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HomeMy WebLinkAboutMarket AnalysisPage 1 9998 N Michigan Rd site analysis | Jan 2025 Jan 2025 9998 N Michigan Rd Market Analysis Page 2 9998 N Michigan Rd site analysis | Jan 2025 Carmel multifamily overview Industrial market overview 3 12 Table of contents Page 3 9998 N Michigan Rd site analysis | Jan 2025 Let’s examine multifamily trends in Carmel, IN Carmel multifamily overview Page 4 9998 N Michigan Rd site analysis | Jan 2025 0 2,000 4,000 6,000 8,000 10,000 12,000 2016 2017 2018 2019 2020 2021 2022 2023 2024 Existing inventory Deliveries Under construction Carmel multifamily inventory Carmel’s inventory has increased by 20.1% since 2020, with 1,840 units delivering over the last two years. Construction activity dropped substantially in 2024 with only 160 units (1.6% of existing inventory) set to deliver over the next 24 months. Source: AVANT by Avison Young, CoStar Page 5 9998 N Michigan Rd site analysis | Jan 2025 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Q1 2 0 1 6 Q3 2 0 1 6 Q1 2 0 1 7 Q3 2 0 1 7 Q1 2 0 1 8 Q3 2 0 1 8 Q1 2 0 1 9 Q3 2 0 1 9 Q1 2 0 2 0 Q3 2 0 2 0 Q1 2 0 2 1 Q3 2 0 2 1 Q1 2 0 2 2 Q3 2 0 2 2 Q1 2 0 2 3 Q3 2 0 2 3 Q1 2 0 2 4 Q3 2 0 2 4 Total occupied units Carmel multifamily occupied units Carmel’s multifamily occupancy has reached 8,770 units with the total number of occupied units increasing by 22.0% since 2019, slightly higher than total inventory growth at 20.1%. In 2024, Carmel’s multifamily absorption reached 679 units. Source: AVANT by Avison Young, CoStar Page 6 9998 N Michigan Rd site analysis | Jan 2025 93.0% 98.0% 93.0% 70% 75% 80% 85% 90% 95% 100% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 Q4 2 0 1 9 Q1 2 0 2 0 Q2 2 0 2 0 Q3 2 0 2 0 Q4 2 0 2 0 Q1 2 0 2 1 Q2 2 0 2 1 Q3 2 0 2 1 Q4 2 0 2 1 Q1 2 0 2 2 Q2 2 0 2 2 Q3 2 0 2 2 Q4 2 0 2 2 Q1 2 0 2 3 Q2 2 0 2 3 Q3 2 0 2 3 Q4 2 0 2 3 Q1 2 0 2 4 Q2 2 0 2 4 Q3 2 0 2 4 Q4 2 0 2 4 Effective rents per unit Stablalized occupancy Carmel multifamily rents & occupancy Despite the surge in new deliveries, occupancy rates continue to hover at pre- pandemic levels, signalling continued strong demand for multifamily product across the Carmel market. Meanwhile rent growth has slowed due to the increase in new deliveries with rents hovering at 2022 levels, when rates last surged. Source: AVANT by Avison Young, CoStar, RealPage Page 7 9998 N Michigan Rd site analysis | Jan 2025 91.7% 94.3% 94.3% 98.2% 93.6% 92.8% $1,736 $1,605 $1,421 $1,766 $1,415 $1,234 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 $1,900 60% 65% 70% 75% 80% 85% 90% 95% 100% 105% Occupancy Effective rent per unit per month Carmel multifamily performance by class Carmel’s multifamily inventory is fully occupied within the Class B & C sectors, while Class A rates still hover above 90% despite elevated construction activity. Meanwhile, multifamily assets within a 1-mile radius of the site are fully occupied and commanding higher rents than Class A assets in Carmel. A sign of strong demand for housing in the area.Notes: Class A occupancy excludes assets built in last 12 months which typically deliver fully vacant; Building classifications are as follows: Class A: units delivering after 2010 Class B: built between 1990-2009 Class C: Built before 1990 Source: AVANT by Avison Young, CoStar Page 8 9998 N Michigan Rd site analysis | Jan 2025 $126,000 $118,000 $109,000 60.1% 62.7% 50.1% 0% 10% 20% 30% 40% 50% 60% 70% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 The Residence at Playfair The Kent at Carmel City Center Aria (located in Zionsville) Avg. HH income Bachelor's degree or higher Demographics for residents in newly delivered assets Residents at newly delivered multifamily assets tend to have an average household income of $100,000+ and are highly educated. Notes: Demographics presented are extrapolated utilizing cell phone data from visitors to the listed properties Source: AVANT by Avison Young, Placer.ai Page 9 9998 N Michigan Rd site analysis | Jan 2025 Located within 1-mile of site Visitation trends of residents at newly delivered multifamily assets Almost one-third of residents visited nearby retailers before coming home or after leaving home in 2024. Meanwhile, over half of residents visited Target 5+ times in 2024, offering