Real Estate Update

WHILE A LAGGING residential real estate market mired in the subprime mortgage mess has dominated headlines m the past year. Indiana's developers and contractors report healthy activity in the stateis commercial and light industrial sectors.

From new distribution centers and office buildings

The following projects include some of the major developments in Indiana that will shape the commercial real estate market in the coming years.

Duke Realty Corp.

As one of the largest commercial real estate companies in the United States, Duke Really Corp. operates from its Indianapolis headquarters and is active in. its home state. One of its major Indiana .projects is the long-term development of' residential, retail office and industrial properties at Anson, a 1,700-acre area along Interstate 65, northwest of Indianapolis in Boone County

"Essentially Anson is a new mixed-use community that will be in development for the next 10 to 15 years," says Joel P. Reuter, Duke's vice president of communications. "It will he home to an anticipated 0,000 residents and 1.3 million square feet of commercial space."

In the coming year, Reuter says, continued development of Anson should include site announcements of industrial and medical office buildings at AllPoints at Anson, as well as educational facilities, hotels, retail and residential development.

In the industrial sector, Reuter expects continued growth in the hulk industrial market, as the region continues to develop rail capabilities and intermodal logistics. One such project is AllPoints Midwest, a joint venture between Duke Realty and Browning Investments. The project is located near the Indianapolis International Airport and borders the CSX intermodal rail facility near U.S. 40 and the new Ronald Reagan Highway.

When completed, Reuter says AllPoints at Anson and AllPoints Midwest will be home to some 10,000 jobs for new and existing businesses who locate in Hendricks and Boone counties. Duke and Browning are investing $745 million in the development of both parks.

"All developers continue to watch the tightening of the credit markets, which may influence development in the short term," he says. "However, Indiana is expected to continue experiencing strong development activity in key submarkets."

Browning Investments

Indianapolis-based Browning Investments is one of the largest developers of modern bulk distribution facilities in the Midwest and has number of major developments in central Indiana that are currently expanding.

Browning Construction is nearing completion on two speculative bulk distribution facilities totaling more than 1.5 million square feet. Both the 947,333-square-foot building in AirTech Business Park and the 646,380-square-foot AllPoints Midwest Building 1 are expected to be completed by the end of the year.

"Our team at Browning will continue to focus on our industrial development projects in the coming year including continued growth at AllPoints Anson, AllPoints Midwest (both joint venture projects with Duke) and AirTech (a joint venture with ProLogis), says director of business development Bob Gallant. "Additionally, we are exploring other land positions in central Indiana and throughout the Midwest and South.

Browning is also working with the Fort Harrison Reuse Authority to bring new development to the Village Center at the former army base in Lawrence and the company has similar consulting projects for the cities of Beech Grove, Westfield and Speedway.

"The local market seems pretty well insulated, at least from an industrial perspective, as deal flow activity has seen an uptick in recent months," Gallant says. "Browning remains bullish on many segments of the local commercial industrial real estate market for the foreseeable future."

Lauth Property Group

Indianapolis-based Lauth Property Group is one of only a few developers and contractors that is licensed in 49 states and the company maintains offices in Charlotte, Dallas, Denver, Orlando, Phoenix and Pittsburgh.

Here in Indiana, Lauth is completing a year marked by major retail developments, including the first phase of Porter's Vale, a 750,000-square-foot power/lifestyle center in Valparaiso, two 404,000-square-foot centers named Brownsburg Station and Lafayette Pavillion, and the 285,000-square-foo. Sycamore Terrace retail center in Terre Haute.

Other projects include the South Indianapolis Medical Plaza, across from St. Francis Hospital South Campus, the John Force Racing Annex, an assembly and research expansion at the company's Brownsburg headquarters and University Loft, a 500,000-square-foot distribution and office building in Mount Comfort, and a similar project at Eaglepoint Business Park in Brownsburg.

"From a geographical perspective. I anticipate Indiana will continue to see more overall activity in the central and northwest regions of the state," says Lauth president Mike Curless. "For example, Indianapolis continues to emerge as a top 10 location for distribution space. Other product types like health care, retail and office space should continue to expand in select submarkets such as Hamilton County where there's a good combination of population and white-collar job growth."

Upcoming projects for Lauth include an expansion of the Midwest ISO headquarters in Carmel, Westpoint One, a 526,000-square-foot distribution center that will be the first of 10 buildings in one of the largest distribution hubs in central Indiana and the second and third phases of Porter's Vale in Valparaiso.

