2Q 2016 South Bend/Mishawaka Office Market Report

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SOUTH BEND/MISHAWAKA
2Q16 OFFICE MARKET
www.cressyandeverett.com
MARKET AT A GLANCE
3.9M
Total
Inventory
11.1%
Vacancy
Rate
-9,332
SF
$18.20
Net
Absorption
Average
Lease Rate
A LANDLORD’S MARKET:
LEASE RATES TICK UPWARDS
AS AVAILABILITY TIGHTENS
The market experienced an increase in leasing during the second quarter of
2016, driven by positive tenant growth via corporate/organizational
expansions, with technology, financial and medical services firms leading
the way. The South Bend/Mishawaka suburban market rallied as tenants
are pushed to the outer fringes of the ever-tightening downtown office
market. The suburban market vacancy rate dropped 40 basis points to
10.8% with 13,074 square feet of positive absorption. The average asking
rent for the suburban market continued its upward trajectory, ending the
second quarter 2016 at $19.24 per square foot.
In comparison, the combined Central Business Districts (CBD) ended the
second quarter with negative absorption of 22,435 square feet and a 11.6
vacancy rate, an increase of 120 basis points from the previous quarter.
The average lease rate decreased by $0.73 to round out the second
quarter at an average asking lease rate of $17.24 per square foot.
The overall office vacancy rate in the South Bend/Mishawaka market
increased slightly in the second quarter of 2016 to 11.1%, an increase of 30
basis points from the first quarter of 2016. Leasing activity has slowed with
9,332 square feet of negative absorption with average asking lease rates
falling to $18.20 per square foot, a decrease of $0.21 per square foot.
Economic Conditions
The U.S. Bureau of Labor Statistics reported a 4.4% unemployment rate for
South Bend / Mishawaka in May 2016. According to the CES survey of
employers, there were 400 jobs added in April for a total of 150,889 jobs.
The CPS survey of households showed 100,458 employed persons for the
month. Overall, the United States gained 38,000 jobs in May and has a
4.7% unemployment rate.
13,074
SF
4.4%
Under
Construction
Unemployment
Rate
AVERAGE LEASE RATE & VACANCY
Average Lease Rate (Price/SF)
Vacancy (%)
$20
20%
$17
17%
$14
14%
$11
11%
$8
8%
2Q10
2Q11
2Q12
2Q13
2Q14
2Q15
2Q16
MARKET PERFORMANCE
2Q16
1Q16
1Q15
(Current Quarter)
(Previous Quarter)
(Previous Year)
3.9M SF
3.9M SF
4.1M SF
Vacancy Rate
11.1%
10.8%
10.8%
Quarterly Net Absorption
-13,012
-8,708
5,878
Average Lease Rate
$18.20
$18.41
$17.85
Under Construction
0
0
0
Completed Construction
0
0
0
Total Inventory
(Local Profile)
12 Month
Forecast
Research
SOUTH BEND/MISHAWAKA
2Q16 OFFICE MARKET
www.cressyandeverett.com
OUR MARKET IN MOTION
Ignition Park Office Building Pays Homage To Studebaker
New VA Outpatient Clinic Eases Accessibility For Veterans
Catalyst One, one of two buildings that recently opened at Ignition Park
in South Bend, is not a typical office building. About 70 people already
work in the building, which has a variety of spaces where people can
work collaboratively in groups or individually. From the unique
Located at 340 Columbia Place, a 4,000-square-foot Community
Based Outpatient Clinic (CBOC) with help support the VA Northern
Indiana Healthcare System. The new facility will help with general
care for veterans but also aid them with social issues of re-entry into
civilian life and gain access to jobs. The new South Bend location will
service about 1,200 area veterans each year.
furnishings to the polished concrete floors, and reclaimed wood and
metal, the building is a tribute to Ignition Park’s history as the former
heart of Studebaker’s vehicle-manufacturing complex. Three
companies now call the Catalyst One home: MicroIntegration, Aunalytics
and Data Realty. MicroIntegration employs 23 people and has room to
grow in its 7,000-square-foot space at Catalyst One. Aunalytics and Data
Realty are related companies and share about 15,000 square feet inside
Catalyst One.
VA Community Based Outpatient Clinic | South Bend, Indiana
Beacon Health System To Collaborate With Mayo Clinic
Catalyst One at Ignition Park | South Bend, Indiana
New Tenants Ink Lease Deals, Renovations Underway At
One Michiana Square
Beacon Health System announced they will partner with the Mayo
Clinic Care Network, becoming the first hospital system in Indiana to do
so. The partnership will allow experts from both systems to work together
and provide the highest level of care to patients. Beacon Health has
been growing exponentially since its merger with Memorial Hospital of
South Bend and Elkhart General Hospital. Beacon has nearly 1,000
physicians and more than 6,000 team members and volunteers.
Within the past two months, two new tenants have moved into 100 E.
Wayne Street in downtown South Bend, commonly known as One
Michiana Square (OMS). The third-floor owner-occupant build-out is
underway, and common area renovation will begin end of July 2016.
Finished improvements at the 99,367 square-foot building include
parking lot resurfacing, bridge work, restriping of the parking garage and
installation of a new roof.
