Indianapolis Retail Market Report

Mounting headwinds loosen record-tight conditions. Amid net absorption of more than 1 million square feet in both 2021 and 2022, metro vacancy compressed to 3.4 percent entering this year, its lowest point on record. These tight conditions placed substantial upward momentum on rents, pushing Indianapolis’ average asking rate up more than 9 percent in 2022, the fastest annual gain in more than a decade. Following these notable improvements, economic headwinds, including reduced retail sales growth, have begun to pressure fundamentals. After three years of well-above average retail sales, 2023’s local spending figure rises at a slower pace than the 10-year mean. As consumers tighten up on discretionary spending, metro vacancy will continue to lift in 2023, following a 30-basis-point uptick in the first quarter. This contributes to a rent growth rate that falls below 2 percent in 2023 — its smallest annual gain since 2019.