3. 2012 Market Report
Indianapolis, Indiana
Dear Colleagues,
This annual report marks the beginning of 2012, a year that will be significant not only politically but
also economically, as we could see a continued recovery or a second global recession. Despite lingering
uncertainties, natural disasters and political unrest overseas, 2011 was characterized by gradually
improving business conditions, giving us rational confidence for the coming year. Although the challenges
of the past year hampered growth, Indiana’s commercial property markets proved to be remarkably
resilient as every segment of commercial real estate demonstrated strengthening fundamentals.
I am also happy to say that Cassidy Turley has had another successful year. Our office received accolades
as the #1 commercial real estate brokerage and the #1 commercial property management firm as
ranked by the Indianapolis Business Journal 2012 Book of Lists. The Indiana Chamber of Commerce
named our office as one of the Best Places to Work in the state for the fifth consecutive year.
Contents
Cassidy Turley is also enjoying success across the country in our second year as a unified
firm. We are attracting top talent and expanding into new markets. Our property management
Economic Overview 4 portfolio has grown to 455 million square feet, and our leasing portfolio stands at 400 million
square feet. Our strategy has been one of smart growth, aiming to get better, not just bigger. In
Industrial Market 8 2011 we added five markets—Atlanta, Boston, Dallas, Houston and Tampa—and now provide
a full suite of services in 26 major markets and more than 60 offices across the country.
Office Market 14
Our progress would not be possible without the support and loyalty of our clients. For this, I thank you, and I
Retail Market 20 hope that our annual report—covering the regional and national economy and its impact on the Indianapolis
commercial real estate market—will prove useful for your business. In these turbulent economic times,
Investment Market 23 keen insight is even more critical to your success, and we stand ready to assist and guide you.
Land Market 28 Sincerely,
Associates 30
Industrial Appendix
Office Appendix Jeffrey L. Henry, SIOR
Regional Managing Principal
w w w.cassidyturley.com | 3
4. 2012 Market Report
Economic Overview
U.S. Economy was revised upward by a hefty 52,000 to
The U.S. has successfully avoided another 210,000. Moreover, the unemployment rate
recession, but economic conditions couldn’t dropped to a two-and-a-half-year low to 8.6
feel more uncomfortable. Despite this feeling percent. The jobs data that drive demand for
of unease, third-quarter gross domestic commercial real estate also registered solid
product numbers were actually quite solid. gains. Professional and business services
Real GDP grew at an annualized rate of added 33,000 payrolls, retail trade added
2.5 percent, more than double the average 49,800, and manufacturers added 2,000.
growth rate registered in the first half of
2011, and as the year drew to a close, This isn’t to suggest that all is well with the
positive economic data began appearing economy or commercial property markets.
in numerous sectors. Retail sales were up Challenges for the U.S. recovery remain and
7 percent in October and “Black Friday” Europe’s debt crisis remains chief among
Economy sales were up 16 percent compared to those them. Between 15-20 percent of U.S.
At a glance
a year ago. That means 70 percent of the exports go to Europe. In addition, U.S. banks
U.S. economy is signaling healthy, possibly have strong financial links to the 17 countries
U.S. Economy 2010 2011(e) 2012 (f)
even robust fourth-quarter GDP growth. that make up the euro zone. Some peg
Real GDP 3.0 1.6 2.0
U.S. bank exposure to European debt (both
Unemployment Rate 9.6% 9.1% 9.0% Equity markets have rallied 7 percent since direct and indirect) at nearly 55 percent
CCI 54 55 54 hitting their low point in July of 2011, and of those banks’ total capital. The U.S.
CPI 1.7 3.0 2.2 the CBOE VIX, a solid measure of investor economy can withstand a mild euro zone
fear, was down to 27 in December; it was at recession, but a deeper recession would
Manufacturing (ISM) 57.3 55.4 55.0
45 just eight weeks prior. All of this sudden surely push the U.S. back into retrenchment.
