HomeMy WebLinkAboutCarmel Position Exec SummaryCARMEL POSITION STRATEGY
EXECUTIVE SUMMARY
FALL 2023
Carmel Position Strategy | 1
Executive Summary
After weathering the economic storms of recent years,
Carmel now faces a new set of challenges within its
housing and commercial real estate markets. As office
work evolves beyond pre-pandemic models, Carmel
needs to support dynamic, flexible development that
caters to the new work-live-play lifestyle that top-
quality employers seek out. Housing typologies are
also expanding to meet new expectations for housing
options like apartments and townhomes in mixed-use,
walkable districts.
The purpose of this report is to identify national,
regional, and local economic trends to better
understand Carmel’s position within the region.
This baseline understanding is vital to develop
strategies that stimulate economic growth and bolster
competitiveness, while also enhancing the overall
well-being for Carmel’s residents.
As Carmel continues to think through ways to
support its existing office market, this report provides
recommendations for the strategies and actions that
the City can take to adapt to changing trends, as well
as case studies for how property owners and cities
have found creative ways to convert older development
models into attractive, dynamic environments.
Carmel’s Subareas
Carmel today is home to strong mixed-use subareas
like the Rangeline Corridor, which for the purposes
of this study encompasses an area centered around
development on Rangeline Road and includes roughly
the half-mile radius around it. Other subareas
including the half-mile radiuses around N Meridian
Street (US-31) and E 96th Street, as well as the newly
added Home Place neighborhood, offer potential
for new types of in-demand development including
walkable mixed-use districts, multifamily buildings,
and “missing middle” housing.
The map at top right shows these subareas as
they were considered for this study, which avoids
overlapping boundaries with other areas around major
corridors (or in the case of Home Place, specific area
boundaries). These areas also include some overlap
with surrounding jurisdictions of Indianapolis and
Westfield to capture market trends in these areas.
Carmel Subareas
Office Vacancy Rate, Carmel Subareas and
Downtown Indianapolis, 2019 to 2023 YTD
Source: CoStar
US-31 Corridor Downtown Indianapolis Rangeline Corridor*
*As the “Carmel Subareas” map shows, “Rangeline Corridor” is a broad subarea
term, and does not just refer to development directly on Rangeline Road.
Source: ECOnorthwest
2 | ECOnorthwest
What has changed
in Carmel and the
region?
Downtown Indianapolis faces competition
from mixed-use suburban districts.
Carmel is leading the region as a major attractor
for new residents and employers alike. The city is
experiencing demographic shifts, with an increasing
number of millennials and empty nesters seeking
urban style living with walkable and bikeable access to
amenities. Mixed-use districts cater to this demand by
offering a blend of housing, retail, and entertainment
options in close proximity.
The transition to remote work, triggered by the
COVID-19 pandemic, has lasted, with several employers
now allowing flexible work environments such as
hybrid-work and/or remote work for employees. Mixed-
use districts provide an opportunity for residents to
live closer to work and reduce commute times, while
employers seek out amenity-rich office spaces to
entice employees back to the office. These new office
spaces are often newer and located in mixed-use
districts where retail, restaurants, and entertainment
are all within the same block.
This demographic change and office landscape shift
can be seen in several market indicators and more
pronounced higher office and multifamily lease rates
seen in the Rangeline Corridor compared to downtown
Indianapolis. Demand is still high for mixed-use
districts such as Rangeline, where vacancy rates for
office and multifamily are below 5 percent, whereas
Downtown Indianapolis is at 6 percent and above.
The Rangeline Corridor is well positioned
to be a leading, mixed-use district.
The Rangeline Corridor has been a catalyst for
major redevelopment projects that include mixed-
use buildings, multifamily housing, office, retail,
and entertainment. Along with these wide range of
development types, there are also dedicated public
spaces, walkable streets, and a rails-to-trails multiuse
path. This was the result of active public involvement
Monon Greenway, 2007 vs. 2018
Source: Google Street View
Before
After
Summary of Carmel’s Current Commercial Real
Estate Market, 2023 YTD
Source: CoStar
10
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Carmel Position Strategy | 3
to transform a former industrial corridor into a premier
walkable district with all the amenities that residents
and employers are looking for.
The momentum that the Rangeline Corridor now has
will continue to attract a wide range of development
types, including commercial and residential projects.
With higher office and multifamily lease rates and
lower vacancy compared to competing areas like
US-31, the Rangeline Corridor has emerged as a
premier district ripe for additional development
and investment. That growth will likely expand and
integrate with surrounding blocks, connecting other
areas to this amenity-rich thoroughfare.
Leverage infrastructure funding for a more
compact and walkable future.
