Opportunities in The Indiana Market and What to Expect in 2021

December 30, 2020

Opportunities in The Indiana Market and What to Expect in 2021

December 30, 2020

According to Berkadia’s 2021 Forecast report, Indianapolis continues to set the standard for urban renewal and economic development. At year end, occupancy is at 95.1%, reaching a 20-year peak. 13,200 apartment units were delivered in the past five years with demand continuing to rise. Indianapolis was among the top 20 single-family home markets in 2020 and is projected to be among the top five in 2021.

In 2021, Indianapolis’ unemployment rate is expected to drop meanwhile the local market population is expected to rise. The City’s effective rent is also projected to rise and is anticipated to be $1,005 by 2022.

Opportunities in the Current Indiana Market

Like the rest of the country, Indiana has felt the impact of the coronavirus, though not as much as other states—there has not been nearly as much regulation on evictions and restrictions, as in other cities like Chicago or New York.

In fact, Berkadia Research found that the city’s construction industry was able to maintain momentum even while many other businesses were closed, because developers were continuously requesting permits. 2,564 market-rate units came online in 2020.

We continue to see enormous demand for well-located assets as vehicles to place capital. Even if investors are not aggressively underwriting year-one rent growth, Indiana still has plenty of stable opportunities to place money, with proven return on investment due to expansive square footage widely available at a lower price compared to primary markets.

Class B and C apartments are still at over 95% occupancy. In fact, demand is so high that most ownership can’t turn units over quickly enough and waitlists remain. In the suburbs of Indianapolis, Class A+ apartment occupancy levels remain high as well.

Looking Forward

Recently, our team closed on a 354-unit multifamily property, built in the 2000’s. Despite COVID-19, we were able to give 20 physical tours and received over 25 offers, 15 of which were above our asking price, speaking to the high demand of properties built in the early 2000s in Indianapolis.

In November, we closed on a 240-unit property for a record-high price per unit. The demand from the specific buyer on this transaction spoke to the value of Indianapolis from outside investors looking for properties to lock in while interest rates are still at record lows.

Secondary markets remain strong as the gateways to steady job growth, rent growth and an exceptional cost of living. With the downtown, urban office markets in flux, I am optimistic about the opportunities that well-run cities like Indianapolis can offer in 2021.

-Chris Bruzas, Senior Director