The U.S. economy and Indianapolis office market are both flashing mixed signals midway through 2022. Inflation reached a 41-year high of 9.1% in June, reducing consumer purchasing power while driving negative sentiment. Against this backdrop, the Federal Reserve is on track for back-to-back rate hikes of 75 bps to temper demand. The job market is very tight, but the anticipated economic slowdown is triggering fears of a recession. Despite macro-economic concerns, the local office market experienced a strong quarter, indicated by an increased level of new leasing activity, positive direct net absorption and the largest quarterly decrease in vacancy since 2016. Still, sublease availability continues to grow, rental rates are flat and large blocks of space will hit the market in 22Q3.
- New leasing activity back to pre-pandemic levels – up 53% YOY.
- Top-tier class A assets and new builds are performing the best.
- Overall asking rents grew by 0.8% YOY, following the national trend of rent stabilization.
- Positive YTD net absorption pushed vacancy down to 17.7%.
- Sublease availability increased for second consecutive quarter.