2021 – Q4 Market Report
The northeast region of Indiana includes eleven counties: LaGrange, Steuben, Noble, DeKalb, Whitley, Wabash, Huntington, Wells, Adams, Kosciusko, and Allen. Fort Wayne is located in Allen county and is the cultural and economic hub of northeastern Indiana. The region is served by the Fort Wayne International Airport and is at the confluence of several major highways and Interstate 69. Fort Wayne is within a 200-mile radius of major cities including Chicago, Cincinnati, Cleveland, Columbus, Detroit, Indianapolis, Louisville, and Milwaukee. It’s also within a one-day drive of one-third of the United States population and one-fifth of Canada’s.
Fort Wayne is the second largest city in Indiana. Allen County has had positive net migration over the last five years, and 2019 had the highest population increase in 20 years. The city is attracting new residents with its abundant amenities combined with its low cost of living. The city is ranked first on Niche’s, “Cities with the Lowest Cost of Living in America” list in 2021. Fort Wayne has been investing in its downtown with a number of transformative projects. The city invested $681 million in projects just in 2020. They’ve also added a number of projects across the city that include the expansion and building of new museums, hotels, parks, greenway trails, and meeting facilities.
Target industries that drive the region’s economy are diverse including distribution, specialty insurance, medical devices and technology, manufacturing, professional and business services, design and creative services, agriculture, transportation and logistics. Major employers in Northeast Indiana include Parkview Health Systems, Steel Dynamics, General Motors, Lincoln Financial Group, BF Goodrich, Frontier Communications, Vera Bradley, Sweetwater Sound, Raytheon, and Nestlé.
There are eight different specialty insurance companies located in the northeast region, including – Lincoln National Life Insurance Company, MedPro Group, Brotherhood Mutual, American Specialty, Swiss Re Group, PHP, INGUARD, and Ash Brokerage Corporation. Abundant access to specialty insurance in this region creates an incredibly business-friendly environment.
Warsaw, Indiana, located in Kosciusko County is a leader in the orthopedic and biologics industry and has earned the title of “Orthopedic Capital of the World.” Northeast Indiana is home to three of the five largest orthopedic device companies. Medical device companies located in the region generate $19 billion in revenue and control 39.5% of the worldwide orthopedic market.
Fort Wayne has racked up an impressive list of accolades and rankings. Here are a few
- The Indiana Chamber of Commerce named Fort Wayne as its 2020 PNC Community of the Year.
- Ranked #2 on U.S. News & World Report’s “Most Affordable Places to Live in the U.S. in 2021-2022”
- Ranked #3 on WalletHub’s, “Best Run Cities in America”, up from #8 in 2020.
- Ranked #5 on SmartAsset’s, “Best Cities for First-Time Homebuyers”
- Ranked #7 on Credit Karma’s, “The 10 Most Affordable Cities For Millennials to Buy a Home”.
Fort Wayne is also a four-time winner of the All American City awards from the National League of Cities, winning the title again in 2021. The spotlight for this year’s award was building equity and resilience.
Northeast Indiana has a growing, business-friendly environment. The wide variety of employment opportunities and exceptional amenities will continue to attract new residents.
BUILDINGS ARE FILLING UP IN THE NORTHEAST REGION AS SUPPLY REMAINS LOW
The Northeast region is continuing to attract interest from users and investors, but there are few buildings available, with low vacancy across all classes.