an example of how multifamily can drive nearby retail sales activity. Notes: Data presented is extrapolated utilizing cell phone data from visitors to the listed properties Source: AVANT by Avison Young, Placer.ai 12.7% 21.9% 47.4% 27.1%29.4% 33.1% 52.3%52.1% 64.9% 0% 10% 20% 30% 40% 50% 60% 70% The Residence at Playfair The Kent at Carmel City Center Aria % visiting retail before going home % visiting retail after leaving home % visiting Target 5+ times in 2024 Page 10 9998 N Michigan Rd site analysis | Jan 2025 51.2% 48.4% 35% 37% 39% 41% 43% 45% 47% 49% 51% 53% A neighborhood with a mix of different kinds of housing where you can walk to stores and restaurants A neighborhood with single-family homes only where you have to drive to stores and restaurants Preferred community types: Hamilton County Over half of respondents in a preference survey prefer walkable, urban neighborhoods, a solution proposed for the future multifamily site. Source: AVANT by Avison Young, MPO, MIBOR Page 11 9998 N Michigan Rd site analysis | Jan 2025 Let’s examine industrial trends surrounding 9998 N Michigan Road Industrial market overview Page 12 9998 N Michigan Rd site analysis | Jan 2025 0.0msf 50.0msf 100.0msf 150.0msf 200.0msf 250.0msf 300.0msf 350.0msf 400.0msf 2016 2017 2018 2019 2020 2021 2022 2023 2024 Mi l l i o n s 20k - 99k 100k - 249k 250k - 499k 500k + Indianapolis industrial inventory Indianapolis’ industrial inventory shifts from 56.7% of total inventory being +250k sf buildings to 65.3% in just 8 years. Construction activity dropped substantially in 2023 and 2024 from a pipeline record 25.2 msf in 2022 to just 4.6 msf to close 2024. Source: AVANT by Avison Young, CoStar *Building sizes 20,000 sf+ Building sizes Page 13 9998 N Michigan Rd site analysis | Jan 2025 Indianapolis industrial vacancy As more buildings delivered within Indianapolis, particularly focused on the +250k sf range, and demand began to slow down due to rising costs of borrowing and worsening economic conditions, drastic jumps in vacancy have been experienced as speculative construction delivered empty. Rising costs of construction, coupled with aggressive Federal Reserve Effective Funds policy has limited the number of new groundbreakings, however large buildings remain vacant, surging vacancy rates in the market. Source: AVANT by Avison Young, CoStar *Building sizes 20,000 sf+ 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20 0 8 Q 4 20 1 2 Q 4 20 1 6 Q 1 20 1 7 Q 1 20 1 8 Q 1 20 1 9 Q 1 20 2 0 Q 1 20 2 1 Q 1 20 2 2 Q 1 20 2 3 Q 1 20 2 4 Q 1 20.0 - 99.9k 100.0 - 249.9k 250.0 - 499.9k 500.0k+Building sizes 20 2 4 Q 4 Page 14 9998 N Michigan Rd site analysis | Jan 2025 0.0msf 20.0msf 40.0msf 60.0msf 80.0msf 100.0msf 120.0msf Southwest East Northwest CBD South Southeast West Northeast North Mi l l i o n s 20k - 99k 100k - 249k 250k - 499k 500k + Indianapolis industrial inventory by submarket Carmel is located within the North submarket, the smallest industrial submarket by inventory in Indianapolis. The majority of the North submarkets inventory falls under 100k sf, making development in this size range difficult as existing product can outcompete on rental rates demanded due to likely being pre- COVID lower construction costs. Additionally, the North submarket is well located near two of Indianapolis’ largest submarkets, the Southwest and Northwest markets, limiting demanded rent rates as users have several options within a 30-minute drive-time. Source: AVANT by Avison Young, CoStar *Building sizes 20,000 sf+ Building sizes Page 15 9998 N Michigan Rd site analysis | Jan 2025 Submarket vacancy & availability comparison –2019 through 2024 Drastic increases in vacancy and availability over past five years are largely affecting larger building sizes as speculative buildings that delivered since 2023 are struggling to attract activity. A major advantage for the Northwest submarket in terms of limiting large jumps in vacancy and availability has been the diversity of building sizes, ages, and classes the submarket offers to users. The North submarket has experienced a decrease in vacancy since 2019, however availability is creeping up, meaning leased space is being put up for sublease. Source: AVANT by Avison Young, CoStar *Building sizes 20,000 sf+ 0% 5% 10% 15% 20% 25% 