Jeff Swiatek

jeff.swiatek@indystar.com

Start with our thriving Downtown, good enough to host a Super Bowl. Add hotel and apartment sectors busily adding rooms to their inventories. Clinch it with a warehousing sector so vast it turns us into the flat roof capital of the world.

That's Indianapolis, the metro area with the newly won distinction of having the second-strongest real estate markets in the Midwest, trailing only Chicago.

The ranking in the Urban Land Institute's Emerging Trends survey, released last month, marks the best Indianapolis has ever done in the annual report.

In compiling its results, the ULI surveys its members and outside real estate professionals. Opinions tend to represent a cross section of the real estate industry, from brokers to developers, engineers to investors, and attorneys to city planners.

Indianapolis' real estate markets have often struggled, even before the recession of 2007-2009, so the finding that they are now seen as outperforming every city in the Midwest except its largest came as something of a surprise.

"It's probably the most promising report (on the city's real estate markets) I've read since the recession," said Jason Tolliver, regional vice president at Cassidy Turley real estate brokerage in Indianapolis. "It shows others outside ... are seeing opportunities inherent in the market here."

The survey results from ULI don't exactly show real estate markets that are on fire. The survey asked respondents to rate markets on a scale of one (weak) to five (strong), and the top Midwestern city of Chicago didn't top 3.5 on any measure. Indianapolis' measures came in rather unimpressively, from 3.10 to 3.23.

But those kinds of numbers still give Indianapolis the right to claim real estate markets that are better than most.

A few Indy-specific findings from the survey:

Industrial/warehouse development is rated the seventh strongest in the country. That's thanks to the city's middle-of-the-country location, which makes it a natural spot to plunk down massive distribution warehouses that can serve big chunks of the U.S. population with one-day truck delivery. The rise in e-commerce from Amazon and other online sellers has only helped the warehousing sector.

•Downtown's real estate growth potential is rated well above average. The Downtown has benefited from a few billion dollars worth of public investment in the past decade, including construction of Lucas Oil Stadium and a near doubling of the Indiana Convention Center.

•Hotel investment potential is rated the 11th best in the nation. The metro area's room inventory has swelled to more than 31,000 rooms, average bookings have steadily stayed above 60 percent, and more new hotels are on the way Downtown and in the suburbs and outlying areas.

•Demand for new office space is tepid — one rare dim spot for the city. Office space under construction totals less than 1 percent of the total square footage of for-rent office space on the market.

To Greg Jacoby, chief operating officer of architectural firm Browning Day, who serves as Indiana chairman of the ULI, the metro area's good showing in the survey translates into more work orders in his business. "All architects and engineers right now will tell you they are fairly busy."

Housing comes up as one of three key measures in the survey, and Indianapolis holds its own there, with sales of existing homes this year running about even with last year, and most projections calling for a slight rise next year. Housing is often seen as a driver of real estate development, particularly retail.

John Vandenbark, senior vice president at CBRE real estate brokerage in Indianapolis, said when he sees studies giving Indianapolis real estate high marks, he credits the relative lack of political partisanship and the area's business-friendly outlook.

"We do a real good job of public-private partnerships here. It's easier to be a developer. They're working with you, not against you."

Vandenbark said he's referring to public-private partnerships like the ones that helped build the 1,005-room JW Marriott hotel, kept the Indianapolis Colts locked into a long-term lease at a new stadium and created an active economic development program that attracts dozens of new businesses a year to the metro area.

One intangible that helps make Indianapolis' real estate markets stronger: The city is home to one of the largest shopping center developers, Simon Property Group, and one of the largest industrial developers, Duke Realty Corp., plus midsize national retail developers such as Kite Realty Group.

"You've got a lot of real estate knowledge just in this market alone," Vandenbark said.

It also helps Indianapolis' real estate markets that they weren't overbuilt in the boom years that preceded the recession. Other cities, such as Phoenix and Miami, found themselves with vastly more residential and commercial space than they needed in the throes of the recession and afterward.

"We didn't have this overhang of inventory," Tolliver said. "So that puts us in an advantageous position" because developers don't have to wait for demand to catch up to the supply of buildings on the market.

Call Star reporter Jeff Swiatek at (317) 444-6483. Follow him on Twitter: @JeffSwiatek.

How's your real estate?

Indianapolis ranks second in an Urban Land Institute survey on the strength of Midwestern real estate markets.

Note: Number shows ranking on a scale of 1 (weak) to 5 (strong) for investment/development/homebuilding.

• Chicago: 3.46/3.30/3.08

• Indianapolis: 3.16/3.23/3.10

• Minneapolis/St. Paul: 3.07/3.03/3.08

• Kansas City: 2.90/2.88/3.28

• Columbus, Ohio: 2.96/2.97/3.01

• Detroit: 3.18/2.83/2.87

• St. Louis: 2.81/2.87/2.98

• Cleveland: 2.83/2.63/2.76

• Madison, Wis.: 2.81/2.83/2.55

• Cincinnati: 2.75/2.65/2.76