West Texas 79 94 98
Intermediate
improvement in the data has spurred a
solid rebound in the consumer confidence Another key factor keeping the risk of
e: Estimate; f: Forecast
index (CCI), which rose to 56 in November recession elevated in the U.S. is the lack
after basically being in the gutter for several of agreement from U.S. policymakers on
Leading Index for Indiana (LII)
months. Most encouraging, the expectations deficit reduction. The super-committee’s
104
component of the CCI moved from 50 in failure to agree on measures to reduce the
102
100 October to 67.8 in November, a massive deficit by $1.2 trillion over the next ten years
98
96 improvement in the consumer psyche. has resulted in even less confidence that
94
There are now clear signs that improved policymakers will come up with a sensible
92
90 growth is translating into new jobs. plan for long-term fiscal sustainability prior
to 2013. Further, the recent economic
99
01
06
08
98
10
00
02
05
11
97
03
07
09
19
19
20
20
20
20
19
20
20
20
20
20
20
20
Source: Indiana Business Research Center ADP reported that private sector improvement does not override the fact that
employment increased by 206,000 from the U.S. remains knee-deep in deleveraging
IN CRE Fundamentals Slowly Improving October to November, the largest monthly recoveries, which are nearly always
Multifamily
gain this year. Small businesses (1-49 characterized by slow, choppy growth.
employees) added 110,000 jobs, medium-
Industrial
sized businesses (50-499) added 84,000, Nevertheless, the conversation has
Office
Retail
and large businesses (>499) added 12,000. rapidly shifted away from “double-dip”
The improvement in the labor market was rhetoric to a more common theme of slow
confirmed in early December when the growth with upside potential. Even if we
Bureau of Labor Statistics reported the U.S. end up with subpar economic growth for
economy added 120,000 jobs. Although 2012, as we did in 2011, that scenario
Downturn
Weak Demand
Recovery
Improving Demand
Upturn
Strong Demand
Mature
Historic Demand
Downturn
n the headline figure was modest relative to engenders continuously improving
High Vacancy Fall ng Vacancy Tight Vacancy Vacancy Rents
Source: Cassidy Turley Research
the ADP report, October data was revised commercial real estate fundamentals
somewhat higher, and September data in the form of stronger demand, falling
4 | We know The State of Real Estate ®
5. January 2012
vacancy, and a commercial market inching in 2011—the debt ceiling debate, the S&P
closer towards sustained rent growth. downgrade of U.S. credit, the European Economic / Market Tracker
crisis, battered consumer confidence—it
Commercial real estate has already is no surprise that investor demand eased.
demonstrated for a solid 20 months that Assuming no additional shocks to the Nationally, Hiring Is Picking Up
it can perform reasonably well in the economy at this point, the CMBS market Private Sector Total Nonfarm
throes of a deleveraging recovery. In fact, will reactivate in larger volume numbers, 300
from April 2010 through the third quarter, and spreads will begin to tighten. CMBS 250
200
the U.S. office sector has absorbed 61.6
Thousands
issuance will reach $30 billion in 2011 150
million square feet, the industrial sector and will near $40 billion in 2012, fueled in 100
50
has absorbed 91.5 million square feet, part by refinancing needs. This will put the 0
and the multifamily sector has absorbed level of CMBS lending in 2012 on par with
Au
Se 1
N
De 0
Ja 0
Fe 1
M 1
Ap 1
M 1
Ju 1
Ju 1
Oc 1
N 1
ov
ov
ar
ay
n-
n-
l-1
g-
b-
p-
t-1
c-
r-1
-1
-1
-1
-1
1
1
1
1
1
1
1
324,000 units. All indications are that
1
2004 levels of investment sales. Moreover,
Source: BLS; iCassidy Turley Research
finalized fourth-quarter numbers will further