30% 35% 40% Va c a n c y 20 1 9 Q 4 Va c a n c y 20 2 4 Q 4 Av a i l a b i t y 20 1 9 Q 4 Av a i l a b i t y 20 2 4 Q 4 Va c a n c y 20 1 9 Q 4 Va c a n c y 20 2 4 Q 4 Av a i l a b i t y 20 1 9 Q 4 Av a i l a b i t y 20 2 4 Q 4 Va c a n c y 20 1 9 Q 4 Va c a n c y 20 2 4 Q 4 Av a i l a b i t y 20 1 9 Q 4 Av a i l a b i t y 20 2 4 Q 4 20.0 - 99.9k 100.0 - 249.9k 250.0 - 499.9k 500.0k+Building sizes North Northwest Southwest Page 16 9998 N Michigan Rd site analysis | Jan 2025 0.0msf 50.0msf 100.0msf 150.0msf 200.0msf 250.0msf 300.0msf 350.0msf 400.0msf 2016 2017 2018 2019 2020 2021 2022 2023 2024 Mi l l i o n s Existing inventory Deliveries Under construction Indianapolis industrial inventory Indianapolis’ industrial inventory has increased by 26.4% since 2019, making it one of the fastest growing industrial inventories in the country. Construction activity dropped substantially in 2023 and 2024 from a pipeline record 25.2 msf in 2022 to just 4.6 msf to close 2024 as delivered supply has far exceeded user demand. Source: AVANT by Avison Young, CoStar *Building sizes 20,000 sf+ Page 17 9998 N Michigan Rd site analysis | Jan 2025 Construction costs mount, increasing developer break-even rents needed As landlords and developers consider demising down large vacant blocks of +250k sf buildings to target a more active occupier requirement size range, competition for smaller yet-to-be developed buildings will hinder elevated rents needed to justify surging construction costs. Currently in the Carmel area, the average total cost of construction without land or demolition is roughly $100- $150/psf for buildings between 20-65k sf (higher costs associated with lower scalability on build-out). For a modest return for a developer, a NNN rental rate approaching $20- $25/psf would be necessary, far exceeding current options within a 20-minute drivetime of Carmel. 190.1 176.1 194.6 192.8 100.0 130.0 160.0 190.0 220.0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2024 Cost of construction materials New industrial building construction 2015-2019 Avg. Cost of construction materials (index 100 = 07/2007) Source: AVANT by Avison Young, Federal Reserve Bank of St. Louis Page 18 9998 N Michigan Rd site analysis | Jan 2025 $6.26 $10.92 $0 $2 $4 $6 $8 $10 $12 Q4 2 0 1 9 Q1 2 0 2 0 Q2 2 0 2 0 Q3 2 0 2 0 Q4 2 0 2 0 Q1 2 0 2 1 Q2 2 0 2 1 Q3 2 0 2 1 Q4 2 0 2 1 Q1 2 0 2 2 Q2 2 0 2 2 Q3 2 0 2 2 Q4 2 0 2 2 Q1 2 0 2 3 Q2 2 0 2 3 Q3 2 0 2 3 Q4 2 0 2 3 Q1 2 0 2 4 Q2 2 0 2 4 Q3 2 0 2 4 Q4 2 0 2 4 Indianapolis NNN Rental Rates $/psf 20.0-99.9k sf NNN Rental Rates $/psf Industrial rental rates plateau Despite robust rental growth since 2019, rates have effectively stopped growing for much of the Indianapolis industrial market. The smaller 20.0-99.9k sf building size range continues to accelerate, however it remains well below the cost of replacement needed to justify new development. Source: AVANT by Avison Young, CoStar Page 19 9998 N Michigan Rd site analysis | Jan 2025 Indianapolis industrial inventory clustering heatmap The site on Michigan Road is situated in close proximity to several major Indianapolis industrial inventory clusters, including the building diversity (in age, size, vintage, etc.) of Park 100, the modern bulk Whitestown cluster, and the equidistant Airport and Lebanon clusters. This close proximity allows for the industrial workforce of these clusters limit their time on the road getting to work, while giving them the ability to call Carmel/Zionsville home. Source: AVANT by Avison Young Page 20 9998 N Michigan Rd site analysis | Jan 2025 One of top congested roadways in Indianapolis A very large deterrent for any industrial users considering the location on Michigan Road is the fact that the site is surrounded by high-traffic retail locations, and the only transportation routes for truck fleets are on some of the most congested areas of the Indianapolis MSA. Additionally, Industrial parks within a short drive-time west or north of the Michigan Road location alleviate hours of idol time for user fleets. Source: AVANT by Avison Young, Placer.ai Page 21 9998 N Michigan Rd site analysis | Jan 2025 For more market insights and information visit avisonyoung.com © 2025 Avison Young. All rights reserved.E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.