SUMMIT 2012 INDPLS MidYear Market Report

www.SummitRealtyGroup.com

2012

INDIANAPOLISMETROPOLITAN MARKET

ANNUAL MID-YEAR REPORT

2

This report contains information available to the public and has been relied upon by Summit Realty Group on the basis that it is accurate and complete. Summit Realty Group accepts no responsibility if this should prove not to be the case. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. Copyright © 2012 Summit Realty Group.

All rights reserved.

LAND

RETAIL

OFFICE

INDUSTRIAL

MULTI-FAMILY

HEALTHCARE

CAPITAL MARKETS

CORPORATE SOLUTIONS

PROPERTY MANAGEMENT

PROJECT MANAGEMENT

REAL ESTATE EXPERTISE

Front cover photo by Jim Nix.

Dear Colleagues:

It’s midpoint of 2012 and there are many great things happening in our market and here at Summit that we are excited to share.

We recently held a “One Year Anniversary in our New Building” party. Even after settling in, we continue to be very proud of our new headquarters.

Early this year, we opened our on-site fitness room. In many positive ways, this has been a game-changer workplace perk. Plus, workers in the adjacent buildings no doubt get a kickout of watching some of us run stair laps out on the fire escape.

And I have to include one of my favorite additions - the large-scale “Pennway” mural, artistically depicting the rich history of our building. The mural is part of a Super Bowl 2012, “46 for XLVI” public art initiative - an innovative partnership between the city of Indianapolis and the Arts Council of Indianapolis to showcase 46 murals throughout the city. A warm shout-out to muralist, Erik Pearson, a great artist and new friend of the firm.

We welcomed our first tenant and new neighbors - Ignition DG. An exhibit design agency headquartered in Bristol, UK, this is their first U.S. location.

Summit’s Property Management division continues to grow in an impressive way.

Summit’s Property Management is now the 2nd largest third party property management service provider in the Greater Indianapolis area. The team currently manages more downtown office buildings than any other third party provider in the market.

Overall, we currently manage 7 msf in the Greater Indianapolis area including Plainfield, Bloomington and Anderson. Recent assignments include the 673,000-sf M&I Plaza in downtown Indianapolis and the 150,000-sf Metropolis office building in Plainfield.

Additional key announcements:

Summit expanded our Investment Services platform - adding Matt Carlstedt / SRGC to the team.

On pages 4 and 6, check out the Top Lease Transactions for Industrial and Office. We’re psyched about Summit’s significant involvement in these top market deals.

And lastly, I’m honored to have been selected as the 2011 Indiana Commercial REALTORof the Year and also inducted into Midwest Real Estate News “Hall of Fame”. I’m blessed to work in a field I truly love and with so many friends and colleagues whom I greatly respect.

The entire Summit team extends a sincere thank you and positive wishes for a successful 2012.

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Best Regards,

Bill Ehret, SIORChief Executive Officer

SUMMIT REALTY GROUP l Cushman & Wakefield Alliancewww.SummitRealtyGroup.com 3

8.2%8.0%7.8%

16.6%

6.51 million

7.2%

1.78 million

UNEMPLOYMENT JUNE 2012

POPULATION 2011 ESTIMATED

POPULATION GROWTH SINCE 2000

Indiana has earned the top AAA bond rating by all 3 major credit rating agencies.

Indiana ranks 9th in Logistics employment and 10th in freight shipments by tonnage.

Indiana bumped up two spots, now ranking 6th of the 50 states in Business Climate. Site Selection Magazine 2011

Indianapolis MSA listed in Top 50 Hottest Cities in the Nation. Brookings Institute 2010

12th largest City in the U.S.; 35th largest MSA – Estimated Population; 27th ranked MSA – Economic Strength. Policom 2012

CEOs rank Indiana 1st in the Midwest and 5th in the U.S. for “Best & Worst States for Business”, earning a 4 out of 5 rating in all 3 categories: Tax & Regulation, Quality of Workforce, and Living Environment. Chief Executive Magazine 2012

Conexus Indiana, the state’s Advanced Manufacturing and Logistics (AML) initiative, will launch its new high school-level AML curriculumin Fall 2012 at Hoosier high schools and career centers. The curriculum is designed to give Indiana students a head-start on careers inthe state’s largest economic sector.