The vacancy rate for the entire region on average was 3.6% at the end of Q4 with market rents continuing to climb at $4.37. Net absorption was positive with over 627,000 square feet absorbed. Class A vacancy was 2.7% at quarter end and is projected to continue dropping throughout 2022. Average market rents were $4.82. Net absorption was positive at 150,000 square feet – a new spec building in New Haven which was leased to Lunar Distribution. Sales for Class A were $8.75 million. Class B properties had rents around $4.27, vacancy at 4.4%, and positive net absorption of 1,700 square feet. Class C vacancy is 2.9%, market rent average of $4.93 and positive net absorption of 475,598 – the second highest absorption over a ten year period.¹
During Q4 there were three spec buildings under construction totaling 475,000 square feet. Two of the properties are 200,000 square feet located in Markle (Huntington County) and Bluffton (Wells County). The third property is located in Kendallville
(Noble County). There are five properties proposed for completion in 2022 totaling 230,000 square feet. There are another five planned to deliver in 2023 that will add 717,000 more square feet to the market. The largest is 637,500 square feet and is located in Roanoke in southwest Allen County.
In Noble County, Forest River, an RV manufacturer, purchased three buildings in Ligonier for an expansion that may add 500 jobs. They’ve also purchased 65 acres to construct three new buildings for another future expansion. The company currently employs 160 in Ligonier.² Elkhart Indiana is known as the “RV Capital of the World” producing 80% of all RVs built in the United States. The industrial market in Elkhart also has a tight supply, so manufacturers are looking at other counties for expansion. Twenty buildings across Noble County have been leased or sold in the past few months. Inventory is low with only older buildings lacking high ceilings that most modern manufacturing requires.³
Other projects in the Northeast region:
- Amazon opened a new fulfillment center near the Fort Wayne International Airport. The 630,000 square-foot facility will employ approximately 1,000 workers.⁴
- Paragon Medical is expanding its Pierceton campus in Kosciusko County. The project represents an investment of $35 million and will be a 3D printing operation for joint replacements. The 34,000 square-foot addition will be complete by the end of 2022.⁵
- With a lack of supply
of Class A properties available, Class B and even some C facilities will attract users.
- With a lack of supply
- Market rents are projected to continue rising through 2022.
- With vacancy already low, and projected to fall, more buildings are needed in the Northeast market.
- There are more spec buildings in the pipeline for 2022 to keep up with demand.
NORTHEAST INDIANA ASKING RENT & VACANCY
NORTHEAST INDIANA ABSORPTION TRENDS
Northeast indiana sales transaction volume ($)
OFFICE CONTINUED TO ATTRACT BUYERS IN Q4, BUT MOSTLY IN CLASS B AND CLASS C PROPERTIES
The office sector continues to make progress. After rising vacancy for most of 2020 and 2021, it finally started to decrease in Q3 from 7% for all classes to end at 6% in Q4. Market rents have remained steady around $16.80 per square-foot. There was positive net absorption of 104,482 square feet. Sales remained strong with a volume of over $25 million. Class A office is still struggling – the vacancy was 20% in Q4 but has started to decline and is projected to continue to decrease. Market rents have been flat at around $18.40 per square-foot on average. Market rents for triple net range from $15-$16 and full service gross rents range from $18-$19 per square-foot. Net absorption was positive for the first time in three quarters with 23,742 absorbed. There were no Class A sales in Q4. Class B is faring better on vacancy with 5.8% in Q4, falling from 8% in Q1. Market rents haven’t moved much and are $16.50. Net absorption was positive at 50,904 square feet. Sales volume was strong for Class B the last three quarters. Q4 had over $20 million in sales. Class C had the lowest vacancy at 1.8%, market rent was $16.80, and net absorption was just under 30,000 square feet. Sales volume was $5 million.¹
- The party supply company Shindigz has struggled during the pandemic. They had relocated to their new downtown Fort Wayne headquarters in 2019 from Whitley County. They temporarily closed in December and haven’t reopened yet. They purchased the 5-story 33,000 square-foot Harrison Place building in 2018.² It’s unclear if the company will re-open.
