Large industrial spaces in central Indiana are nearly filled, which brings in more money for building owners but also limits the options in Johnson County for companies that want to move here.
Less than 5 percent of industrial space in the region is vacant; and in Johnson County, that number is even lower at 2.6 percent, according to reports from real estate firm Cassidy Turley.
Demand for large warehouses and manufacturing complexes in the Indianapolis area is driving up rent prices and attracting new investors, Cassidy Turley regional vice president Jason Tolliver said.
For example, a Denver-based industrial investment company purchased a 450,000-square-foot building in Greenwood for $15.75 million this summer, less than two years after the previous owner bought it for more than $4 million less.
Supply and demand
Low supply: Industrial vacancy rates in central Indiana are among the lowest in the nation at 4.4 percent. In Johnson County, that number is at 2.6 percent, according to a report from real estate firm Cassidy Turley.
High demand: Companies want to locate warehouses in the Indianapolis area because of its centralized location in the U.S. and access to interstates. Demand also is driving up prices for industrial space. Rents are expected to increase, and sales prices for buildings will climb.
No room: Johnson County Development Corp. must turn away companies looking for vacant large industrial spaces because currently none is available. The county has some vacant manufacturing buildings, but most are smaller than 50,000 square feet.
Growth: Developers and investors are expected to build facilities to meet the demand for industrial space in central Indiana. Johnson County could be a site for new growth due to a new interchange on Interstate 65 at Worthsville Road in Greenwood and plans to extend Interstate 69 along State Road 37 in the county.
But the lack of available large warehouses locally also forces the Johnson County Development Corp. to turn away companies looking for buildings with 200,000 square feet of space or more because none is available.
Low vacancy rates and continuing high demand for space will increase prices short term and is expected to lead to construction of new buildings, Tolliver said. With a new Interstate 65 exit planned at Worthsville Road in Greenwood, the county could see some of that growth, Johnson County Development Corp. President and Chief Executive Officer Cheryl Morphew said.
Several bidders made offers on the property at 700 Commerce Parkway in Greenwood because of high interest in the Indianapolis area paired with few investment options, according to a news release issued about the sale. Industrial Income Trust purchased the building, which has two tenants, Celadon Group and Genco Marketplace.
Former owner Cohen Asset Management, based in Los Angeles, had bought that building in January 2012 for $11 million.
Indianapolis-area industrial vacancy rates are among the Top 5 best in the nation, Tolliver said. Indianapolis’ vacancy rate is 4.2 percent, compared with the national and Midwest averages, which are both 8.5 percent. Indianapolis is centrally located in the U.S. and connects with major transportation routes, such as interstates 65 and 70, making the area attractive for warehousing companies that require 300,000 square feet of space or more, Tolliver said.
The southern Indianapolis market, which includes nearly all of Johnson County and parts of Morgan and Shelby counties, has an even lower vacancy rate of 2.6 percent, according to the Cassidy Turley report. Since 2011, five industrial buildings larger than 250,000 square feet in Greenwood have been sold, according to county property records. Those buildings have sold for as high as $28 million and have had prices from $15 to more than $60 per square foot.
“It’s an amazing market. There’s a lot of strength, so there is a premium there for owners and for investors,” Tolliver said.
But in Johnson County, since those largest buildings are full, local development officials don’t have space available for companies that want to rent warehouse space in Greenwood, Morphew said.
“We get leads every other day, if not every day, looking for existing building lease space. So what that does is narrow our capability to be competitive. If you don’t have inventory, for us it’s a denial. We’re denying that request because we have nothing to meet that criteria,” Morphew said.
The county has vacant industrial buildings, but most are smaller than 50,000 square feet and companies often want more space, Morphew said.
Companies have been interested in a 50,000-square-foot shell building under construction in Franklin, Morphew said. That building is basically four walls and a roof so that a company can design the interior for its specific needs, she said. Earlier this year, the shell building had drawn more than 10 requests for information in six months.
Johnson County doesn’t have as much industrial space as other areas in central Indiana. The south region has about 11 million square feet of industrial facilities compared with more than 62 million square feet in the southwest or 45 million square feet on the northwest and east sides.
More warehousing space is available in Hendricks County, for example, because of Indianapolis International Airport and the rail yard in Avon, which offer more transportation options, Morphew said.
Investors and developers are starting to consider more large-scale buildings due to the low amount of available space and high interest in Indianapolis, Tolliver said. Johnson County could be poised to benefit from that expected growth over the next 10 years, he said.
Greenwood experienced a boom in developers constructing large industrial sites in the late 1990s and early 2000s, Morphew said. For example, four buildings along Commerce Parkway in Greenwood have been built since 1999, with the most recent being constructed in 2008.
Construction of the new I-65 interchange at Worthsville Road could spur new manufacturing or warehouse development in Greenwood within the next five years. Whiteland and Franklin also hope to develop the area around their interchanges to attract business and industrial development, but companies typically aren’t looking to go that far south of Interstate 465, Morphew said.
Plans to extend Interstate 69 along State Road 37 could lead to more warehousing development similar to those near I-65, Tolliver said.