Indiana remains in the Top 10 States for Bioscience employment. It is one of only two states offering specialized bioscience employmentin 4 of the 5 subsectors – Agricultural Feedstock & Chemicals, Drugs & Pharmaceuticals, Medical Devices & Equipment, Research, Testing & Medical Laboratories, and Bioscience Distribution. Indiana’s bioscience jobs have grown by 14% over the last decade, outpacing the national average of 6.4%. Batelle/Biotechnology Industry Organization (BIO) Report “State Biosciene Industry Development 2012”

Indiana received a Gold Shovel award in 2011 and Silver Shovels in 2010, 2009, and 2008 for Top Investment Projects, among states with population of 5 – 9 million. Area Development Magazine, Summer 2012

Site Selection Magazine recognized Indy Partnership as one of the Top Ten Economic Development Groups, citing its ability to createjob growth and capital investment in the 9-county region. Site Selection Magazine 2011

Indiana is home to the 5th largest wind farm in the U.S. (the 4 largest are all in Texas)

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OTHER SOURCES:U.S. Census Bureau and U.S. Department of LaborIndiana Workforce DevelopmentIndiana Economic Development CorporationDevelop IndyConexus IndianaSummit Realty Group Research Department

INDY RECOGNITION

INDY NUMBERS

U.S.INDIANAINDPLS MSA

9.6%

311.6 million

4

VACANCY & ABSORPTIONThe Indianapolis industrial market continued to make impressive gains in Q2 2012. The overall vacancy rate for the market stands at 6.7%, down from 7.5% just one quarter ago. A number of large leases in Q2 contributed to this drop in vacancy including: Prime Distribution’s lease of 412,000 square feet (sf) in the South submarket, Henry Schein’s lease of 380,160 sf in the Northwest submarket, and Atkins Nutritional’s lease of 211,500 sf in the East submarket, among others.

With year-to-date leasing activity at 3.8 million square feet (msf), and outpacing the previous four years, this trend of steadily declining vacancy rates and positive absorption and is expected to continue.

RETURN OF SPECULATIVE CONSTRUCTIONThe steady decline in vacancy over the past six quarters has not only led to an increase in investment sale activity, which currently stands at 3,001,733 sf sold to investors at mid-year, but also the return of speculative construction to the Indianapolis industrial market.

A lack of large contiguous modern bulk space has spurred a new wave of speculative construction, which to-date includes three buildings totaling over 1.8 msf already under construction with target delivery dates in Q4 2012. Largest of these is the 794,608-sf IDI World Connect Building 1 at Ameriplex. Next is the ProLogis 622,440-sf 445 Air Tech building. And lastly, the 450,000-sf VanTrust Project One Building. All three buildings are located in the Southwest submarket.

These speculative projects, along with ongoing build-to-suit construction for companies such as Vance & Hines, Regal Beloit and Helmer, further showcase the attractiveness of the business climate in Indianapolis, as well as the peace of mind that the state’s economic stability can offer companies looking to relocate.

OUTLOOKOngoing interest in the favorable economic climate of the Indianapolis market continues to attract both investors and business owners looking for the best and most fiscally sound environment to run their businesses. As net rents continue to increase, and with no foreseeable let up in demand for modern warehouse/distribution space, it is anticipated that more speculative construction will likely break ground before the end of 2012.