S u ce Bu au bo Sta s Cas dy Turl
assuming the recovery follows the script
substantiate this growth trend. For the office we have laid out, investor demand will
and industrial sectors, the current pace of continue to spread beyond the primary
demand is not far off from pre-recession trophy markets, with secondary and tertiary U.S. ufacturing Remains i xpansi n
Ma Manufacturing Remains in Expansion
(2005 and 2006) levels, and the multifamily markets seeing much stronger sales activity
sector is registering the strongest levels of in 2012. If the U.S. economic recovery
65
demand since the technology boom of the falters, then we will see a flight back to 60
55
late 1990s. Retail is the one commercial safety, which will disproportionately benefit 50
45
sector that continues to lag behind. Demand primary markets such as New York, Boston, 40
for retail space did turn positive in the first San Francisco, and Washington D.C. 35
30
quarter of 2011 (+704,000 MSF), but rising
n 0
Ja -97
1
ay 0
Ju -9 4
J u -0 8
N 03
M -9 2
M -0 6
S l -9 5
N -96
Se l -02
Se l-09
M -9 3
M r-0 7
J a -04
Central Indiana Economy
Ju 0 1
N -10
M -99
Ja - 9
-1
M r -0
gas prices in the early summer took their toll
-
p-
ay
ay
ep
n
ov
ov
ov
ar
ov
p
n
a
a
N
on consumer spending. As a result, the retail The Indiana economic outlook brightened
sector shed more space than it absorbed somewhat during the fourth quarter as the Ins tu e o S py anagemen
Source: Institute for Supply Management
in second and third quarters of this year. Leading Index for Indiana (LII) regained
With retail sales having shown flashes of almost all the ground it lost since last
an uptrend since August, it is reasonable January, registering 96.9 in November, Corporate Profits Continue to Impress
r t Pro t i t p
just shy of its post-financial crisis high of
to expect that the retail sector will begin Corporate Profits, Billions of Dollars, SA
97.1. While economists remain cautious,
absorbing space again in early 2012.
this upward trend is undoubtedly a positive
Investment sales have clearly slowed sign, with four of the LII’s five components
2,000 30 Year Average
recently. According to Real Capital Analytics, moving higher. The LII is an index developed 1,600
November marked the first year-over-year by the Indiana Business Research Center 1,200
800
decline in any month since the bottom designed to reflect the structure of the state 400
of 2009 as all property types except economy and predict, in a general way, 0
the direction of economic activity within
81
93
05
85
89
97
01
09
multifamily witnessed a slight decline in
19
19
19
20
20
19
19
20
investment activity. Although a decline the next several quarters. It is comprised
Source: Federal Reserve Bank of St. Louis
e al Re e v Ba of St Lou s
in CMBS conduit lending has been one of five national measures that become
factor, the broader economic malaise is available more quickly than do state-level
weighing more heavily on investors. Even data, thereby offering a more timely view
within the multifamily segment, where of future conditions. The five components
financing is cheaper and easier to obtain, of the index are the National Association
investors have grown more cautious. of Home Builders Housing Market Index,
the Census Bureau’s value of unfilled
Given the numerous shocks that occurred motor vehicle and parts orders, the interest
w w w.cassidyturley.com | 5
6. 2012 Market Report
Economic Overview
rate spread between the Federal Funds growth rate for the period 2007–2010 million. The European Union began its
rate and the 10-year Treasury yield, the ranked 10th in the nation. For real estate dramatic increase in imports in 2002, hit a
Purchasing Managers Index, and the professionals this is good news as metro downdraft in 2009, and recovered in 2010.
