Colliers Turley Martin Tucker Outlines State of Real Estate

Press Release

INDIANAPOLIS – The Central Indiana real estate market proved to be thriving in all sectors in 2006, the presenters will report at Thursday’s annual The State of Real Estate® event, “Forces in Focus,” hosted by Colliers Turley Martin Tucker, the largest local commercial real estate brokerage firm, at 4 p.m. at Clowes Hall on the Butler University campus, 4602 Sunset Avenue.

Industrial Market

The Central Indiana industrial market experienced another banner year in 2006. Occupancy growth totaled 5.7 million square feet (MSF) for the year, eclipsing 2005’s total of 5.6 MSF. This report marks the third consecutive year of at least 5 MSF of occupancy growth. Over the three-year span of 2004-2006, occupancy growth was 17.7 MSF. Putting this growth into perspective, the previous three-year span, 2001-2003, saw an occupancy growth of 7.1 MSF.

This explosion in growth is directly attributable to Central Indiana’s emergence as a major distribution hub. From 2001 through 2003, distribution space (modern bulk, traditional bulk, and medium distribution) accounted for 7.5 MSF of growth. That figure ballooned to 16.7 MSF from 2004 through 2006. The explanation lies in location. Seventy-five percent of the U.S. population lies within a one-day truck drive from the Indianapolis area, where four interstate highways converge – more than any other metropolitan area in the country.

This growth is causing developers to branch out to new locations, like Whitestown, Monrovia, and Greenwood.

But, manufacturing is thriving, too. Manufacturing is returning to Indiana spurred by massive investment from both within and abroad. According to the Indiana Manufacturer’s Association, 48,000 new jobs have returned to Indiana since 2003. More are projected with the signing of major deals by Honda in Greensburg, Toyota in Lafayette, and Nestle in Anderson.

Multi-tenant Office Market

“The Central Indiana office market appears poised and ready for an active 2007, “ stated Jeff Henry, managing principal of CTMT. “Overall, office vacancies have not been this low for a number of years, and speculative office development continues in the northern submarkets.”

Supporting his statement, the overall Indianapolis vacancy rate, at the end of 2006, remained at 16.6 percent (the same level as at the end of the third quarter). This rate is three-tenths of a percentage point lower than the 16.9 percent vacancy rate at the end of fourth quarter 2005.

Retail Market

The retail picture in Central Indiana becomes brighter as the number of jobs increase and gas prices drop, so consumers have more discretionary dollars to spend. Developers are building more retail sites closer to residential areas of large numbers of consumers and redeveloping shopping areas to be more aligned with the lifestyles of large numbers of consumers. It adds up to an expectation of increased retail sales in the future, and new retailers entering the Central Indiana marketplace.

As evidence of the redevelopment adapting to lifestyle, Simon Property Group is redeveloping Castleton and Greenwood malls to include lifestyle components. Ground-breaking for the 950,000-square-foot, open-air Hamilton Town Center has taken place, also.

Investment Market

“Investors continue to find core property types in the Indianapolis market providing desired returns as cap rates held steady throughout the last half of 2006,” explained Henry. “Indianapolis rental market fundamentals improved, and multi-family housing investors with an abundance of capital sought to purchase quality product in this area.”

The Indianapolis office investment market posted another record year in 2006 with a total of $403 million in transactions recorded. Sales of 30 office buildings took place, involving more than 4.79 million square feet of inventory. This action followed the largest year ever recorded for office sales: 2005 saw a volume of nearly $775 million.

Investment in industrial properties was very strong. The 27 transactions, which totaled more than 9.3 million square feet, involved a number of buildings because many consisted of portfolios containing many different properties.

High-quality, well-leased industrial product continues to garner cap rates in the high 6 to low 7 range, and the price per square foot has risen to the $45-$50 range.

The retail investment market was very active with seven major transactions covering more than 573,000 square feet of multi-tenant, retail shopping center space. Clearly, 2006 had a good number of deals compared to the past few years, but the overall square footage has been less than the average for many of those same periods. The majority of retail investment sales in the Indianapolis market continue to be shadow-anchored strips, neighborhood centers, and single-tenant triple-net retail assets.

Land Market

The slowdown in single-family residential developments was offset by increased activity for industrial, retail, office, and medical land.

The year saw several new developments begin taking shape, like the new retail corridor on North Michigan Road and the commercial corridor on 146th Street, plus the first major speculative office development in years take place along the North Meridian office corridor.

