Why Retail and Specialty Spaces in Indianapolis Are Moving Faster Than Ever

From the transformation of underutilized properties into vibrant retail real estate hubs to the expansion of popular neighborhoods like Mass Ave, Broad Ripple, Keystone at the Crossing and Carmel Midtown Plaza, the city is experiencing a retail renaissance. This momentum is reflected in key market indicators. As of Q4 2024, Indianapolis recorded a net absorption of  119,000 square feet in retail space, underscoring the strong demand for commercial properties. Meanwhile, the vacancy rate for retail properties fell to 5.3% by Q2 2024—the lowest in two decades—highlighting the market’s resilience and attractiveness to tenants and investors alike. In this article, we’ll explore the key drivers behind this trend and examine how Indianapolis has positioned itself as a premier market for retail and specialty businesses.

Key Drivers Behind Indianapolis’ Booming Retail and Specialty Space

Several factors contribute to the unprecedented growth of Indianapolis’ commercial retail space and specialty space market. A thriving economy, low vacancy rates, and strong consumer demand have made the city attractive to businesses. Strategic urban development, population growth, and infrastructure investments further shape this dynamic market. Below, we discussed the key factors driving this rapid transformation:

 Strong Economic Growth

A key factor driving the rapid expansion of Indianapolis’ retail and specialty markets is the city’s substantial and diversified economy. Over the past several years, Indianapolis has solidified its position as a hub for various industries, with real per capita GDP rising by 10% from 2017 to 2022— surpassing the national growth rate of 9.2%. This momentum is expected to continue, with forecasts projecting a 3.1% increase in real GDP by 2025, keeping the city ahead of national trends.

The city’s economy is powered by a diverse mix of industries and major employers, including three Fortune 500 companies—Elevance Health (formerly Wellpoint), Eli Lilly, and Corteva. The life sciences sector remains a cornerstone, with Indianapolis hosting one of the most significant clusters in the country. Meanwhile, the tech industry is expanding rapidly, with more than 2,200 IT firms employing around 24,000 people. Thanks to the city’s strategic location as the “Crossroads of America,” logistics and distribution also play a crucial role, further strengthening Indianapolis’ economic profile.

The labor market reflects this strong performance, with an unemployment rate of 4.0% as of August 2024—lower than both state and national averages. Additionally, the local workforce grew by 1.3% over the past year, outpacing broader trends. With steady job creation, rising consumer spending, and a thriving business climate, Indianapolis is well-positioned for continued growth, making it an attractive destination for retailers and investors. 

Low Vacancy Rates and High Demand

The interplay of low vacancy rates and high demand fosters a competitive market landscape in Indianapolis, where quality commercial retail properties are being absorbed at an accelerated pace. This trend is particularly pronounced in desirable submarkets, where the competition among retailers for limited available spaces has intensified significantly. Areas such as Avon, Fishers, and Carmel  are experiencing notably low vacancy rates, underscoring the acute scarcity of retail opportunities in these sought-after locations. With limited supply and sustained demand, landlords benefit from increased leasing activity and higher rental rates. The Marcus & Millichap Retail Q4 Report highlights that average asking rents in Indianapolis are $16.79 per square foot (NNN), showing a 1.2% dip from the previous quarter but marking an 8.2% increase compared to the same period last year. 

To mitigate the space shortage, new developments and adaptive reuse projects are being implemented; however, the persistently low vacancy rates suggest that competition for retail locations will remain high.

Strategic Urban Development

Indianapolis is undergoing a transformative wave of urban development, with over $5 billion allocated to active projects reshaping the city’s economic and commercial real estate landscape. These initiatives aim to enhance infrastructure, attract investment, and create vibrant, mixed-use districts that support long-term growth and sustainability.

The city has implemented a comprehensive plan addressing land use, transportation, and parks, supported by a sophisticated zoning system that ensures effective land utilization. A key initiative is the OneHealth Innovation District, anchored by Elanco Animal Health’s headquarters and a partnership with Purdue University, which aims to establish a significant life sciences hub. Additionally, the $175 million redevelopment of the City Market campus will introduce high-density residential and mixed-use spaces, revitalizing the Market East District.

Public-private partnerships are crucial in these development initiatives, enabling efficient project implementation. The city is also integrating residential units into existing commercial retail buildings to address housing shortages, rejuvenate underutilized properties, and foster mixed-use environments that enhance foot traffic, stimulate economic activity, and elevate the vibrancy of commercial areas. Furthermore, Indianapolis is committed to sustainability through initiatives tackling climate change and promoting innovative city technologies while enhancing its infrastructure and transportation systems to improve connectivity and pedestrian safety.