Dow Jones Transportation Average. areas with stronger economies are much The majority of this growth came from the
more likely to witness stronger demand euro zone countries that have increased their
The Ceridian-UCLA Pulse of Commerce and increasing interest in real estate. imports by 22.4 percent (average annual
Index (PCI) also showed some new life in rate) since 2002. Indiana exports to non-
October, rising 1.1 percent following three It is estimated that around 40,000 jobs will
euro zone countries also grew since 2002,
consecutive months of declines. The PCI, be added to Indiana payrolls in 2012 as the
but since 2008 their imports have dropped
a real-time measure of the flow of goods overall economy strengthens. As a result,
off. More specifically, Germany, France
to U.S. factories, retailers and consumers, the state’s unemployment rate may well
and Spain have collectively commanded
had declined far more severely than the shift down to 8 percent by year-end. Exactly
70 percent of the Indiana export market
LII over the preceding months. Although where these jobs will come from is the
within the euro zone by importing $4.2
its authors are cautiously optimistic of its subject of debate. Predictions of economists
billion worth of Hoosier goods. While France
newfound positive direction, it remains vary greatly in terms of what segments of
and Germany have been top 10 trading
to be seen if the PCI reversed course for the Indiana economy will grow and by how
partners for the past 10 years, Spain just
good or if it is in the midst of a swing that much. The most optimistic forecasts predict
joined the leaders in 2010. Of all the euro
has characterized so many economic stronger growth in financial, education
zone countries, Spain has had the largest
indicators amidst the deleveraging recovery. and health, and professional and business
average annual rate of growth over the
sectors, with manufacturing and trade jobs
Also supportive of consumer spending last decade, driven primarily by growing
seeing slightly slower growth. Other forecasts
and economic growth are relatively healthy Spanish demand of Indiana pharmaceutical
expect to see more sluggish overall growth
household finances. Though delinquency products. Overall, the euro zone has
and a bumpy ride for these key commercial
volumes are inching up again across the recorded double-digit average annual
real estate sectors. Regardless of which
nation, consumer balance sheets remain growth rates in the short, medium and long
prediction plays out to be more accurate,
in far better shape in most Midwestern continued growth for the state is projected term—an important trend for the Indiana
states, including Indiana. Hoosiers’ real by all, and this bodes well for the commercial economy and one that could suffer as a
personal income (income after taking into property markets. Certainly, more robust result of the European sovereign debt crisis.
consideration the effects of inflation on growth would be preferred, but slow
In Indianapolis faltering business and
purchasing power) has kept pace with growth is better than no growth, and with
professional services are slowing the
the nation since the beginning of the strengthening fundamentals in all segments
recovery, but hiring should accelerate in
recession and has started to rise again. of the property markets, there is little
the second half of 2012. The business
reason to expect that we will not continue
Indiana’s real gross domestic product rose and professional services sector, a
to experience year-over-year improvements
by 4.6 percent in 2010, the third-fastest primary demand driver for office space,
in all commercial real estate segments.
increase in the nation, driven by growth in remains under pressure from declines
the manufacturing sector. However, in 2011 Much discussion has been given to the in administrative and support jobs,
it slowed to 2.2 percent as construction potential negative impact the European and demand for these services will
and government employment shrunk. sovereign debt crisis could have upon the remain weak until the local recovery
2012 Indiana GDP growth estimates national property markets if a prudent course strengthens. On the bright side, according
range from 2.5 percent to 3.1 percent and forward isn’t agreed upon by European to Moody’s Analytics, the high-value-
will likely track somewhere in between. leaders. It is worth pointing out that Indiana added components of business and
Interestingly, the top ten metros for is not insulated from the affair. Europe has professional services have surpassed
economic growth since the recession, as long been a strong trading partner with their previous peak. Although these jobs
measured by their gross metro product, Indiana. In 2010, the most recent year comprise a smaller share of business and
are concentrated on the East Coast annual data is available, European Union professional services employment, these
and in Texas. One notable exception countries imported more than a quarter of jobs hold a larger share of the wages
is Indianapolis, where the economic Indiana’s exports (27%) for a total of $7.7 and have a greater impact on growth.