NOTABLE NEW LEASE TRANSACTIONSMid-year 2011 – Mid-year 2012BUILDING SUBMARKET TENANT SF

* 800 S Perry Rd Southwest online retailer 925,800

* 700-716 Airtech Pkwy Southwest RR Donnelley 799,344

2001 Commerce Pkwy South Anderson Merchandisers 703,496

* 760 Commerce Pkwy South Prime Distribution 412,000

5445 Guion Rd Northwest Henry Schein 380,160

600 S Perry Rd Southwest Jacobson Warehouse Co. 333,566

* 1551 S Perry Rd Southwest GENCO (sublease) 308,620

* 700 Commerce Pkwy W South GENCO-ATC 292,500

* 3023 N Distribution Way East Atkins Nutritionals, Inc. 211,500

* 909 Whitaker Rd Southwest Smart Warehousing, LLC 190,440

2516-2548 Airwest Blvd Southwest Apotex 156,590

* 850 N Graham Rd South KYB America, LLC 153,748

* 2800 Airwest Blvd Southwest Thermal Structures, Inc. 141,028

1105 E Northfield Dr Northwest Life Science Logistics (expansion) 132,000

2525 N Shadeland Ave East Fresh Warehouse 128,000

7900 Rockville Rd Southwest Jacobson Warehouse Co. 124,377

595 Perry Rd Southwest Hanzo Logistics (expansion) 106,875

4760 Kentucky Ave Southwest Sunshine Manufacturing 105,800

5345 Decatur Blvd Southwest Rolls-Royce Corporation 81,759

* denotes Summit brokered transaction

INDUSTRIAL

2012 YTD LEASING ACTIVITYSubmarket Distribution

EAST11.5%

NORTHEAST5.4%

CBD3.1%

SOUTH32.2%

EAST11.5%

SOUTHWEST23.8%

STATS ON THE GO

Q2 2011 Q2 2012Y-O-Y

CHANGE

Overall Vacancy 8.9% 6.7%

ManufacturingAvg. Net Rental Rate (psf/yr) $2.22 $2.03

Warehouse / DistributionAvg. Net Rental Rate (psf/yr) $3.07 $3.01

FlexAvg. Net Rental Rate (psf/yr) $5.78 $6.00


Q2 2012 INDUSTRIAL SUBMARKET STATISTICS

NORTHWEST

SOUTHWEST

SOUTH

NORTHEAST

CBD

EAST

86th Street

Mer

idia

n St

Key

sto

ne A

ve

Binf

ord

Blvd

IndianapolisInternational Airport

OVERALL INDIANAPOLIS INDUSTRIAL MARKET

TOTAL MARKET INVENTORY OVERALL VACANCY RATE TOTAL AVAILABLE SFYTD OVERALL

NET ABSORPTION

213,303,774 SF 6.7% 14,352,321 SF 3,390,678 SF

Overall Vacancy and Net Absorption include both direct and sublease space being marketed as vacant.

SOUTHWESTTOTAL INVENTORY 67,997,265 SFVACANCY RATE 3.9%AVAILABLE SF 2,624,309 SFYTD ABSORPTION 1,315,380 SF

NORTHEASTTOTAL INVENTORY 18,358,564 SFVACANCY RATE 9.3%AVAILABLE SF 1,710,087 SFYTD ABSORPTION 211,790 SF

NORTHWESTTOTAL INVENTORY 48,504,997 SFVACANCY RATE 6.1%AVAILABLE SF 2,962,444 SFYTD ABSORPTION 599,535 SF

EASTTOTAL INVENTORY 35,977,995 SFVACANCY RATE 8.0%AVAILABLE SF 2,863,005 SFYTD ABSORPTION 214,312 SF

CBDTOTAL INVENTORY 23,916,281 SFVACANCY RATE 12.4%AVAILABLE SF 2,956,095 SFYTD ABSORPTION 285,952 SF

SOUTHTOTAL INVENTORY 18,548,672 SFVACANCY RATE 6.7%AVAILABLE SF 1,236,381 SFYTD ABSORPTION 763,709 SF

Tracked statistics include Marion and surrounding counties in roughly a 25-mile radius around downtown Indianapolis. Industrial statistics include single & multi-tenant buildings with minimum 15,000 rentable square feet (rsf).Overall Vacancy and Net Absorption include both direct and sublease space being marketed as vacant.

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CBD28.3%

OTHER3.4%

SOUTH2.2%

CASTLETON7.4%

KEYSTONECROSSING

8.7%

I-69 / SHADELAND11.9%

NORTHWEST15.5%

MERIDIANCORRIDOR

22.6%

VACANCYVacancy rates continued their downward trend in the first half of 2012. Overall vacancy for the Indianapolis market stands at 21.1%, down from 22.3% a year ago. Overall vacancy is down, year-over-year, in 8 of the 12 submarkets. Notable changes were seen in the two largest Suburban submarkets, Keystone Crossing and the Meridian Corridor, where overall vacancy rates fell to 17.8% and 19.7% respectively Q2 2012, down from 22.5% and 21% Q2 2011.