- MetalX, a recycling company has relocated their headquarters from Waterloo in DeKalb County to the north side of Fort Wayne. The company employs approximately 50 people. The new office is located at 9910 Dupont Circle Drive East.³
- IU Health is expanding into southwest Allen County in Roanoke near I-69. IU Health purchased 137 acres and is seeking to rezone part of it for a potential future medical campus. Currently the first medical office building is under construction with delivery planned by the end of 2022.⁴
- Parkview Hospital has begun construction on their 88,000 square-foot addition which will double its size and make it a full-service hospital. It will also add 125 jobs. The facility will be renamed Parkview Kosciusko Hospital and plans to finish construction in summer 2023.⁵
- Perpetual Industries, a technology incubator, moved into their new, 22,000 square-foot corporate headquarters Auburn in DeKalb County.
- Class A office vacancy is forecast to decrease throughout 2022. However, absorption may be low due to a lack of users for the foreseeable future.
- Class B and C will continue to perform well in both decreasing vacancy and attracting buyers.
- Office still lags behind other sectors due to the trends accelerated by the pandemic. With less workers returning to the office and changing office layouts, uncertainty remains.
NORTHEAST INDIANA ASKING RENT & VACANCY
NORTHEAST REGION ABSORPTION TRENDS
NORTHEAST REGION TRANSACTION VOLUME
RETAIL RECOVERY IS IN FULL SWING WITH LOW VACANCY AND RISING RENTS ACROSS ALL CLASSES
Retail leasing activity remained steady in the Northeast Market in Q3. There was more interest in leasing new space as well as people following through, versus more hesitancy that existed since March 2020. Class A retail properties have a vacancy rate of 3.5% with rates in the range of $18-$20 triple net. Class B vacancy is higher at 8.9% with rates from $11-$16 triple net. Class C retail vacancy is 5.7% with rates from $10-$12. Absorption also trended positive after negative absorption over the last few quarters.¹
Sales volume improved throughout 2021 with Q3 ending with over $34 million in transactions. CoStar showed that 59 properties sold. They ranged from strip centers to fast food restaurants and pharmacies, demonstrating that investors are feeling more confident about retail. Bradley Company represented the owner in a sale transaction of an Ace Hardware in Warsaw and the seller in a transaction for a strip center in Garrett.
Large mixed-use projects continue in downtown Fort Wayne. Electric Works has announced a public market and food hall. Union Street Market will feature over twenty vendors and include a year round farmer’s market. The first phase of Electric Works has a planned opening for Fall 2022. The project is estimated to have a $400 million annual economic impact.²
The City of Fort Wayne also revealed plans for the $25 million Riverfront Phase II project. The project will add new trails, wetland boardwalk, new boat docks, and an open-air pavilion. The project will span the north side of the river. This project and the first phase which included Promenade Park have spurred other downtown developments.³ The Lofts at Headwaters Park is under construction. The project includes 200 apartments, townhomes, 24,000 square feet of office and 27,000 square feet of retail and flex space. The 651-space garage is currently under construction. The project is scheduled for completion in early 2023.⁴ The Riverfront at Promenade Park will feature 200 apartments and seven town homes, a 900-space parking garage, 30,000 square feet of office space and nearly 15,000 square feet of commercial space. The parking garage will open next year and the rest of the project in 2023.⁵
Other retail news:
- Bradley Company represented Aldi and the landlord in their expansion at Columbia Plaza in Columbia City. Aldi is doubling their store size to 22,185 square feet and is planning to reopen in November. They signed a new 15 year lease.
- Barnes & Noble previously announced they were leaving Jefferson Pointe to relocate across the street to Orchard Park. They will be reopening there in November. Their previous big box space at Jefferson Pointe won’t be vacant long, Burlington plans to open in the space.
Class A retail space is becoming scarce in the market.
Retail leasing pace has significantly picked up in 2021 and seems likely to continue. Net absorption has been positive over the last three quarters of 2021 and projected to be positive in Q1 2022.
Investor confidence in the retail sector is returning with over $34 million in sales in Q3.
Northeast Indiana Asking rent & Vacancy
Northeast indiana absorption trends
NORTHEAST indiana SALES TRANSACTION VOLUME ($)