The outlook for the commercial and residential real estate markets in Central Indiana is mixed heading into 2010.
The overall residential market appears to be heading in a positive direction; however, when this market is broken down into the sale of new houses versus existing houses, one sees two different stories. On the bright side, the market for existing homes continues to improve due in large part to low mortgage rates, the extension of the first time homebuyer tax credit and the continued availability of foreclosure properties. However, new home starts are slowing due to the overall difficulty in obtaining financing, the competition from relatively inexpensive foreclosure properties, and the difficulty of move-up homebuyers to sell their current home.
A positive sign regarding the new home market is the entry of two new homebuilders to the Indianapolis market. Fischer Homes, a mid-west builder headquartered in Ohio, and Ryan Homes, a regional builder headquartered in Virginia, both moved into the Indianapolis market late in 2009. Ryan Homes acquired the lots originally owned by Indianapolis-based builder C.P. Morgan. The entry into the market of these builders demonstrates the potential for growth and opportunity that can still be found in Central Indiana.
The commercial office market will continue to favor tenants through 2010. Economic pressures such as tight credit markets, asset depreciation and business consolidation and downsizing have combined to increase office vacancy rates in Central Indiana. Due to these conditions, viable tenants looking for new office space should benefit from much greater flexibility in leasing terms such as rental rate, length of term and more aggressive build-out options. In addition, current tenants will seek to restructure their lease terms to their benefit and while landlords will consider near-term concessions but require more long-term security.
Across both the residential and commercial markets, there should be little to no new development while both markets work through existing available inventory. As credit markets and unemployment numbers improve, both the commercial and residential markets should firm up through 2010 and into 2011.