Indiana and specifically, the Indianapolis market, is a prime market for real estate investors in both the residential and commercial sectors because of a strong economy. At the end of 2017, economists at Indiana University had projected Indiana's economy to grow at a robust rate of 2.8% for 2018, outstripping the projected national rate of 2.6%. Final results actually showed both the national as well as Indiana economies outperforming those initial projections. Indiana's economy grew at around 3.2% for the year and the national rate ended at around 3.0%. For 2019, Indiana's economy is forecasted to remain strong, expected to continue to outpace the national rate, fueled by growth across the board - in jobs, numbers of establishments, income levels, wages as well as gross state product.
Mirroring the overall economy in 2018, Indiana's housing market also experienced strong price growth fueled by unmet demand due to high consumer confidence as well as low unemployment and interest rates. Housing prices grew 7.7% in Indiana compared to 7.0% nationally.
For 2019, both residential and commercial real estate are projected to remain strong sectors for investment.
On the residential side, there are multiple reasons why Indiana and particularly Indianapolis makes sense for investment in 2019, both for cash flow and appreciation.
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Indianapolis is Affordable. Despite high demand, Indianapolis real estate remains affordable compared to the rest of the country. Whereas the national median home price is around $272,000, the Indianapolis average is $177,000.
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Strong Demand. Indianapolis is the 15th largest city in the US and continues to attract businesses new residents. High rental demand has helped push rental rates up making Indianapolis a prime real estate investment market for cash flowing properties.
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High Occupancy Rates. The Indianapolis real estate market has the fourth highest occupancy rate out of the top twenty single-family rental markets in the entire country. With a high 95.6 percent occupancy rate and a financially stable, reliable tenant pool, the Indianapolis is an attractive market for potential investors seeking consistent cash flow.
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Continued Growth in Home Value. Although not expected to reach 2018 growth levels, the Indianapolis market is still expected to experience strong growth in 2019 and in the foreseeable future fueled by strong economic metrics including strong employment and consumer confidence. Properties in the market should continue to provide long-term appreciation coveted by investors.
On the commercial side, Indianapolis is expected to be a strong market for investment. Companies are attracted to Indianapolis for a variety of reasons including: a centralized location, skilled labor force, a pro-business government and low expenses. Indianapolis boasts a diversified economy represented by several industries including advanced manufacturing, life sciences, technology, logistics and warehousing, agribusiness, and sports. Indianapolis is FedEx’s second largest hub in the world and the 14th largest city in the U.S. with a population of 853,173. It is also the economic heart of the region and home to numerous conventions, professional sports teams, and world-class organizations. Eli Lilly & Co., Rolls-Royce, Anthem, and Roche Diagnostics have established headquarters in the city, in addition to being Salesforces’ largest hub outside of its global headquarters in San Francisco.
Janice Paine, Senior V.P. of Brokerage for Central Indiana with Bradley Company predicts another strong year for the commercial real estate market here in 2019. “The market here has been very strong,” Paine said. “It is cautious, though, too. That is one of the things that makes Indianapolis and the Midwest such good places to invest. We tend not to overbuild like in other parts of the country. So, yes, our market has been strong for a long time. That’s because the growth here is based on solid fundamentals.”
Despite robust demand and strong competition in the Indianapolis market, there remain arbitrage opportunities for those intimately knowledgeable and familiar with the region. Investors with informational advantages that can find value properties should be able to either quickly unload these properties because of high demand or retain them for consistent cash flow because of a large, reliable renter pool. Each strategy would be effective in either of the residential and commercial segments given the current economic climate in Indianapolis.
Ryan Moeller of Fall Creek Asset Management LLC is proof of the value of investing locally. Having worked and lived in Indiana for years, Ryan has been able to find and exploit significant arbitrage opportunities, even with increased competition and in this information age designed to level the playing field. Here are Ryan’s thoughts on the Indiana market. “We believe that the Indiana market is rife with market inefficiencies that can be exploited for significant gain through our intimate knowledge of the area and boots on the ground approach. Our knowledge of the Indiana market in both the residential and commercial segments with a firm understanding of supply and demand has allowed us to find bargains in the past and will allow us find bargains going forward that would be ideal for quick turnaround for maximizing short-term profit or for investing with a long view for income and long-term appreciation and profit.”
The Indiana market, particularly Indianapolis, has all the elements ideal for investment in 2019 and going forward. With robust projected growth, residential and commercial real estate should continue to thrive and despite increased demand and competition in both sectors, opportunities still exist to make substantial profit through market inefficiencies. Market inefficiencies, by definition, are situations where the price of something doesn’t reflect all the publicly available supply and demand information, due to lack of information, negligence, etc. A person like Ryan Moeller who has long been able to identify market inefficiencies in his local market and been able to take advantage of these inefficiencies for significant gain is poised to benefit from the dynamic Indianapolis real estate market and the Indiana market as a whole going forward.