6 | We know The State of Real Estate ®
7. January 2012
Indianapolis’ continuing recovery will remain diversified economy, a reasonable cost
muted until stronger national growth in structure, and a steady pipeline of new Economic / Market Tracker
2013–2014 gives way to a broader services residents and businesses. As a result,
expansion. Economists expect payrolls employment growth will track above the
to return to their pre-recession peak in Midwest average, with growth occurring U.S. ume s Are S Are Still agi g
C n Consumers l D leve Deleveraging
2015, about a year after the nation. The faster here than in other peer markets. Household Debt-to-GDP
transportation and distribution sector will 100%
Additionally, Indianapolis’s mild housing
remain a key growth driver as it continues 80%
correction is creating less of a drag on
to benefit from improving demand for 60%
Central Indiana consumers; the peak-to-
durable goods. Midwest demand for core 40%
trough house price correction is estimated
capital goods was strong in the second 20%
at 7 percent, using the FHFA index, far
and third quarters despite the debt-ceiling 0%
below the nation’s 18 percent mark.
debacle and financial market turmoil.
54
58
63
19 8
73
78
82
87
19 2
97
01
06
11
Expect prices to improve next year, with
6
9
19
19
19
19
19
19
19
19
20
20
20
Also, inventory growth has slowed, which F e al Rese
Source: Federal Reserve
a larger gain in 2013 as the labor market
reduces the possibility of an inventory
strengthens. By then hiring will become
overhang that would force Midwestern
more robust in Indianapolis because of
manufacturers to sharply cut production. Indiana Business Bankruptcies Falling
the metropolitan area’s large share of
This foreruns continued growth in the employment in private services, which will Bankruptcy: Business-Total, ( 12-Month Ending) for Indiana
Central Indiana industrial sector in 2012. be at the forefront of national growth. 1,000
Peak
800
Unfortunately, local hiring in manufacturing In short, the long-term prospects for the 600
will likely fall short of production gains Indianapolis market are bright. As many 400
occurring elsewhere. Instead, the pace of metropolitan areas struggle amid lackluster 200
local economic recovery will be driven by factory hiring, Indianapolis is positioned to 0
large private services, where productivity compensate by attracting high-paying jobs in
20 0
00
20 2
20 3
20 4
20 5
20 7
20 9
10
01
03
06
09
11
06
08
0
0
0
0
0
0
0
20
20
20
20
20
20
20
20
20
gains are much harder to achieve. This fields such as healthcare, life sciences and Source: U.S. District Courts:
isn’t to suggest the Indianapolis forecast information technology. Growth within these Administrative Bankruptcies Office
is bleak. The Indianapolis moniker as the sectors will keep job and income growth
“Crossroads of America” is well deserved. ahead of other Midwestern cities, while
As a result, the logistics and distribution Commercial & Industrial
also boosting an already diverse industrial m a & al e
Tenant Finances Better
sector in particular will continue to witness core. Further, Indianapolis stands to gain Charge Off Rates, SAAR (%)
growth from increased output from across from positive net migration flows which will 3.3
3.0
the Midwest. Longer term, the Indianapolis further reinforce an expanding healthcare 2.7
2.4
metro area will reap the benefits of a well- and consumer-dependent service industry. 2.1
1.8
1.5
1.2
0.9
0.6
0.3
0.0
05
06
07
07
08
09
10
10
11
05
08
11
06
09
20
20
20
20
20
20
20
20
20
20
20
20
20
20
Commercial Real Estate Loans Commercial & Industrial Loans
Source: U.S. Board of Governors of the Federal Reserve System
w w w.cassidyturley.com | 7
8. 2012 Market Report
Industrial Market
U.S. Industrial Market square feet in 2010 and a projected 47
Despite a challenging economy, the U.S. million square feet in 2011. In the near term
industrial market continues to grow. Reports muted development is likely to continue as
show the industrial market in the midst of the current rent dynamic is not supporting
a sustained rebound from recessionary speculative construction in most markets. As
slump that finally hit in 2009 and lasted a result, the lack of new industrial product
into 2010. Demand for industrial warehouse will likely continue to drive down the vacancy
space registered 24.7 million square feet rate nationally, a trend that will accelerate
at the beginning of the fourth quarter, in 2012–2014 as demand grows at a faster
marking the third straight quarter in which pace than supply for the next several years.