Adaptation to Market Trends

Indianapolis’ retail real estate market is adapting swiftly to evolving consumer behaviors and broader industry trends, positioning itself as a forward-thinking hub for innovation. The city heavily invests in mixed-use developments, integrating residential, commercial, and recreational spaces to cater to modern urban lifestyles. A key trend in Indianapolis’ commercial retail listings is the shift toward experiential retail, where businesses offer immersive experiences that combine digital and physical elements to engage modern consumers, while also focusing on sustainability to attract environmentally-conscious consumers. 

Furthermore, Indianapolis is dedicated to community-centric development, fostering livable neighborhoods that support local businesses as essential gathering places, thereby enhancing residents’ overall quality of life. As reflected in its comprehensive plan and zoning system, the city’s flexible urban planning allows for rapid adaptation to emerging trends, as demonstrated by initiatives like the OneHealth Innovation District.

Strategic Location and Infrastructure

 Indianapolis’ central positioning at the intersection of major interstate highways—I-65, I-69, I-70, and I-74—establishes it as one of the most well-connected cities in the Midwest. This advantageous positioning provides unparalleled access to both regional and national markets. This connectivity is further strengthened by a comprehensive transportation network encompassing highways, rail systems, and air travel, enabling efficient logistics and supply chain operations for businesses. Indianapolis International Airport, a top-ten U.S. air cargo throughput airport, is critical in facilitating national and global trade.

Beyond its geographical advantage, Indianapolis continues to invest in modern infrastructure, including enhanced transportation systems, reliable utilities, and cutting-edge digital connectivity. The city is also a key player in rail transport, with CSX Transportation’s division headquarters and classification yard in nearby Avon reinforcing its role as a logistics powerhouse.

Favorable Demographics and Population Growth

Indianapolis benefits from a dynamic demographic profile and a steady population growth rate, which are critical factors driving economic development and attracting businesses. The population of the Indianapolis metropolitan area expanded by approximately 11.8% between 2010 and 2020, reaching over 2.1 million residents. This upward trend signifies its surge in appeal as a destination for businesses and individuals alike.

Indianapolis is seeing an influx of young professionals driven by its affordability, vibrant culture, and job opportunities. This ongoing population growth expands the consumer base, boosts local businesses, and supports new housing and commercial developments. The city’s diverse and youthful population and attractive living conditions make Indianapolis a compelling location for companies looking to thrive in a competitive landscape.

Diverse Range of Specialty Spaces

Indianapolis is evolving to accommodate diverse specialty spaces that serve niche markets and enhance the consumer experience. The city has fostered an environment where unique retail, innovative workspaces, and vibrant community hubs thrive.

Boutique shops, artisan markets, and local food spaces have become integral to the city’s retail scene, offering one-of-a-kind products while supporting local entrepreneurs. For example, the Indy Winter Farmers Market connects residents with local farmers and artisans, promoting sustainable practices and community engagement.

Cultural districts like Mass Ave and Fountain Square feature a blend of retail, dining, and entertainment options, attracting locals and visitors. Additionally, co-working spaces in Indianapolis, such as Brandnook, cater to the growing number of freelancers, startups, and remote workers, offering flexible environments that encourage collaboration.

Indianapolis has also seen significant investment in mixed-use developments like The Bottleworks District and Fishers District, which combine residential, commercial, and recreational spaces to create vibrant, integrated communities.

Strong Labor Market

Indianapolis is characterized by a dynamic labor market driven by various sectors, such as manufacturing, healthcare, technology, and logistics, offering its residents numerous employment opportunities. The city’s unemployment rate, recorded at a mere 3.6% in December 2024, reflects the health and resilience of its workforce. The presence of esteemed educational institutions, such as Indiana University-Purdue University Indianapolis (IUPUI), Butler University and Marian University, is pivotal in cultivating a skilled workforce. Additionally, initiatives by organizations like EmployIndy are instrumental in workforce development, offering resources and training programs designed to enhance the skills of job seekers and align them with employer demands. The increasing trend of remote work has also positively impacted Indianapolis’s labor market, drawing professionals from various regions attracted by the city’s affordable cost of living, engaging lifestyle, and extensive amenities. This influx enriches the local talent pool and promotes enhanced competition, innovation, and industry collaboration. Furthermore, the city’s supportive ecosystem for small businesses and startups, exemplified by organizations like Speak Easy and Launch Indiana, fosters entrepreneurship and job creation.

Conclusion

If you’ve been watching the Indianapolis retail market, you’ve likely noticed a shift—vacant spaces aren’t empty for long. Vacancy rates in prime locations have dropped, foot traffic in key shopping districts is rising, and leasing deals are closing quickly. The retail renaissance in Indianapolis is just the beginning. With a strong labor market, innovative urban development, and a growing population, Indianapolis is becoming a top destination for retail and specialty spaces. The city’s evolving commercial property investment landscape, strategic location, and infrastructure create a compelling environment for businesses to thrive. Its commitment to development and adaptability ensures that Indianapolis remains a strong contender in the commercial real estate market.