stores. What’s kept the mall afloat are its restaurants, particularly ones that are exterior-facing—places like Ruth’s Chris Steak House, Harry & Izzy’s and the recently opened Sugar Factory.

Indianapolis-based Simon Property Group, one of the mall’s original owners and the company that managed Circle Centre for more than two decades, gave up its involvement in 2021, selling its 15% share of the Circle Centre Development Corp. and turning over operations to Chicago-based firm JLL.

Now, the ownership group is considering ways it might redevelop or reuse the 2-1/2-block property, which was developed by combining a number of existing buildings and historic facades with new structures. The group has solicited and received ideas and suggestions from several design firms for rethinking the property.

But Adam Collins, a partner at Indianapolis law firm Wallack Somers & Haas who represents Circle Centre Development Corp., told IBJ the discussions remain preliminary and the group is not ready to announce any plans.•