While developers have become experts in assembling
a complex mix of funding sources, capital markets
are making it even more difficult to have a project
demonstrate financial viability. Many projects are
struggling to progress due to insufficient funding.
One tool that will continue to prove vital with certain
projects is tax increment financing (TIF). Along with
site accumulation and disposition, TIF was a key
ingredient in developing these walkable, amenity-rich
areas by supporting public space improvements and
structured parking.
Looking ahead, incentives like TIF should be
considered in the context of broader financing
constraints, but where possible, continue to encourage
compact growth, complete streets, and inclusive
communities.
Auto-oriented corridors must adapt to
stay competitive.
Traditional suburban commercial shopping centers
and office plazas have become more outdated and
appear to be losing the demand they once had. As
more businesses and households seek more compact
and walkable neighborhoods, it is essential for
these traditional auto-oriented corridors to adapt to
changing trends.
Infill development is one way to build complementary
growth through vertical and horizontal mixed-use
development. Through a strategic integration of
residential, commercial, and recreational elements,
the City can support retrofitting these areas to better
develop a sense of community by adding amenities to
draw both residents and businesses.
Rangeline Corridor
Source: ECOnorthwest
New Development Permits, 2021-2023
High
Low
Source: ECOnorthwest
4 | ECOnorthwest
How can Carmel adapt to meet its goals?
STRATEGY 1
Integrate Rangeline
with Surrounding Areas
Carmel can strategically extend the thriving
Rangeline area, promoting integration with adjacent
neighborhoods and fostering future mixed-use
hubs. This approach benefits both the Rangeline
area and surrounding neighborhoods by enhancing
accessibility to resources, trails, dining options, and
workspaces along the Monon Greenway.
Action 1: Address zoning barriers for mixed-use
development.
Consider amendments to zoning around US-31
to support mixed-use redevelopment. The report
identified the following adjustments to consider:
• Create flexibility for setbacks and height
requirements in the Meridian Corridor that align
with more pedestrian-orientated uses.
• Provide flexibility in ground floor requirements and
uses to allow for scaled redevelopment, particularly
for large-floorplate commercial buildings.
• Add flexibility in existing mixed-use districts
for both vertical and horizontal mixed-use
development with different configurations of
residential units.
Action 2: Support the integration of bike and
pedestrian infrastructure to promote a more
walkable environment.
The following considerations have potential to
enhance connectivity between various areas of the
city and enhance the pedestrian realm.
• Prioritize bike and pedestrian trail network
connections from the Rangeline corridor to
surrounding neighborhoods and the Monon
Greenway along 106th St, Carmel Dr., and 116th St.
• Enhance trail access points to the Monon
Greenway and add amenities such as bike parking,
wayfinding, and good lighting.
• Work with developers to incentivize building
part of the pedestrian infrastructure and develop
district-level wayfinding and streetscape plans
to build on requirements and develop a stronger
sense of place.
• Convert underutilized right-of-way or vacant spaces
to parks and greenways near the bicycle and
pedestrian network.
• Develop district-level wayfinding and streetscape
plans to build on pedestrian requirements and
develop a more integrated connectivity network.
• Leverage private investment in public space to
accomplish connectivity goals related to city assets.
Monon Greenway
Source: ECOnorthwest
Source: ECOnorthwest
Carmel Position Strategy | 5
STRATEGY 2
Support phased
redevelopment on large
office sites
Currently, there is a chance to engage in infill
development that prioritizes amenities and to
strategically redevelop underutilized spaces,
thereby enhancing the appeal of office buildings for
both tenants and residents, as well as improving
conditions for employees.
Action 3: Develop a parking strategy.
Creating a focused parking strategy can yield
numerous advantages by optimizing land use
to foster livelier, sustainable, and cost-efficient
communities.
• Encourage shared parking solutions in auto-
oriented commercial corridors.
• Allow flexibility for parking requirements in mixed-
use redevelopment to meet market demand.
• Partner with developers to ensure user needs
are met, such as the City providing incentives to
support the viability of a development.
Action 4: Continue the City’s successful approach
of requiring shared public amenities in exchange
for incentives like TIF.
This action guarantees that public funds enhance
private investments, generate economic prospects,
and improve public spaces.
• Demonstrate the viability and successes of mixed-
use developments as great examples of office
repositioning to get financial support from lending
institutions .
• Communicate a comprehensive strategy around
infrastructure investments to support phased
redevelopment and use strategic infrastructure
investments as a catalyst for redevelopment.
• Look towards potential for investment around future
public space, workforce housing, or transit options.
STRATEGY 3
Keep Carmel an accessible
community for workers to
live in
Through careful planning and collaborative
partnerships, Carmel can cultivate inclusive
development and communities enriched with a
unique sense of identity by encouraging a broader
range of housing options for residents of all income
segments.