For the Keystone Crossing submarket, a combination of low overall vacancy, high direct average asking rates, and steady leasing activity has led to the construction of the first speculative office building in the Indianapolis market since 2008. The 3-story, 80,700-square foot (sf) class A building, by local developer Sourwine, will begin construction Q3 2012 and is scheduled for delivery Q2 2013.

LEASING & ABSORPTIONAlthough 2012 leasing activity is not yet at the same level as first half of 2011, the trend of consistent improvement remains steady. One major factor in this trend is the re-emergence of the CBD. The CBD, which had fallen behind suburban submarkets in the previous two years, accounted for 28.3% of year-to-date leasing activity for the entire market. This activity makes it the strongest performing submarket in the Indianapolis MSA through mid-year 2012. Contributing to this strong performance is the sub-lease of three floors totaling 60,000+ sf to multiple tenants at the PNC Center. As this space is absorbed over the coming quarters, overall vacancy rates will continue to trend downward.

Large leases signed in previous quarters have been absorbed in the first half of 2012, contributing to the lowered vacancy rates in many submarkets. Some of these include: State Farm with more than 80,000 sf in the Keystone Crossing submarket; Travelers Insurance with 55,113 sf in the Meridian Corridor; and Kightlinger + Grey’s lease of 23,537 sf in the CBD.

OUTLOOKThe Indianapolis office market is poised to make larger gains in the 2nd half of 2012 than it did in the first. Activity has been consistent, and is expected to pick up as the US economy continues to stabilize. The consistent positive trends in the market are likely to further increase investor interest, and suggest that a pick-up in activity will be seen in the coming quarters.