"Northwestern Indiana should continue to benefit from the increased suburban expansion of the Chicago metro area," Curless adds. "The increased activity will likely be in the form of local and national development and investment in these locations."

Holladay Properties

Halladay Properties in South Bend is one of the largest privately held developers, design/build firms and fully integrated real estate companies in the eastern half of the United States. The company has enjoyed a busy year of continued construction at its large Ameriplex developments across the state, says president and CEO John Phair.

In the past year, Ameriplex at the Port, a 400-acre project in Portage, saw some $50 million in development, including a 120,000-square-foot office building, two warehouse and distribution facilities of 500,000 square feet and the opening of a Bass Pro Shops that has already welcomed one million shoppers.

Meanwhile, Ameriplex at the Crossroads, a 386-acre, master-planned and mixed-use business park in Merrillville, saw more than $35 million in development that included a new specialty hospital for Pinnacle Healthcare and an addition to the Purdue Technology Center of Northwest Indiana.

"Both of these projects will have considerable activity going into the next year," Phair says.

However, Holladay's largest project is the 1,500-acre Ameriplex Business Park, located southwest of the Indianapolis International Airport, which was just recognized as one of the first "Certified Wildlife-Friendly Developments" in the country. The three-year designation was developed by the Indiana Wildlife Federation to encourage stewardship of natural resources in commercial developments.

Although the new development has 6.5 million square feet of buildings and already serves 5,000 employees, it also has more wildlife now than before construction started, Phair says, explaining that is the result of attention to issues such as native plantings, drainage and ponds which attract birds and serve as a habitat.

In addition to wildlife, the project is attracting a range of new tenants, including a 1.1 million square foot distribution center for Pepsico and a new 80-acre technology center for Purdue Research Park that will include office and industrial buildings, three sites for restaurants and retail, and a 300-bed, six-story hotel with a 30,000-square-foot conference center.

Regency Properties

Evansville-based Regency Properties develops, manages and leases commercial properties and currently oversees nearly two million square feet of shopping center and office space in five states.

President and CEO James R. McKinney says the company has been active over the past year in smaller markets where new developments can have a large impact on the lifestyles of those who live in the area by bringing in new types of shopping opportunities and reducing the need to travel to other markets.

"We enjoying focusing on what we call county seat communities, he says. "We recognize that the quality of life in a community has many aspects to it and one of those is the shopping environment."

Examples of such projects in the past year include a 53,000 Gander Mountain outdoors retail store in Evansville, as well as shopping centers in Madison, Bedford, Seymour and Mount Vernon.

Republic Development

One of the largest construction projects in Indiana is a 725-acre mixed-use development in Hamilton County called Saxony. Republic Development of Toledo expects more than $500 million to be invested in the project during the next 10 years. The pedestrian-friendly community will also include more than 3.5 million square feet of office, office flex and light industrial space situated within a prominent corporate campus setting.

Five distinct retail areas interspersed throughout the community will be designed to accommodate more than one million square feet of shopping space and 55 acres of the project are devoted to parks and recreational areas.

Richard Arnos, president of Republic Development, says continued work on the project will focus on combining all aspects of community in a way that benefits those who live and work there.

"Saxony integrates more fully residential users with retail, entertainment and office uses; access to the area is easy via interstate or major arterial routes; bulk parking is located behind buildings; traffic calming techniques are employed; the location and relative scale of buildings is carefully planned; walking and outdoor activity is encouraged; the area has very high growth, income and educational attainment levels ; all of which foster an energy and vitality throughout the community that is unique, he says.

Industrial Contractors

Industrial Contractors in Evansville is a family-owned business and a major employer that hires as many as 2,600 workers during peak construction periods, Industrial Contractors and its three affiliated companies have contributed to the development of Evansville and southern Indiana by constructing buildings that have helped to define the region's landscape.

In the past year, the company completed a $10 million project that involved construction of three buildings for the Expressway Autoworld Complex in Mount Vernon. Other projects included a four-story, 170,000-squarefoot office building for American General Finance in Evansville, a fast-track $5 million printing facility for The Cortegra Group and a 90,000-square-foot student center for the University of Evansville.