Action 5: Support office-to-residential conversion.
Carmel’s large inventory of C class office space
provides an opportunity to repurpose these buildings
for additional housing. The following considerations
can help with office-to-residential conversion.
• Highlight and market new opportunities of federal
funding for office-to-residential conversion to
property owners and investors.
• Support and remove barriers to tenant
improvements to upgrade lower class office to
premium spaces.
Action 6: Allow for middle housing in transitional
areas with development potential.
Opportunities exist to gradually add density in
existing areas of the city that can produce additional
housing units. The following considerations could
move the needle toward providing a variety of housing
options affordable to different income segments.
• Consider new options for ADUs by expanding
allowances for ADUs in single family zones as an
incremental approach to adding new residential units.
• Explore areas to expand middle housing allowances
near major corridors like US-31 or E 96th and
strategically upzoning areas near new mixed-use
developments.
Source: ECOnorthwest Source: ECOnorthwest
6 | ECOnorthwest
Moving Forward
As a nationally recognized community, Carmel
can utilize its resources to integrate mixed-use
development, enhance connectivity, and provide
attainable housing. By implementing the strategies
outlined here, Carmel can build on its reputation as
a leader in planning for the future needs of residents
and employers. With a bold vision and collaboration
with partners, the city can evolve its built environment
to equitably serve the community today and tomorrow.
The following case studies showcase examples of
recent office-to-residential conversions that could
help the City, office property owners, and investors
imagine what an office-to-residential conversion
could look like and the creative tools used to make
the conversion successful. The case studies provide
examples from Alexandria, VA; Charlotte, NC; Parkville,
MO; and Spokane, WA.
Midtown Plaza
Source: ECOnorthwest
Carmel Position Strategy | 7
Office Repositioning Case Studies
Project: Park + Ford
City: Alexandria, VA
Year Built/Converted: 1967/2021
Units Produced: 435
Building: 450,000 SF (across two roughly
equally sized 14-story buildings), with 90 x 180 ft.
rectangular floor plates
Vacancy: 38%
Conversion Cost Per Unit: $271,264
Park + Ford is located on the west side of Alexandria,
an inner ring suburb within the greater Washington
D.C. market. Alexandria is part of a well-connected
region, but the project site is located away from major
transit lines in a more auto-oriented area with easy
highway access and growing connectivity to regional
bike trails. Before conversion, it primarily hosted
federal agencies as tenants.
Project Description
In 2020, Lowe and USAA Real Estate began pursuing
residential conversion for the majority of two
buildings located near the interchange of I-395 and
King Street. In the wake of the COVID-19 pandemic, the
building saw rising vacancies in former office tenants.
The development team saw the opportunity to
reposition these properties into mixed-use residential
buildings, with a focus on attracting millennials
moving from the city to lower density suburbs with
easy access to highways.
The new units in Park + Ford offer apartment
residences larger than those which are typically
developed as new construction in the Washington
D.C market in order to utilize interior floor space. To be
attractive to young professionals, the building offers a
number of premium amenities and ground floor retail.
Additionally, the project transformed 10,000 square
feet of structured parking space into a daycare to add
value for young families.
Outcome
After occupancy, Park + Ford has exceeded its pro
forma expectations and saw a faster uptick in
occupancy than anticipated with remote workers
leaving the city during the pandemic.
Case Study 1
Attracting Millennials Leaving the City for the Inner Suburbs
Sources
Image: Bonstra | Haresign ARCHITECTS
https://www.bisnow.com/washington-dc/news/multifamily/
construction-begins-on-435-unit-office-to-residential-conversion-
in-alexandria-106567
https://www.businesswire.com/news/home/20220629005344/
en/Lowe-and-USAA-Real-Estate-Unveil-Park-Ford-Transformation-
of-1980s-Era-Office-Complex-Into-Modern-Apartments-in-
Alexandria-Virginia
https://www.nmhc.org/globalassets/research--insight/research-
reports/conversion/behind-the-facade_conversion-report.pdf
8 | ECOnorthwest
Project: Link Apartments
City: Charlotte, NC
Year Built/Converted: 2020
Units Produced: 553
Building: N/A
Vacancy: N/A
Total Cost Per Unit: $300,000 (approx.)
The Link Apartments are located in Charlotte, North
Carolina outside of the city’s central business district
(CBD). At the time of construction, the Little Sugar
Creek greenway had recently been extended to the
area (providing improved bike access) and another
new renovation project nearby created a new anchor
for dining and shopping within walking distance.