Three corridors where major developments that began in 2006 and will blossom in 2007 include:146th Street corridor in Hamilton County, the I-65 corridor in Boone County, and the State Road 39 corridor in Hendricks County.

Additionally, multi-family projects increased, including plans for an apartment and retail complex along the canal in downtown Indianapolis.

Residential Market

While the rest of the nation was reeling from a fast-cooling housing market in 2006, Central Indiana held its ground. In fact, the Indianapolis area experienced its second-best year in real estate history, with projected home sales down a mere 1.9 percent compared with 2005’s record-setting year. Other highlights for the 2006 residential real estate market include:

Average sales prices in the nine-county region also defied the odds, increasing nearly 1 percent in 2006 to an average of $156,612.
There were 30,449 homes sold in 2006, compared with 31,032 in 2005.

The relatively low 30-year fixed mortgage rates in 2006 helped to keep the overall Central Indiana real estate market healthy. Rates in the 6 percent range kept buyers in the market despite the increased inventory of available homes for sale.

“What 2006 illustrated is that Central Indiana continues to be impervious to ‘bubble’ markets,” said H. James Litten, president of F.C. Tucker Company’s Residential Real Estate Services Division. “Since we did not experience the major upswings that were felt on the coasts and in other hot markets, such as Las Vegas and Phoenix, we also did not experience the downfalls.”

The local residential real estate market was not without its challenges in 2006, Litten added. Unlike 2005’s balanced housing inventory, this year shifted to a buyers’ market.

“Fortunately, we should see inventory begin to level off this year,” Litten said.

Thursday’s Speakers

For Thursday’s The State of Real Estate® program, CTMT specialists in industrial, investment, office, land, and retail plus a residential REALTOR® from F.C. Tucker Company will recap Year 2006 and present projections for the future of Central Indiana real estate.

Participants in this year’s The State of Real Estate® include:

· Host: Jeffrey L. Henry, SIOR, managing principal of CTMT/Indianapolis.

· Master of ceremonies: Gerry A. Dick, president of Grow Indiana Media Ventures, LLC, creator and host of Inside INdiana Business with Gerry DickSM.

· Speaker on the industrial marketplace: Donald A. Treibic, SIOR, principal/senior vice president in the industrial services division of CTMT.

· Speakers on the investment marketplace:

Michael B. Drew, CCIM, senior vice president, Investment Services
Group;

John E. Huguenard, SIOR, CCIM, principal/senior vice president, Investment Services Group;

T. Scott Pollom, CCIM, principal/senior vice president, investment services division of CTMT;

Rebecca L. Wells, CCIM, vice president, Investment Services Group;

Angela J. Wethington, JD, vice president, investment services division of CTMT.

· Speaker on the office marketplace: David A. Moore, SIOR, CCIM, principal/vice president in the office services division of CTMT.

· Speaker on land activities: G. Raymond Simons, III, senior associate in CTMT’s land services.

· Speaker on the residential marketplace: Patricia Torr, GRI, with F.C. Tucker Company, Inc.

· Speaker on the retail marketplace: William S. French, principal/vice president in the retail services division of CTMT.

· Speakers on the statewide perspective:

Steve Allen, GRI, F. C. Tucker, Shelbyville;

Douglas B. Anderson, CLS, F. C. Tucker, Lafayette;

Ken M. Newcomb, Jr., President, F. C. Tucker Commercial, Evansville.

One of the nation’s largest full-service commercial real estate firms and an affiliate of Colliers International, Colliers Turley Martin Tucker (CTMT) handles more than $4 billion in annual real estate transactions and manages more than 140 million square feet of industrial, office, multi-family and retail space. CTMT has approximately 1,050 associates of which 455 are licensed real estate professionals throughout its regional offices in Cincinnati, Columbus and Dayton, OH: Indianapolis, IN; Kansas City, MO; Minneapolis/St. Paul, MN; Nashville, TN and St. Louis, MO.

CTMT’s Corporate Solutions division transacts, leases or administers the portfolios of more than 22,000 locations totaling 100 million square feet throughout the United States, the United Kingdom and Canada.

CTMT is also an owner/shareholder of Colliers International, the largest real estate federation in the world, with more than 248 offices in 51 countries on six continents.

For more information about Colliers Turley Martin Tucker and the 2007 Market Report, visit www.ctmt.com.

Source: Colliers Turley Martin Tucker