Surge of New Construction Increasing Tenant Options
The U.S. economy displayed mixed signals throughout 2022. Near-record job growth caused the unemployment rate to end the year at 3.5%, matching a five-decade low. The annual inflation rate hit a 41-year high in June but was followed by six month of deceleration. This caused the Federal Reserve to ease up from consecutive 75 bps monthly interest rate hikes, while leading economic indices point to a possible recession in 2023. Despite this uncertainty, consumer confidence hit its highest level in December since last spring, and the Indianapolis industrial market hit new heights. Record new leasing activity grew 13.9% and led to net absorption of 17.5 MSF. While the 21.2 MSF of new speculative deliveries caused vacancy to rise, the 5.4% direct vacancy rate remains below the 10-year average.
- Strong tenant demand for Indianapolis industrial product led to a fourth consecutive year of record-high new leasing activity.
- Average asking rental rates grew by 14.2% to $5.31 triple net.
- Indianapolis ranks as a top ten market nationwide for growth, absorption and overall construction levels.
- A surplus of speculative construction was completed, pushing the vacancy rate up to 5.4%, its highest point since 21Q2.