Free WIFI At South Bend Community Centers
Free WiFi is coming to two South Bend community centers — Charles
Black Recreation Center, 3419 W. Washington Street and Martin Luther
King, Jr. Recreation Center, 1522 Linden Avenue — as part of an
expansion of South Bend’s free internet service. The internet will now be
available to students, seniors, and others using these community centers
on South Bend’s west side. “Closing the digital divide is part of our city’s
commitment to inclusion,” Mayor Buttigieg says. “Internet access is
increasingly a necessity for education and economic opportunity. This
project reaches even more families to create a more connected
community.”
Beacon Health System / Mayo Clinic | Northwest, Indiana
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SOUTH BEND/MISHAWAKA
2Q16 OFFICE MARKET
www.cressyandeverett.com
NOTABLE LEASE TRANSACTIONS
Tenant
Building
Submarket
Type
Square Feet
RTU-VT Indiana, LLC
100 E. Wayne Street
South Bend CBD
Full Service Gross
1,782
ONB Insurance Group
100 E. Wayne Street
South Bend CBD
Full Service Gross
6,017
North American Signs
6001 Nimtz Parkway
Blackthorn
Full Service Gross
3,680
NOTABLE SALE TRANSACTIONS
Building
Submarket
Sale Price
Price/SF
Square Feet
16605 SR 23
South Bend Other
$250,000
$137.36
1,820
13388 SR 23
Granger
$248,000
$97.41
2,546
SUBMARKET STATISTICS
Submarket
Area
Total
Inventory
(SF)
Under
Construction
(SF)
Total
Vacancy
Rate (%)
Quarter
Absorption
(SF)
YTD
Absorption
(SF)
Class A
Lease Rates
(Price/SF)
Class B
Lease Rates
(Price/SF)
Total Average
Lease Rates
(Price/SF)
Mishawaka
CBD
62,436
0
5.1
0
0
0
$16.14
$16.14
South Bend
CBD
1,781,058
0
11.8
-22,435
-22,388
$21.77
$15.89
$17.35
CBD Total
1,843,494
0
11.6
-22,435
-22,388
$21.77
$15.92
$17.24
Mishawaka**
1,089,444
13,074
10.8
5,992
-5,783
$21.08
$13.45
$20.55
South Bend*
990,232
0
6.2
3,431
6,451
$16.00
$14.64
$13.45
Mishawaka/
South Bend
Total
2,079,676
13,074
10.8
9,423
668
$21.25
$14.33
$19.24
TOTALS
3,923,170
13,074
11.1%
-13,012
-21,720
$21.38
$15.64
$18.20
*Blackthorn and South Bend Other submarkets have been added to South Bend submarket.
**Edison Lakes, Granger and Mishawaka Other submarkets have been added to Mishawaka submarket.
Newmark Grubb Cressy & Everett (NGCE) quarterly market reports are a compilation of data from multiple sources. The data is reviewed quarterly and adjusted due to circumstances in the market, such as new construction and demolition.
The vacancy square footage is compiled from a combination of online data from multiple major listing services, broker provided listing information and industry knowledge. NGCE has created this report to provide the most accurate
information possible. We do not assume responsibility, however, for errors, omissions, prior sale, lease or withdrawal from the market.
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SOUTH BEND/MISHAWAKA
2Q16 OFFICE MARKET
www.cressyandeverett.com
HOW DO WE
COMPARE? UNITED STATES
TOTAL
TOTAL
INVENTORY
INVENTORY
(SF)
VACANCY
RATE
NET
ABSORPTION
AVERAGE
LEASE RATE
(PSF)
UNDER
CONSTRUCTION
(SF)
UNEMPLOYMENT
RATE
STATE
LOCAL
7.9B
191M
3.9M
11%
10.4%
11.1%
0.13%
0.1%
-0.24%
$25.32
$13.85
$18.20
118.7M
826,462
13,074
4.7%
5.0%
4.4%
Market Perspective
“The office market is currently very tight with low vacancy rates for our market. Many building owners have
upgraded their buildings elevating them from Class B to Class A. Both of these factors have led to the
increase in rental rates for office properties, bringing them to the highest level we have seen in our market.”
Shawn Todd, Senior Broker
South Bend/Mishawaka Office
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SOUTH BEND/MISHAWAKA
2Q16 OFFICE MARKET
www.cressyandeverett.com
Corporate Headquarters
4100 Edison Lakes Parkway
Suite 350
Mishawaka, IN 46545
574.271.4060
NEW!
Fort Wayne Office
200 E. Main Street
Suite 540
Fort Wayne, IN 46802
260.399.4057
Grand Rapids Office
32 Market Street
Suite 302
Grand Rapids, MI 49503
616.456.6400
www.cressyandeverett.com
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Meet Our Team
Ed Bradley, Jr., CCIM/CPM/SIOR
Shawn Todd
Senior Vice President, Principal
574.271.4060 (o)
574.485.1538 (d)
edbradley@cressyandeverett.com
Senior Broker
574.271.4060 (o)
574.485.1520 (d)
shawntodd@cressyandeverett.com
Years of Experience
25+
Years of Experience
9+
Areas of Specialization
Office
Investment
Industrial
Property & Facilities Management
Areas of Specialization
Office/Retail Leasing
Investment Properties
Business Brokerage
©2016. Newmark Grubb Cressy & Everett has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in
our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents.
All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Cressy & Everett (NGCE) has not verified any such
information, and the same constitutes the statements and representations only of the source thereof, and not of NGCE. Any recipient of this publication should independently verify such
information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s
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