NOTABLE NEW LEASE TRANSACTIONSMid-year 2011 – Mid-year 2012BUILDING SUBMARKET TENANT SF

9200 Keystone Crossing Keystone Crossing State Farm 88,408

280 E 96th St Meridian Corridor Travelers Insurance 55,113

6335-6345 Castleway Ct Castleton IU Health 34,638

PNC Center CBD Kronos 31,725

9480 Priority Way W Dr Keystone Crossing Magnolia Health Systems 30,009

9998 Crosspoint Blvd 1-69 / Shadeland Stanley Convergent Security 26,000

* 8415 Allison Pointe Blvd Castleton Comcast 23,785

1 Indiana Square CBD Kightlinger & Gray, LLP 23,537

11611 N Meridian St Meridian Corridor Liberty Mutual 23,507

* 8440 Allison Pointe Blvd Castleton DuCharme McMillen & Assoc 22,163

* PNC Center CBD FinishMaster (sublease) 21,996

* 1320 City Center Dr Meridian Corridor Fresenius Medical Care 21,673

* 250 W 96th St Meridian Corridor David A. Noyes 20,068

7333 W Washington St Airport Ivy Tech Community College 19,615

111 Congressional Blvd Meridian Corridor Shepherd Insurance 18,964

* 250 W 96th St Meridian Corridor David A. Noyes (sublease) 18,812

3600 Woodview Trace Northwest National American University 17,914

8900 Keystone Crossing Keystone Crossing T2 Systems 17,801

4040 Vincennes Cir Northwest GexPro 17,789

* 135 N Pennsylvania St CBD General Electric 16,644

* denotes Summit brokered transaction

OFFICE


STATS ON THE GO

Q2 2011 Q2 2012Y-O-Y

CHANGE

CBD Overall Vacancy 20.3% 21.3%

Suburban Overall Vacancy 23.1% 21.1%

CBD Class ADirect Asking Rents (psf/yr) $22.55 $20.31

Suburban Class ADirect Asking Rents (psf/yr) $19.20 $18.53


Q2 2012 OFFICE SUBMARKET STATISTICS

IndianapolisInternational Airport

Mer

idia

n St

86th Street

Binf

ord

Blvd

Key

sto

ne A

ve

NORTHWEST I-69 &SHADELAND

WEST

AIRPORTSOUTH

EAST

MIDTOWN

CBD

NORTH/CARMEL

MERIDIANCORRIDOR

KEYSTONE

CASTLETON

EASTTOTAL INVENTORY 691,527 SFVACANCY RATE 20.7%AVAILABLE SF 142,993 SFYTD ABSORPTION 0 SF

MIDTOWNTOTAL INVENTORY 1,380,229 SFVACANCY RATE 8.3%AVAILABLE SF 113,890 SFYTD ABSORPTION -1,501 SF

MERIDIAN CORRIDORTOTAL INVENTORY 6,390,580 SFVACANCY RATE 19.7%AVAILABLE SF 1,260,942 SFYTD ABSORPTION 150,381 SF

NORTHWESTTOTAL INVENTORY 3,993,296 SFVACANCY RATE 21.2%AVAILABLE SF 847,253 SFYTD ABSORPTION -171,486 SF

I-69 / SHADELANDTOTAL INVENTORY 2,598,651 SFVACANCY RATE 21.5%AVAILABLE SF 559,529 SFYTD ABSORPTION 131,927 SF

CARMELTOTAL INVENTORY 678,212 SFVACANCY RATE 25.5%AVAILABLE SF 173,102 SFYTD ABSORPTION 12,745 SF

KEYSTONE CROSSINGTOTAL INVENTORY 4,099,762 SFVACANCY RATE 17.8%AVAILABLE SF 728,805 SFYTD ABSORPTION 110,484 SF

CASTLETONTOTAL INVENTORY 2,200,535 SFVACANCY RATE 26.4%AVAILABLE SF 580,850 SFYTD ABSORPTION 10,238 SF

AIRPORTTOTAL INVENTORY 969,835 SFVACANCY RATE 26.4%AVAILABLE SF 256,290 SFYTD ABSORPTION -867 SF

SOUTHTOTAL INVENTORY 1,443,500 SFVACANCY RATE 21.0%AVAILABLE SF 303,187 SFYTD ABSORPTION 12,527 SF

CBDTOTAL INVENTORY 10,650,901 SFVACANCY RATE 21.3%AVAILABLE SF 2,266,898 SFYTD ABSORPTION -142,184 SF

WESTTOTAL INVENTORY 970,591 SFVACANCY RATE 39.1%AVAILABLE SF 379,266 SFYTD ABSORPTION 5,485 SF

OVERALL INDIANAPOLIS OFFICE MARKET

TOTAL MARKET INVENTORY OVERALL VACANCY RATE TOTAL AVAILABLE SFYTD OVERALL

NET ABSORPTION

36,067,619 SF 21.1% 7,613,005 SF 117,749 SF

Overall Vacancy and Net Absorption include both direct and sublease space being marketed as vacant.Tracked statistics include Marion and surrounding counties in roughly a 25-mile radius around downtown Indianapolis. Offi ce statistics include multi-tenant buildings with minimum 15,000 rentable square feet (rsf).Overall Vacancy and Net Absorption include both direct and sublease space being marketed as vacant.

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CENTRAL INDIANAThe Central Indiana investment markets have seen steady activity in the first half of 2012. Modern bulk industrial remains the most active product type. However, sellers of office are beginning to realize the benefits of increased interest in the Central Indiana market. Generally, buyers have been attracted to a healthy positive spread on yields when compared to first tier markets, in combination with increasingly attractive debt terms.

INDUSTRIALThe industrial market has remained strong through the first half of 2012 as investors continue to view Central Indiana as a stable market providing attractive yields at a cost basis significantly below the most competitive markets across the country. Specifically, institutional investors and publicly traded REITs continue to target modern bulk distribution centers, which has led to continued cap rate compression. The modern bulk product overall vacancy rate is 6.8%. Coupled with the declining cap rate environment, developers have begun, or are in the final stages of, planning speculative bulk developments.

Medium distribution and flex have not yet seen the same investor interest. Those product types have yet to experience the same level of cap rate compression, causing owners to hold assets and focus on improving overall performance.