demand eclipsed 20 million square feet,
amid strength in autos, mining, electronics Year-over-year investor demand is picking
and other sectors. In fact, the overall up for industrial properties. After several
Indianapolis Industrial Market industrial market has now grown for nearly impressive quarters of absorption, investors
At a glance nine consecutive quarters, providing a are becoming increasingly comfortable
further sign of strengthening stability. For with the industrial sector, particularly given
4Q11 4Q10
context, the current pace of net absorption higher yields vis-à-vis other product types.
Inventory SF 242,786,193 242,416,228 exceeds the levels recorded over the Further, the strength of the industrial market
Vacant SF 10,339,804 15,166,669 same three-quarter period in 2006 and is also reflected in its comparative lack of
Vacancy Rate 4.7% 6.3%
2007—both very healthy years for the distressed properties. Distressed asset sales,
industrial sector. Further, most local markets which barely rose above 20 percent of the
Occupied SF 232,266,970 227,249,559
are now exhibiting improving industrial total industrial transactions during the worst
Absorption (Qtr) 1,022,521 2,659,489 fundamentals with warehouse space now of the recessionary market, have fallen to
Absorption (YTD) 5,017,411 3,437,690 back to pre-recession levels. Through the around 15 percent. Despite unspectacular
first three quarters of 2011, 55 out of 67 internal rates of return, returns on warehouse
markets tracked have recorded positive investments are relatively predictable
Vacancy Rate (Industrial) demand for space with the greatest demand and this predictability has become very
10%
occurring in Dallas, Detroit, Chicago, Dayton, attractive, particularly for life insurance
Historical Average Milwaukee and Indianapolis. Overall, port companies and other institutional investors
8%
cities, distribution center hubs and auto who are seeking certainty and a viable
6%
markets logged the best recent gains. alternative to the rising prices for the
4% core office and multifamily assets.
2% The U.S. industrial vacancy rate is currently
more than 70 bps below the peak of 9.9 Indianapolis Industrial Market
0%
2005 2006 2007 2008 2009 2010 2011 percent reached in the second quarter of The pace of leasing slowed somewhat during
2010. Through October 2011, U.S. industrial the latter half of 2011 but despite the slower
vacancy had continued its descent and pace, year-over-year leasing velocity remains
Net Absorption (Industrial) registered 9.2 percent. Average asking rents considerably better than 2010. Through the
8,000,000 have increased for three straight quarters first half of 2011 we witnessed 3.8 million
and are now tracking at around $5.13/ square feet of new leasing and 3.2 million
6,000,000 nnn. As for the development pipeline, square feet of renewals and expansions.
