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HomeMy WebLinkAboutMarket Analysis - Executive SummaryMarket Analysis | 9998 N Michigan Rd | Carmel, IN Summary of Findings January 2025 Market Analysis | Summary & Recommendations January 2025 Page 2 Contents Project Overview ........................................................................................................................................................... 3 Market Analysis Findings ............................................................................................................................................. 4 Avison Young Copyright © 2025. Avison Young. Information contained in this report was obtained from sources deemed reliable and, while thought to be correct, have not been verified. Avison Young does not guarantee the accuracy or completeness of the information presented, nor assumes any responsibility or liability for any errors or omission s therein. All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced, in part or in full, in any format, without the prior written consent of Avison Young. Project Overview Avison Young understands this report is intended to determine the feasibility of a future multifamily development at 9998 N Michigan Rd, Carmel, IN 46032, which is currently vacant. To do this, the Analysis examined multifamily and industrial trends within the city of Carmel and areas surrounding the subject site to determine which use is in highest demand and whether existing market conditions can support either use. To determine the feasibility of future multifamily, the Analysis examined the following historical trends: - Multifamily demand/supply performance assessment: o Change in demand/supply, occupancy, and effective rents - Indirect benefits associated with future multifamily development: o The Analysis examined visitation trends for residents at newly delivered multifamily assets to determine how future multifamily development can support/enhance nearby business activity To determine the site’s feasibility for industrial uses, the Analysis examined the following trends: - Industrial supply/demand assessment: o Assessment of nearby Industrial historical supply performance by size, year built, and other key building characteristics to determine the types of industrial development that are in demand - Land/development cost analysis to determine viability of future development at site: o This segment of the Analysis examined if construction costs could support the delivery of a competitive in-demand industrial product Avison Young Copyright © 2025. Avison Young. Information contained in this report was obtained from sources deemed reliable and, while thought to be correct, have not been verified. Avison Young does not guarantee the accuracy or completeness of the information presented, nor assumes any responsibility or liability for any errors or omission s therein. All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced, in part or in full, in any format, without the prior written consent of Avison Young. Market Analysis Findings Overall findings Carmel’s population is projected to increase by 11.0% between 2024 and 2030, with the addition of almost 12,000 new residents, which will result in additional multifamily demand. Meanwhile, existing market conditions demonstrate there is currently and projected to be strong demand to support the success of the site’s proposed multifamly development. Meanwhile, should the use at the site be geared towards industrial, asking rents for the project are estimated to be 30-40% above the highest asking rents in the Indianapolis region, therefore putting the site at a significant disadvantage from an industrial perspective, due to proximity to Park 100, the variety of space, vintage, and class options currently in the market, elevated congestion along primary corridors surrounding the site, as well as the increased costs of construction and demolition of the e xisting asset versus going a little further out and developing raw land. Multifamily overview Multifamily demand/supply performance assessment: The city of Carmel has experienced an increase in multifamily demand in recent years, particularly following the pandemic. Between 2019 and 2022, stabilized occupancy rates increased from 93.0% to 98.0% (full occupancy), which helped prompt increased development activity. Between 2019 and 2024, the multifamily supply increased by 20.1% following the delivery of almost 2,000 new units. Despite the uptick in deliveries, demand has continued to remain strong with stabilized occupancy remaining unchanged from 2019 levels, standing at 93.0% while Carmel’s multifamily occupancy has reached 8,770 units with the total number of occupied units increasing by 22.0% between 2019 and 2024. In 2024 alone, Carmel’s multifamily market absorbed 679 units, signalling a continued strong demand for multifamily housing. Meanwhile, multifamily performance near the site is showing signs of even more demand; occupancy rates within a one-mile radius of the site hover at 98.2%, while the average effective rents per unit per month near the site are similar to Class A multifamily rents across the Carmel market. Avison Young Copyright © 2025. Avison Young. Information contained in this report was obtained from sources deemed reliable and, while thought to be correct, have not been verified. Avison Young does not guarantee the accuracy or completeness of the information presented, nor assumes any responsibility or liability for any errors or omission s therein. All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced, in part or in full, in any format, without the prior written consent of Avison Young. Utilizing cell phone visitation data provided by Placer.ai, Avison Young was able to determine the average household income and educational attainment levels for residents in recently delivered multifamily assets. Residents within these assets have an aver age household income $100,000+ per year while more than 50% of residents have a bachelor’s degree or higher. Multifamily’ s ability to support nearby retail Leveraging the same cell phone mobility data, Avison Young was also able to gain a deeper understanding of visitation trends for residents in newly delivered multifamily assets. Through the sampling of three assets, the Analysis discovered almost 33% of residents visited nearby retailers (e.g. fast food or quick service restaurants, breakfast shops, groceries, community shopping centers, or superstores), before coming home or after leaving home in 2024. Meanwhile over 50% of residents at all buildings visited a nearby Target five or more times in the past year. Industrial overview Industrial demand/supply performance assessment: The broader Indianapolis market has experienced a wave of industrial development, particularly speculative development, since the onset of COVID. Between 2019 and 2024, Indianapolis’ industrial inventory grew by 26.4%, one of the largest expansions of space in the country. As new speculative projects broke ground in late 2022, market demand began to plateau as aggressive Federal Reserve policy led to increased operational and borrowing costs for industrial users, limiting expansion plans, leading to surges in vacancy as new speculative buildings delivered without leases in place en mass. Avison Young Copyright © 2025. Avison Young. Information contained in this report was obtained from sources deemed reliable and, while thought to be correct, have not been verified. Avison Young does not guarantee the accuracy or completeness of the information presented, nor assumes any responsibility or liability for any errors or omission s therein. All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced, in part or in full, in any format, without the prior written consent of Avison Young. Rental rates grew aggressively after 2019, however recent shifts in slowing demand have capped rental growth and put vacant newly delivered spaces at a disadvantage from a price perspective as surging construction material and borrowing costs have to be blended into asking rates in the market. Despite stable occupancy for buildings under 100,000 sf over the past two years, availability is creeping upward as sublet space hits the market, particularly in the North submarket in which Carmel is located. Development in this building range may seem attractive to capture the most active requirements in the market, however base construction costs for smaller buildings do not offer the economies of scale needed to justify groundbreaking , as build-out costs alone in the submarket fall roughly between $100-$150/psf without demolition, or land costs being factored in. The breakeven rental rates needed from tenants to meet developer costs would exceed $20-$25/psf NNN, which far exceed the Indianapolis market’s highest asking rates by a 30-40% factor. Additionally, as the northwest side of Indianapolis continues to exceed 10% population growth over the past 5 years, continued congestion on local roads will put the North submarket at a disadvantage for attracting industrial demand as less trafficked options just west of the area are ample. Avison Young Copyright © 2025. Avison Young. Information contained in this report was obtained from sources deemed reliable and, while thought to be correct, have not been verified. Avison Young does not guarantee the accuracy or completeness of the information presented, nor assumes any responsibility or liability for any errors or omission s therein. All opinions expressed and data provided herein are subject to change without notice. This report cannot be reproduced, in part or in full, in any format, without the prior written consent of Avison Young. Contact details Inquiries Grant Hayes Manager, Market Intelligence | U.S. Client Advisory & Multifamily Lead grant.hayes@avisonyoung.com Peter Kroner Director, Market Intelligence | U.S. Industrial / Supply Chain & Logistics peter.kroner@avisonyoung.com Visit us online avisonyoung.com