OFFICEThe office investment market is beginning to show signs of recovery, with a significant increase in the number of projects being brought to market over the first half of the year. Investors are slowly re-entering the Central Indiana office market in hopes of taking advantage of the attractive spreads between going-in yields and the low interest rate lending environment. Specifically, the Indianapolis CBD has been active with the sale of Chase Tower and a multitude of properties expected to trade in the 3rd quarter including Circle Tower, Capital Center, and the Farris Building to name a few.

CAPITAL MARKETS

NOTABLE INVESTMENT SALES – INDUSTRIALMid-year 2011 – Mid-year 2012PROPERTY SF

KPJV Distribution – 5 Building Portfolio 2,128,822

Anderson Merchandisers Building, Franklin IN 703,496

Park 100, Building 56 300,000

AllPoints at Anson, Building 14 280,000

7250 E 90th Street 89,000

NOTABLE INVESTMENT SALES – OFFICEMid-year 2011 – Mid-year 2012BUILDING SF

Chase Tower (under contract) 1,057,877

111 Congressional Blvd 177,957

Haverstick 1 & II 77,984

Pennwood 1 & II 71,892

INDIANAPOLISOFFICESALESSales by Total $ (mil)

INDIANAPOLISINDUSTRIALSALESSales by Total $ (mil)

Sales Graphs Source: Real Capital Analytics

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50

100

150

200

250

300

350

400

Q1 '09 Q1 '10 Q1 '11 Q1 '12

ROLLING 12-MO. TOTAL QUARTERLY VOLUME

0

50

100

150

200

250

300

350

400

450

500

Q1 '09 Q1 '10 Q1 '11 Q1 '12

ROLLING 12-MO. TOTAL QUARTERLY VOLUME


OVERVIEWThe Indianapolis multi-family market finished the first half of 2012 with an uptick in occupancies and rental rates – typical after the seasonal dip Midwest owners have become accustomed to. Atypical is the velocity at which the rental market strengthened – a notable 2.1% growth over this time last year, coupled with rent growth. This growth, combinedwith the number of new units delivered over the past 24 months, enables us to paint a very positive picture of the Indianapolis rental market.

The downtown rental market continues to dominate overall, due to an under supply of product, significant job growth and a growing student population at the IUPUI campus. Occupancy in the downtown market continues to tighten, with “A” and “B” grade properties averaging 96%. Despite seeing the majority of new multi-family construction, the north submarket remains strong.

The transaction market was fairly active during the second half of 2011, with the majority of the year’s $200 million trading during that time. While transaction volume during the first half of 2012 was (<$90 million), it is likely we will see similar or slightly more activity in Q3 and Q4. As in 2011, “B” and “C” grade properties continue to dominate the Indianapolis transaction market as investors become increasingly anxious to churn equity and lenders push out REO product as well as assets requiring recapitalization.

OUTLOOKThe future of the Indianapolis apartment investment market remains positive due to favorable debt markets, rent and occupancy trends and relative affordability in comparison to other midwest markets. These factors have contributed significantly to a large group of new investors to the market and we expect this trend to continue.