4,000,000
a lack of new product has provided the During the final half of 2011, new leasing
industrial market a brief respite to recover. fell by 77 percent to 882 thousand square
2,000,000 The industrial sector delivered 317 million feet and the rate of renewals and expansions
square feet in 2006, 284 million square declined by 28 percent to 2.3 million square
0
2006 2007 2008 2009 2010 2011 feet in 2007 and nearly 284 million square feet. Despite the general slowdown in the
Net Absorption feet in 2008. But development dropped second half of the year, the pace of leasing
considerably since that time, registering both in terms of total square footage and
126 million square feet in 2009, 41 million number of deals inked rose from the third
8 | We know The State of Real Estate ®
9. January 2012
to the fourth quarters. By year-end the market with a little more than 10 million
industrial market had posted 5.5 million square feet of that amount vacant. The Industrial / Market Tracker
square feet of new leasing, 5.6 million square amount of overall sublease space available
feet of renewals and expansions and over 1.8 on the market declined throughout the
million square feet in user sales. Strikingly, year, ending at 1.5 million square feet in Indianapolis Downtown Submarket:
Absorption and Vacancy Change
over 2.6 millions square feet of leasing was December. The average quoted asking rental
driven by new tenants to the market. rate for available industrial space remained 60
6%
Thousands Square Feet
unchanged during the fourth quarter at 40 5%
20 4%
Net absorption for 2011 registered 5.01 $3.84 per square foot. This represented a 0
3%
million square feet, with 1 million square 1.9 percent increase in quoted rental rates 20
07
08
10
11
09
2%
20
20
20
20
20
40
feet of that growth occurring during the from midpoint of 2011 when rents were 60 1%
final three months of the year. This marks reported at $3.77 per square foot. The 80 0%
the fifth consecutive quarter of occupancy average quoted rental rate within the flex Absorption Vacancy
growth in the Central Indiana industrial segments was $8.49 per square foot at the Source: Cassidy Turley Research
sector with year-over-year gains in excess of end of the fourth quarter, while warehouse
1.6 million square feet. In fact, the Central rates tracked at $3.48 per square foot. Indianapolis East Submarket:
Indiana industrial market witnessed more Absorption and Vacancy Change
growth through the first nine months of 2011 Growing momentum in the industrial 800 10%
than during all of 2010 and nearly double market took place even while the overall
Thhousands Square Feet
8%
600
that of 2009. By year end, every industrial economy seemed to be stuck in idle during 400
6%
submarket had witnessed varying shades the second quarter and while economic 200
4%
2%
of occupancy growth. Submarket variations growth was somewhat lackluster during 0 0%
in net absorption included the Southwest the third quarter. Over the final quarter
08
09
10
07
11
industrial growth accelerated and multiple
20
20
20
20
(+1.90 MSF), Northwest (+1.83 MSF), East
20
Absorption Vacancy
(+354,000 SF), South (+345,000 SF), economic indicators provided good
Source: Cassidy Turley Research
Southeast (229,000 SF), West (+158,000 reason to be optimistic about the Indiana
SF), North (+87,000 SF), Downtown economy and industrial markets in 2012.
(+60,000 SF), and Northeast (+58,000 SF). Indianapolis Northeast Submarket:
In November the Leading Index for Indiana Absorption and Vacancy Change
Overall market vacancy declined slightly for (LII) increased to its highest level since 1,175 8%
September of 2008, and full percentage
Thousandds Square Feet
the fifth consecutive quarter, ending the 975
775
6%
year at 4.7 percent, down 160 bps from point above where it stood in August, by 575 4%
a year prior. At year end, vacancy rates registering at 97.2. The LII is an index 375
175
2%
had either decreased or remained flat in developed by the Indiana Business Research 25 0%
all nine of the Central Indiana industrial Center designed to reflect the structure
07
08
11
09
10
20
20
20
20
20
submarkets. Variations in submarket vacancy of the state’s economy and predict the Absorption Vacancy
for all product types included the South direction of economic activity in the next Source: Cassidy Turley Research
(7.7%), Northeast (6%), East (5.3%), North several quarters. It is comprised of five
(4.8%), West (4.5%), Downtown (3.9%), national measures that offer insight into
Indianapolis North Submarket:
Northwest (3.7%), Southwest (3.6%) and future conditions of the Indiana economy.
