Net absorption returned to positive ground in the 127-million-square-foot Indianapolis warehouse/ distribution market in the second quarter of 2012, but the modest total of 171,000 square feet pushed the vacancy rate down just 10 basis points to 10.8%. That is still below the U.S. average of 13.5%. The average asking rent rose 0.3% to $3.85 psf and the average effective rent increased 0.6% to $3.46 psf. But the good news was reversed in July, when 230,000 square feet of negative net absorption pushed the vacancy rate to 11.0% and rents fell 0.3% by both measures.
The market will soon face the delivery of one project with 900,000 square feet of manufacturing space and two projects with 1.5 million square feet of warehouse/distribution space that are already under construction. Reis predicts the vacancy rate will end 2012 at 11.2%, as the asking and effective averages rise 0.5% and 1.2% for the year. Subsequent years will see flat vacancy but improved rent gains of up to 3.0%, Reis predicts.
The 14.8-million-square-foot Indianapolis Flex/R&D market remains weak. The second quarter vacancy rate of 19.9% was up 10 basis points from the prior quarter on 20,000 square feet of negative net absorption, and up 150 basis points from a year earlier. The rate fell back 10 basis points in July. The average asking rent fell 0.1% during the quarter to $6.71 psf, while the average effective rent was unchanged at $5.76 psf. July saw no change by either measure. Reis predicts the vacancy rate will end 2012 at 19.6% and remain above 18.0% through 2016, despite limited new supply. Flat rents in 2012 are forecast to be followed by modest gains, reaching the 2.5% per year level starting in 2014.
“The overall vacancy rate for the market stands at 6.7%, down from 7.5% just one quarter ago,” according to Cushman & Wakefield, which credits several large new leases. The overall rental rate is $3.01 psf for warehouse/distribution and $6.00 psf for Flex, according to this source.