MULTI-FAMILY

NOTABLE MULTI-FAMILY SALES – YTD 2012PROPERTY GRADE # UNITS

Lakes of Carmel A 324

Ashgrove B 57

Brockton B 284

Oak Lake at Crooked Creek B 216

Piccadilly B 54

Hillcrest Woods B - 384

Cold Springs Manor C 109

Red Mill C 164

Vineyards at Apple Creek C 198

STATS ON THE GO

PROPERTY COUNT 632

TOTAL UNITS 122,529

AVERAGE UNITS / PROPERTY 198

AVERAGE OCCUPANCY RATE 92.1%

AVERAGE YEAR BUILT 1974

$645

$659

$675 $677$683

$690$695

$625

$635

$645

$655

$665

$675

$685

$695

2006 2007 2008 2009 2010 2011 Q2 12

AVERAGE QUOTED RENTS – MARKET WIDE

89%

90%

92%

90%

91%

92%

93%

87%

88%

89%

90%

91%

92%

93%

94%

2006 2007 2008 2009 2010 2011 Q2 12

AVERAGE OCCUPANCY RATES – MARKET WIDE

AVERAGE RENT PER SF BY CLASS

$0.93

$0.75

$0.68

$0.60 $0.65 $0.70 $0.75 $0.80 $0.85 $0.90 $0.95 $1.00

CLASS A CLASS B CLASS C

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HEALTHCARE

The healthcare sector remains one of the fasting growing business segments within central Indiana. Naturally, this has also driven growth in the underlying real estate serving this sector. Major hospital systems continue to control the bulk of construction, with large scale projects in the works at Exit 10 in Fishers submarket and in Greenwood area, South submarket. While no speculative buildings are coming out of ground, there has been continued demand for medical office space and new pre-leased buildings are under construction.

Corresponding with the two high growth markets previously mentioned, Fishers and South submarkets also bring in the highest average full service rental rates. The rates for the remaining submarkets were relatively consistent across the board, which speaks to the strong and stable healthcare market. Overall, rental rates remain steady and are historically slow to fluctuate. We do not foresee any changes within these rates in the short term.

Leasing activity was primarily clustered in the north-oriented submarkets as well as the South submarket. Activity in the South was mainly due to growth and expansion of the St. Francis Hospital system. While activity in the northern markets consisted generally of practices consolidating, the leasing of the medical office buildings near both the IU Health & St Vincent North campuses, and the growth of the hospital systems as they bring many practices back onto their campuses. The relatively low leasing activity in the Fishers submarket is a bit misleading, as demand has far outpaced supply.

The big question looming over this sector is what the new healthcare reform will mean to medical office real estate. Speculation spans the entire spectrum – from an increase in demand due to the additional number of insured, to the continued growth of the hospital systems which could lead to a reduction in the demand for independent medical office buildings. While specifics are unclear at this point, healthcare reform will surely cause both hospital systems and private practices to reexamine their business models. Any adjustments could potentially limit funds available for medical office space, as well as affect rental rates of medical office buildings controlled by hospitals.

We anticipate the healthcare real estate market to remain steady over the next six months while the outcome of the Fall election is decided. 2013 however, will definitely be a year of change as the market attempts to reposition itself in the changing healthcare landscape.


MERIDIANCORRIDOR

17.8%

CARMEL16.6%

SOUTH15.9%

NORTHWEST13.9%

NORTHEAST9.7%

CBD7.9%

SW HENDRICKS5.8%

EAST5.0%

WEST4.1%

FISHERS3.3%

AVAILABILITY RENTAL RATE

$17.

45

$13.

79

$12.

48

$16.

53

$16.

19

$16.

42

$14.

72

$14.

62 $15.

84

$15.

14

$17.

52

$17.

37

$14.

29

$19.

50

$16.

24 $17.

57

$16.

64

$19.

22

$18.

42

$16.

90

$0.00

$5.00

$10.00

$15.00

$20.00 OVERALL FULL SERVICE

AVERAGE RENTAL RATES

478,

918

227,

882

244,

475

94,8

09

512,

951

279,

435

400,

550 45

6,80

5

166,

026

118,

944

0

100,000

200,000

300,000

400,000

500,000

600,000

SUBMARKET AVAILABILITY


MARKET OVERVIEWAs a university town with several growing industries, Bloomington’s economy has been somewhat insulated from but not entirely immune to the economic downturn. Nonetheless, its economy is showing signs of a recovery. There is significant infrastructure investment underway, including the rebuilding of the SR-46 Bypass, major improvements to Walnut Street, the re-opening of West 3rd Street, and the impending connection of I-69. As a result, the market is primed for change, growth, and investment.

MULTI-FAMILYThe strongest product in the Bloomington market remains multi-family. The occupancy rate on the approximately 12,000 units tracked by Summit is over 96%. Downtown rental rates average $1.46 per square foot (psf). To date, the market has largely been dominated by local players. However, new projects like Georgia- based Ambling Company’s project on 11th Street may signal a shift. Old National Bank is in the process of divesting prime parcels on Kirkwood which will likely feature a large housing component.

