Online retail sales are driving a boom in the Indianapolis industrial real estate market. Quality warehouse space is crucial for companies involved in e-commerce. Higher sales prices and rents are leading to increased tax assessments and taxes for industrial properties.
Location, Location, Location
The central location of Indianapolis, and the fact that it is a major FedEx hub, has helped spur industrial growth.
There have been four significant e-commerce developments in the past two years, including:
Newegg's 412,000 sf fulfillment center
Solutions 2 Go's 191,000 sf building
Walmart.com's move to a 1.15 million sf building in the suburb of Plainfield
Ozburn-Hassey Logistics' 450,000 sf facility In Plainfield
Since 2013, 15% of the industrial square footage leased in metro Indianapolis has been related to e-commerce. Indianapolis now ranks eighth among all U.S. industrial markets in terms of total net absorption, according to Cushman & Wakefield. In the second quarter of 2015, net absorption for modern bulk warehouse space totaled 1.6 million sf, more than any other industrial segment in the market.
Indianapolis had 9 million sf of warehouse space for retail fulfillment under construction at the end of last year. Approximately 4 million sf was build-to-suit and fully absorbed. The remaining 5 million sf of speculative warehouse space was partially absorbed. This means there are still many options available to immediately accommodate new e-commerce companies.
As online consumer spending continues to increase and the need grows for suitable e-commerce facilities, property tax assessments will keep going up. This was evidenced with recently issued assessments in suburban Hendricks County where warehouse values increased by 20% to 30%. It will be up to owners to proactively manage their tax expense to protect their bottom line.