Cassidy Turley: Economy Continues Robust GrowthPosted: Updated:
The regional vice president of research at Cassidy Turley says strong economic growth fueled continued gains in the Indiana commercial real estate market in the third quarter. Jason Tolliver says growth is now “much less episodic and spread throughout the state.” He also says high quality job growth is supporting stronger spending. In an interview on Inside INdiana Business Television, Tolliver also says the retail market is on "the cusp of a breakout." October 31, 2014
Q3 2014 Report
INDIANAPOLIS, Ind. -- By most measures the economy is accelerating. Real GDP grew by a robust 4.6% in the second quarter as businesses restocked and our forecast calls for GDP to continue to track around 3.2%
with all of the components of GDP tracking at healthy rates.
This will translate into a solid backdrop for the office market, akin to what we have observed over the past year and actually stronger growth than what we observed during the last real estate boom.
A stronger economy is also evident in the employment numbers. A wide array of private industries is contributing to Indianapolis job growth.
Construction, leisure/hospitality and business and professional services are leading the way, while finance and manufacturing are also propelling employment gains.
Over the past year, Indiana’s unemployment rate has fallen by 170 basis points, which is one of the largest rates of decline in the U.S.
Over the same period, the jobless rate for the Indianapolis-Carmel MSA has continued to track lower than both the state and national averages and currently stands at 5.1% on a non-seasonally adjusted basis.
Middle- and higher-wage industries are seeing some of the strongest growth lately, a factor that had largely been missing throughout the entire post-recession recovery/expansion period.
We do anticipate that interest rates will rise as the Fed concludes quantitative easing in October but we do not expect to see a sudden spike in rates. In fact, it’s that geopolitical turmoil overseas may actually slow the pace of movement, but it would be prudent to anticipate operating in a higher interest rate environment.
The Indianapolis market registered 94,487 SF of net absorption during the third quarter thereby elevating net occupancy gains for the year to 238,918 SF. As a result, vacancy rates overall fell slightly and are currently tracking just under the historical average at 18.5%.
It is telling that we are now observing stronger demand across the quality spectrum, with all classes of space posting occupancy gains for the quarter and the year. This is indicative of a much healthier property market where tenant expansions and new leasing have grown sufficient to permeate all classes of space.
Growth for the year has been most in the Midtown and Northeast submarkets; however, seven of the 10 submarkets witnessed occupancy gains in the quarter and all saw underlying fundamentals improve. Notable leasing activity for the year has surpassed 1.6 MSF with over 400,000 SF occurring during the third quarter. Tenants responsible for the largest transactions in the quarter included National Government Services (186,000 SF in Castleton Park), Republic Airways (91,048 SF in College Park Plaza), Coordinated Care Corporation (48,062 SF in Landmark Center), ACS Human Services (40,204 SF at 4450 Victory Lane), Fuzion Analytics (27,296 SF in Northpoint Center) and Southern Wine & Spirits (25,201 SF in Keystone at the Crossing).
Source: Cassidy Turley