Absorption and Vacancy Change
Southeast (1.9%). Across the market, The five components of the index are the
product-type variations in multi-tenant National Association of Home Builders 200 14%
Thousands Square Feet
vacancy were comprised of flex (9%), office Housing Market Index (HMI), the Census
12%
100
10%
0
showroom (8.3%), medium distribution Bureau’s value of unfilled motor vehicle 100
8%
(5.7%), traditional bulk (4.6%), modern bulk and parts orders, the interest rate spread
09
10
11
07
6%
08
20
20
20
20
20
200
4%
(3.1%), manufacturing (2.6%), maintenance between the Federal Funds rate and the 300 2%
(1.8%) and transport (1%). At the close of 10-year Treasury yield, the Purchasing 400 0%
Absorption Vacancy
the fourth quarter, there was a total of 25.9 Managers Index (PMI) and the Dow Jones
Source: Cassidy Turley Research
million square feet of available space in the Transportation Average (DJTA). Strikingly,
w w w.cassidyturley.com | 9
10. 2012 Market Report
Industrial Market
the November reading not only marked but as context the highest the HMI has manufacturing segment. Signs of life may
the index’s 2011 highpoint, it also marked registered since the housing-crisis was a also be found in the automotive sector
the first time in a year that all five of these value of 22) offering further evidence that as unfilled orders for motor vehicles and
LII components improved in unison. pockets of recovery are slowly beginning parts continues to increase. Further, the
to emerge. The Institute for Supply DJTA added a small gain in November on
Breaking down the drivers behind the LII Management’s PMI also rose to its highest top of a major 17 percent gain in October
uptick offers even more promising news. level since June to 52.7. A reading above to end the year with a reading of 4946.
The housing market improved for the third 50 is indicative of continued expansion in Granted, it still has a long climb to regain
consecutive month with confidence reaching the manufacturing sector, a major demand its post-recession high of 5515 but we are
its highest level since the homebuyer tax driver for industrial warehouse space, and absolutely trending in the right direction.
credit ended in 2010. In December the this most recent reading now marks the
HMI rose to 21 (below historical standards 28th consecutive month of an expanding Another positive harbinger for the industrial
market, particularly for the logistics and
distribution segment, is that Indiana ports
have experienced one of their busiest years
Largest Signed Industrial Transactions—YTD 2011 since before the recession. This growth
*All square footage rounded to the nearest thousand, all transactions greater than 50,000 SF isn’t limited to Indiana, in fact overall U.S.
port traffic is up to the tune of a 2 percent
New Leases increase in tonnage shipped, but Indiana
Company Location Square Footage growth is impressive. Case in point, the
Amazon Southwest 925,000
Port-of-Indiana Burns Harbor announced in
November that it had already handled more
Amazon Southwest 900,000
cargo in 2011 through 11 months than it had
RR Donnelly Southwest 799,000 any other year since 2006. The Ceridian-
OHL Southwest 406,000 UCLA Pulse of Commerce Index (PCI), a
real-time measure of the flow of goods to
Genco Southwest 309,000
U.S. factories, retailers and consumers,
Venture Warehouse and Distribution West 299,000
also makes the case for increased demand
Genco Marketplace South 292,000 within the logistics and distribution segment.
Gilchrist & Soames Southwest 251,000 As with many other indices the PCI spent
the final quarter of 2011 recovering ground
Apotex Southwest 156,000
lost earlier in the year but it continues
ERI Recycling Southwest 156,000 to trek positively, having increased 1.2
Cherryman Industries East 135,000 percent over the final two months of 2011.
Global Stainless Supply East 128,000
Pulling all of this together, it remains
Wepack Northwest 125,000
clear that despite an economy which is
Hanzo Logistics Southwest 102,600 struggling to garner momentum, the Central
Undisclosed Southwest 105,800 Indiana industrial market is growing and
commercial real estate fundamentals
Sataria Southwest 97,500
continue to improve. Indeed, there are
Sky Enterprises Northwest 90,000 many encouraging signs that suggest
International Paper Northwest 72,000 recovery for the economy and for the
National Trade Supply South 68,000 broader property markets will continue.
Indices are trending positive, oil prices have
Tridien Medical Northeast 60,100
fallen from the highs witnessed at midyear,
Fastenal Northwest 51,000 banks are flush with cash and businesses
Total Square Feet 5,528,000 remain extremely profitable. There is little
doubt the economy will continue to move
Source: Cassidy Turley Research
10 | We know The State of Real Estate ®
