By Aspire Economic Development + Chamber Alliance
Central Indiana’s industrial real estate market has experienced notable shifts in 2023 marked by decreased demand and a surplus of available options. Michael Weishaar, vice chair of Industrial Brokerage Services, has witnessed the ups and downs of the local market during his 20-year tenure with Cushman & Wakefield and its predecessor companies.
“Demand has cooled off from record levels recorded in 2022, with year-to-date overall net absorption declining 39.8%, and year-to-date new leasing activity dropping 54.9% from 2022,” said Weishaar.
The primary factor contributing to this shift is the record amount of newly constructed industrial spaces over the past 18 months resulting in an oversupply. Weishaar pointed out that the market’s future vacancy levels depend on how quickly this surplus can be leased up.
“In many cases, leases are also taking longer to complete than in the past because the internal approval processes within corporate America have become more complex with greater scrutiny on the part of upper management,” he said.
Despite these challenges, Weishaar has seen a notable interest from new users exploring the Central Indiana market.
“It’s not all bad news, though. While demand is certainly less than it was a year ago, there does seem to be a fair number of new users exploring our market,” he said. “Many developers have turned their focus more toward build to suit pursuits rather than focusing on building speculative buildings as of late.”
When asked about the causes behind these trends, Weishaar cites multiple factors.
“Increased interest rates, users are still assessing what a post-pandemic inventory level looks like and general economic and political uncertainty have all contributed to these trends.”
The formula for successful industrial development in communities is consistent. Access to credit, stable political and economic institutions and efficient supply chains will make for steady industrial growth.
Weishaar noted what happens if these conditions conducive to growth shift the other way.
“When a developer struggles to obtain financing and therefore must hit the pause button or even call off a new development entirely, or a user seeks to reduce the size of its footprint due to a new post-pandemic supply chain strategy, or economic uncertainly causes a user to cancel plans for expansion, it negatively impacts new capital investment going into a community,” he said.
Weishaar sees strong potential for continued economic growth in Johnson County but warned of the negative effects of a slow down or halt in investment.
“Johnson County is in a prime location for industrial development opportunities with its proximity to Interstate I-65, a skilled labor force and communities rich in amenities, but if capital investment slows, this effects the future tax base and job growth in the community.”