DTZ: Millennials Driving Urban Growth

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A managing director at DTZ says the growing desire of young professionals to live in urban areas is helping fuel a rebound in multiple commercial real estate sectors. Jon Owens was one of the presenters at Wednesday's annual DTZ State of Real Estate event in Indianapolis. He says Millennials moving to downtown Indianapolis will ultimately attract more employers, retailers and multi-family housing. Owens cites Cummins Inc.'s (NYSE: CMI) $30 million Indianapolis headquarters as a catalyst that will spark growth. He says city leaders can encourage and capitalize on that growth by increasing public transit options and upgrading the area's "aging inventory."

March 4, 2015

News Release

Indianapolis, Ind. -- DTZ, a global leader in commercial real estate services, held its annual The State of Real Estate Indianapolis event today at the Murat Theatre at Old National Centre in Indianapolis.

This widely recognized real estate event has grown to include 1,200 of the industry and business community’s top executives. Attendees heard from DTZ’s experts about new perspectives, trends and forecasts for the broader economy and the Indianapolis office, industrial, multi-family and retail sectors as well as the capital markets sectors.

DTZ Managing Principal Jeffrey L. Henry, SIOR, hosted the event, and Gerry Dick, anchor and creator of Inside INdiana Business, Indiana’s only statewide business television program, as well as president and managing editor of Grow INdiana Media Ventures, LLC, served as master of ceremonies.

Program highlights from The State of Real Estate 2015 program, “Outlook 2020: A World of Opportunity,” included:

Office Market

With the improving economy, competition among businesses to attract and retain the best talent, particularly millennials, is fierce. Employers have figured out that human capital is the means to business success, and tied that to research that shows happy, healthy and engaged employees produce more and cost less. According to Managing Director Jon R. Owens, SIOR, this is all leading to a renaissance in office design that creates a more interactive and collaborative business environment.

As new office designs that appeal to the younger workforce become more prevalent, employers will follow and push occupancy of office space in Indianapolis to new levels.

Industrial Market

According to Senior Vice President Bryan W. Poynter, SIOR, CCIM, Indianapolis is one of the most sought after industrial markets in the country. As a distribution and logistics hub, landscape changing developments are emerging; speculative construction is being planned and built at a record pace; and the market has reacted to the need for medium-distribution speculative space with recent construction. But maintaining Indiana’s existing infrastructure is paramount to maintaining its position as the Crossroads of America.

Multi-family Market

The rebounding job market has spurred millennial’s interest in renting a home rather than home ownership. More than 8 million millennials are expected to move into new homes in the next four years, and most will be renters. In addition, 10,000 baby boomers will retire each year for the next 19 years. This mix of Millennials and retiring Baby Boomers is driving demand for new construction with high-end amenities in downtown Indianapolis and the far north suburbs, according to Senior Vice President Scott Pollom, CCIM. Rents are on the rise, and 4,000 new units will be developed this year. Renters, developers and investors all have a keen interest in the Indianapolis multi-family market, which will drive a frenetic pace in 2015.

Retail Market

The retail market as a whole is shifting to make shopping experiences more experiential. This is driven by the recovering economy and the influence of millennials and their shopping demands and interests.

Retailers are moving away from the one-dimensional shopping experience and toward multi-platforms to make the experience more enjoyable for their consumers. According to Senior Vice President Jacqueline Haynes, CCIM, this is occurring at high-end luxury malls in the Indianapolis retail market featuring experiential retailers like Tesla, Apple and Microsoft. Such retailers are often tech driven and/or interactive.

Also, The Kroger Co. is rolling out five Indiana Marketplace stores of 100,000 to 125,000 square feet each, compared to its usual footprint of 50,000 square feet. Creating a bigger shopping experience, these stores include a variety of experiential amenities such as an artisanal cheese shop featuring an expert to offer recommendations and samples, wine tasting events, cooking classes, a jewelry store, Starbucks, clothing department, etc.

Capital Markets

Indianapolis registered nearly $600 million in office investment sales during 2014, ranking 36th amongst U.S. markets and continuing a five-year trend as a Top 40 U.S. office investment market. The city also ranks as a Top 25 industrial market, executing more than $650 million industrial investment transactions in 2014. According to Senior Managing Director Jeff Castell, SIOR, CCIM, investors seeking yield will continue non-core and secondary market industrial acquisitions, and broadened parameters will include value add and even development deals. Debt capital is readily available, and competition will test underwriting discipline with higher valuations and greater leverage. All of this translates to the continued trend of abundant equity and debt sources contributing to rising prices.

Retail investments outperformed the S&P last year, generating strong returns for investors. REITS and Institutional investors are raising funds to buy large pools of property as they balance their portfolios to reduce risk and increase returns. With demand for A+ assets stronger than ever, compressing CAP rates, and large investor pools, the playing field has become very competitive. Many private investors are turning towards value add and redevelopment acquisitions, increasing their future value by leasing to high-volume retailers.

About DTZ

DTZ is a global leader in commercial real estate services providing occupiers, tenants and investors around the world with a full spectrum of property solutions. Our core capabilities include agency leasing, tenant representation, corporate and global occupier services, property management, facilities management, facilities services, capital markets, investment and asset management, valuation, building consultancy, research, consulting, and project and development management. DTZ manages 3.3 billion square feet and $63 billion in transaction volume globally on behalf of institutional, corporate, government and private clients. Our more than 28,000 employees operate across more than 260 offices in more than 50 countries and proudly represent DTZ’s culture of excellence, client advocacy, integrity and collaboration. For further information, visit: www.dtz.com or follow us on Twitter @DTZ.

Source: DTZ