Report: Indianapolis Tech Office Growth Among Highest in Nation
Indianapolis made the top 10 in a new report that looked at 45 U.S. cities and measured an area’s attractiveness to tech companies based on how much space those companies are leasing.
The report, commissioned by commercial real estate company Jones Lang LaSalle (JLL) and titled “U.S. Technology Office Outlook,” found that tech companies signed leases for slightly under 985,000 square feet of office space in greater Indianapolis between the third quarter of 2015 and the second quarter of 2016. That resulted in Indianapolis being ranked 10th among the 45 cities. The total square footage included new leases, lease renewals, and renewals with expansions.
Mike Cagna, an Indianapolis-based senior research analyst at JLL, said this is the sixth annual edition of the report. He described Indianapolis cracking the top 10 as “a huge jump” attributed mostly to Salesforce. In what Cagna said was the 14th largest deal nationwide, the enterprise software giant leased 227,781 square feet in the soon-to-be-named Salesforce Tower downtown. Other local companies splashing out cash on big offices included Octiv’s ongoing expansion downtown and Blue Horseshoe Solutions’ nearly 30,000-square-foot office in Carmel.
According to the JLL report, Silicon Valley remains the most concentrated technology leasing market, but “corporate expansion and startup growth into Indianapolis, Nashville, and New Jersey (among others) has given legs to a new industry growth driver in each of these markets.”
The central business district has the densest concentration of tech companies in Indianapolis. There, tech companies lease over 450,000 square feet of space at roughly $20 per square foot, with a vacancy rate of about 15 percent, according to the JLL report. Compare that to South San Francisco, where approximately 880,000 square feet is occupied by tech companies at a price of $74.69 per square foot, with only 6.7 percent vacant.
The relatively low cost of living in Indianapolis is a major reason why it’s so popular, Cagna said. According to the report, it’s the top-ranked city in the nation in terms of affordability. “Indianapolis is historically an affordable market,” he added. “It’s why we have such strong activity.”
And although downtown Indianapolis is growing quickly, Cagna said suburban markets are also benefiting from a booming tech sector. The northwest suburbs of Indianapolis saw the most activity in recent months, with nearly 400,000 square feet under lease by tech companies at an average of slightly over $18 per square foot.
Where Indianapolis is struggling, the report found, is in the realm of capital. When looking at investment volume, which was determined by the rate of venture capital investment and cash raised through initial public offerings as compiled by PricewaterhouseCoopers, Indianapolis ranked near the bottom of the 45 cities examined, with just $58 million in funding for tech companies between the third quarter of 2015 and the second quarter of 2016. Not surprisingly, San Francisco was tops in this metric, too: Its companies garnered $11 billion during the same time period.
Cagna said in addition to funding, another challenge Indianapolis has is the small number of incubators to help startups get to market. “When they come out of the basement, they need somewhere to go,” he pointed out.
In general, Cagna said, Indianapolis’s tech ecosystem is on an upward trajectory, coming in at 22nd overall with a resiliency score, which measures a city’s ability to bounce back after periods of economic contraction, of 71.9 out of 100. According to the report, Indianapolis is ranked 11th in economic momentum, 22nd in innovation, and 34th in talent. Cagna said Indianapolis also falls right in the middle of the 45 cities in terms of the number of millennials calling it home.
Cagna has lived in Indianapolis since 2002, and during that time, he’s witnessed a lot of growth. Originally from New Jersey, he first started visiting the city when Peyton Manning took over as quarterback for the Indianapolis Colts in the late 1990s.
“Downtown is completely different,” he said. “Back then, it was kind of a ghost town. Now, it has a bustling vibe that wasn’t there in the early 2000s. The state is doing a better job of retaining the talent pumping out of the universities, and the city has invested in the urban core—there are a lot more living options and a lot of development in the past five years. There’s better retail, better attractions, and better mass transit, which are all things that cater to young professionals.”