Project Description
In 2014, Grubb Properties purchased two old mid-
century office buildings located in a developing area
outside of Charlotte’s downtown area, including ten
acres total of the two buildings and their large surface
parking lots. In the following years, the developer first
renovated the outdated offices into premium Class
A spaces, and then repurposed the parking lots for
new construction multifamily housing. The process
involved rezoning the land for multifamily use and
making a number of public realm improvements to
sidewalks surrounding the buildings. The final project
includes a shared parking garage to serve both office
and residential tenants.
Outcome
According to Grubb Properties, the method of
converting suburban office parks has been beneficial
in this case and others, “By re-zoning the land for
multifamily use, we essentially got the land for free.
This is particularly powerful in urbanizing parts of
cities like this one where land is expensive. In these
areas, surface parking is a very poor use of that
precious “resource.”
Sources
Images: Grubb Properties
https://www.grubbproperties.com/blog/great-unpaving-transforming-
parking-lots-neighborhoods
https://www.fastcompany.com/90876627/how-parking-lots-across-
the-u-s-are-being-turned-into-housing
Case Study 2
Transforming Office Parking Lots to Multifamily Housing
Before
After
Carmel Position Strategy | 9
Project: Six at Park
City: Parkville, MO
Year Built/Converted: 2019/2020
Units Produced: 27
Building: 54,000 SF, (half MF, half office), 100 x
120 ft. rectangular floor plates
Vacancy: 40% pre-leased as prerequisite for
construction
Conversion Cost Per Unit: $66,667
Parkville, MO is an affluent Midwestern river town with
historic charm located approximately a 20-minute
drive to Kansas City. Like Carmel, the small city is
home to corporate headquarters and prior to the
COVID-19 pandemic had a higher rate of residents
commuting to and from Kansas City. Six at Park
is located along Missouri’s Route 9, a regional
connection to the CBD next to Park University.
Project Description
During construction which began in 2019, the Foutch
Brothers development team saw an opportunity early
in the onset of the COVID-19 pandemic to pivot to a
mixed-use office and residential building. Meeting the
growing wave of remote work, the developer switched
from an all-office plan to a split of half-office and half-
apartment early in 2020.
The development received support from the Parkville
Old Town Community Improvement District (CID) and
the City of Parkville for developing parking space to be
shared between office tenants, residents, and visitors
to Old Town.
Outcome
The project had a positive financing experience, with
the initial office loan able to cover apartments when
reassessed. Six at Park met pro forma expectations,
and although the target market was students
because of the building’s proximity to Park University,
it ultimately saw most units occupied by workers at
corporate offices in Parkville.
Sources
Image: NMHC
https://www.bizjournals.com/kansascity/news/2021/03/24/foutch-six-
at-park-parkville-apartment-conversion.html
https://www.nmhc.org/globalassets/research--insight/research-
reports/conversion/behind-the-facade_conversion-report.pdf
https://parkvillemo.gov/download/SixAtParkIndependentCost-
BenefitAnalysis.pdf
Case Study 3
Pivoting New Suburban Class A Office for Mixed-Use Development
10 | ECOnorthwest
Project: 508 West Apartments
City: Spokane, WA
Year Built/Converted: 1964/2022
Units Produced: 85
Building: 55,000 SF building + 14-story 43,000 SF
parking structure, rectangular 87-60 and 48x64
floor plates
Vacancy: 40-50%
Conversion Cost Per Unit: $176,000
The 508 West apartments are located in a CBD-
adjacent district in mid-sized city with a cluster of
medical and bioscience industry employers.
The building’s 14-level attached parking garage was
originally constructed with flat floors with relatively
small square footage, minimizing the need for
replacing entire floors and allowing for natural light to
reach into new units.
Project Description
Developer targeted new remote workers coming
into the market for its relative affordability and
concentration of medical professionals. This project
leveraged an underutilized existing parking garage by
converting it into residential units alongside the main
building’s renovation. To make the former garage
work for residential use, the developer took out every
other floor to create high-ceiling loft-style studio and
one-bedroom units. The final product is a mixed-use
residential building with ground floor commercial
(including a coffee shop, pharmacy, and hair salon).
Outcome
This project was a risky concept, which is not a typical
development in the Spokane market. The developer
obtained a loan from a local financier with interest in
the area who trusted Brumback/Squire’s track record
in the region. The building was also a long-term hold
which was seeing increasing vacancy and limited
potential to continue as single-use office.
Sources
Top Image: InLand Northwest Business Watch
Bottom Image: Google Streetview
https://www.spokesman.com/stories/2019/dec/20/downtown-
medical-office-building-garage-to-be-conv/
https://www.spokanejournal.com/local-news/brumback-to-convert-
qualmed-plaza-into-rental-units/
Case Study 4
Renovating Structured Parking to Meet Growing Housing Demand
Before
In progress