Looking forward, Industrial Contractors anticipates a busy year with construction of new modern headquarters for Berry Plastics in Evansville, a new building for the school of business at the University of Southern Indiana and continued expansion at Casino Aztar. The company also expects to work in the northern Indiana community of Bluffton, where Alexin is building a new aluminum casting facility

F.A. Wilhelm Construction

As one of the largest general contractors and construction managers in the Midwest, Indianapolis-based F.A. Wilhelm Construction Co. has been a major employer of the state's construction workers in the past year.

Construction projects at the state's universities have been a large part of the company's project load in 2007, according to Larry Roan, vice president of business development. Such projects include Park Hall at Bali State University, Simon Hall at Indiana University and the Medical Information Sciences Building at Indiana University-Purdue University Indianapolis.

"University buildings will continue to be strong, especially research facilities," he predicts. "Also universities are updating their current student housing and building new student housing."

Other projects that Wilhelm is working on include a Biotech Development Lab for Eli Lilly and a Forensic and Health Sciences Lab for the State of Indiana and ongoing work at the Indianapolis International Airport expansion where the company has handled concrete and steel construction at the Midfield Terminal.

Looking forward, Roan predicts the company will have a busy year in 2008 with a variety of projects that include Clarian Arnett Hospital in Lafayette, Altra Indiana Ethanol in Cloverdale, Horseshoe Southern Indiana Casino, Elizabeth and the new Honda plant in Greensburg.

"In the next 12 to 18 months, the construction economy is steady to strong," he says. " It is hard to forecast past that."

Tonn and Blank

Tonn and Blank, which was established in Michigan City in 1922, offers general construction, design/build and project management services to a wide and varied clientele primarily in the industrial, commercial and institutional markets. The company, which became a division of Alverno Construction Corp. in 1998, has a strong presence in northwest Indiana and recently opened a satellite location in Indianapolis.

That has helped Tonn and Blank to build more than $500 million in current projects, including a number of health care facilities such as St. Elizabeth Regional Health replacement hospital in Lafayette, St. Francis South Campus Expansion in Indianapolis, St. Anthony Medical Centers Outpatient Medical Campus in Crown Point and St. Joseph Regional Health Centers Replacement Hospital in Mishawaka. The company is also building a youth center for Lake County parks and replacing a blighted retail center and constructing a new YMCA in Valparaiso.

"We have not seen any signs of it slowing down and with the continual expansion of healthcare and rumors of a new intermodal in northwest Indiana it may even increase," says Tonn and Blank president and CEO Jon Gilmore.

The Hagerman Group

Since its 1908 founding in Fort Wayne, the Hagerman Group has grown over four generations of family ownership, acquiring Geupel DeMars in the late 1990s to become one of the state's largest construction companies.

"I think you will see a very diverse commercial construction workload throughout the state of Indiana for the next three to five years," says Jeff Hagerman, president of The Hagerman Group. "The Indianapolis area will continue to be strong riding the coattails of Lucas Oil Stadium and. the start. of the Convention Center. With the development of Harrison Square in Fort Wayne, construction should be steady in that specific market, but the availability of balanced vertical market work will be limited in northeast Indiana."

Upcoming projects range from construction of the $70 million Ball Memorial Hospital South Tower in Muncie and pouring concrete foundations for the new $530 million transmission plant in Tipton that is a joint venture between Chrysler and GETRAG, a German transmission manufacturer, to the 100-acre Virginia B. Fairbanks Art & Nature Park Indianapolis Museum of Art that will be one of the largest of its kind in the United States.

"Notre Dame, Purdue, Indiana and Ball State should also continue to provide ample opportunities for construction over the next few years considering the very successful fundraising drives each have done recently for capital improvements," Hagerman says.

The company's work in that area includes the $35.6 million renovation and expansion of the Law School at the University of Notre Dame in South Bend and the new $30 million Wayne T. & Mary T. Hockmeyer Hall of Structural Biology at Purdue University.

"Of all the vertical markets available for construction, I think we will see the biggest decline in commercial/retail work and K-12 schools throughout the state in the next three to five years," he adds.

Finding tenants

Jeff Henry, managing principal at Colliers Turley Martin Tucker, says the new construction projects in Indiana are fairly balanced with demand for commercial and light industrial space real estate markets across the state.

"We think the activity will remain steady as we have seen it in the past year," he says.

Although an increased emphasis on logistics in central Indiana has created demand for light industrial space for several years, Henry says past year was one of the best for new office buildings, which rely on traditional job growth. He attributes that to some of the new construction to pent-up demand by developers who saw limited space in the market and completed a number of new single-building projects, which should be absorbed into the market without any major problems.