OFFICEOverall vacancy rate for office stands at 11.3%, down from 12.9% just one year ago. Newer companies entering the market include California-based Coupons.com and Virginia-based Cigital. The largest recent transactions have been relocations: Employment Plus moved into 21,363 sf in the Finelight Building on Liberty Drive and IU Health leased 8,000 sf at Johnson Creamery downtown. Investment sales activity is also showing renewed signs of life. The Author Solutions single-tenant building sold at slightly over a 10% cap rate and an IU Health medical building sold at ± 8% cap rate. Meanwhile, the City of Bloomington is planning a mixed-use development in the downtown Showers Furniture Factory area, a twelve acre assemblage recently purchased from IU.

MEDICAL OFFICEMedical office product remains strong with overall vacancy down to 5.0%. New construction continues with the IU Health building on Clarizz plus a senior housing project on Moores Pike. Expect changes in medical related real estate as practice groups realign and healthcare reform changes the landscape.

INDUSTRIALThe industrial market is performing well. Overall vacancy rate has bumped down to 7.9%, improving from 8.4% mid-year 2011. Over the last few quarters, 18 industrial properties were leased or sold. Upland Brewery opened a new 35,761-sf brewing facility on Profile Parkway and Circle Prosco purchased a 49,056-sf building on Curry Pike. Sunrise Greeting will vacate its 168,000-sf facility on Vernal Pike year-end. Asking rental rates remained stable across all product types – manufacturing, warehouse, and flex.

BLOOMINGTON

STATS ON THE GO

INVENTORYOVERALLVACANCY

AVERAGEPSF

RENT

Industrial 9.8 msf 7.9% $4.68

Office 2.4 msf 11.3% $12.02

Medical Office 631,844 sf 5.0% $13.35

Multi-Family 11,894 units 3.3% $0.96

MULTI-FAMILY HISTORICAL OCCUPANCY

93%

94%

95%

93%

96%

96%

91%

92%

93%

94%

95%

96%

97%

2006 2007 2008 2009 2010 2011

OFFICE VACANCY AND RENTAL RATES

11.3

%

12.9

%

11.9

%

14.5

%

5.1%

$10.00

$10.50

$11.00

$11.50

$12.00

$12.50

$13.00

$13.50

$14.00

0%

2%

4%

6%

8%

10%

12%

14%

16%

OVERALL DOWNTOWN EAST WEST MEDICAL

VACANCY RATE RENTAL RATE

www.SummitRealtyGroup.com 241 North Pennsylvania Street Indianapolis, IN 46204 317.713.2100

Office | Industrial | Land | Retail | Multi-Family | Capital Markets | Corporate Solutions

Property Management | Project Management | Global Supply Chain Solutions | Valuation Services

Economic Incentives Procurement | In-house Market Research | Marketing / Graphic Design

2012MID-YEAR REPORT

Summit Realty Group takes great pride in the accuracy and completeness of our commercial real estate research. Our Research Team continually compiles property and transactional data; verifies information via actual field surveys as needed; and updates our extensive, proprietary data platform. This data is critical to the success of our brokers and clients.

With our culture of shared knowledge among our brokerage team, each specializing in one of the product types we report on, Summit’s research platform is second to none.

Summit’s Research Team provides statistics, trend analysis, and forecasting of the overall market and submarkets. We provide clients with both standard and customized analysis to meet specific needs, both from an overall market aggregate perspective or for a specific project/building purpose. And via the Cushman & Wakefield platform, we have access to research data of all major U.S. and global markets.

INVENTORY DATABASE – BUILDINGS & LAND

AVAILABILITY DATABASE – LEASE, SUBLEASE, SALE

TRANSACTION COMPARABLES – LEASE & SALE

TENANT & STACKING PLAN DATABASE

CONSTRUCTION & DEVELOPMENT TRACKING

DEMOGRAPHIC & GEOGRAPHIC ANALYSIS

MARKET COMPARATIVE ANALYSIS

CUSTOMIZED, PROJECT / SITE SPECIFIC ANALYSIS

DEMOGRAPHIC & GEOGRAPHIC ANALYSES

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Documents

SUMMIT 2012 INDPLS MidYear Market Report