City’s first spec office building in 5 years opening doors

Sourwine Real Estate Services is about to deliver to the Indianapolis market the first speculative office building since 2008.

The $12 million project with 80,700 square feet of Class A space for lease should be finished by mid-June, the Indianapolis-based developer says.

Sourwine is offering 80,700 square feet of space in 8335 Keystone Crossing. (IBJ Photo/Aaron Bernstein)

Dubbed 8335 Keystone Crossing, the three-story structure is the third building in the company’s Keystone Office Centre southeast of 86th Street and Keystone Avenue. As a so-called "spec" building, it was constructed without a commitment from a major tenant as an anchor.

The building could serve as a barometer for demand within the Indianapolis-area office market as it begins to rebound from the economic downturn.

The area's office vacancy rate for Class A space recently has hovered around 20 percent. But without much office development in the pipeline, office brokers expect the rate to slowly decline.

Last year, the entire metropolitan market logged about 700,000 square feet of positive absorption, mostly in the northern suburbs, said John Robinson, managing director of the Indianapolis office of Jones Lang LaSalle.

“With no new construction, it doesn’t take an economics major to figure out supply and demand,” he said. “The key right now to successful office leasing is having a large tract of space available.”

Just one building in the Keystone at the Crossing submarket, Three Woodfield Crossing, can match Sourwine’s latest entry by offering 80,000 square feet of contiguous office space, Robinson said.

Each of the three stories at Sourwine’s building has 25,000 square feet of leasable space. The first floor also has a fitness center.

Sourwine has yet to sign a tenant for the building. But company leaders are encouraged about prospects, particularly since one of Sourwine’s buildings within Keystone Office Centre is fully leased and the other is 96-percent occupied.

“We have belief not only in our own product but a belief in the Keystone submarket to perform above average,” said Joe Sourwine, the developer’s asset manager and son of company President Jim Sourwine. “We just think it’s an advantageous time to bring this to the market.”

Healthy activity in the Keystone at the Crossing area helped persuade Sourwine to undertake the spec project. Besides the high occupancy rates at its own two existing buildings, Sourwine was encouraged by increasing demand for office space within the nearby Keystone at the Crossing complex.

That complex, owned by Philadelphia-based Equus Capital Partners Ltd., is 93-percent leased, according to Jones Lang LaSalle statistics.

Simon Property Group Inc.’s continued investment in The Fashion Mall also contributed to Sourwine's optimism. In addition, construction of the $30 million mixed-use Ironworks at Keystone development at the southwest corner of 86th Street and Keystone Avenue should help the spec building attract tenants, Joe Sourwine said.

“For us, the signs are very positive, especially in the Keystone submarket,” he said. “Keystone has lots of great amenities.”

The most recent speculative office building to open in central Indiana was Lake Pointe Center 5, completed five years ago by Indianapolis-based Edgeworth Laskey Properties at the southwest corner of Interstate 465 and Allisonville Road.

Sourwine will own and manage its new building. CSO Architects was the designer of the brick-and-glass structure, and Shiel Sexton the construction manager.

The Indianapolis office of the Cassidy Turley brokerage is handling leasing. Sourwine is asking $21.50 per square foot, a “very competitive rate” for Class A office space in the Keystone at the Crossing submarket, Joe Sourwine said. Rents at the Keystone at the Crossing complex range from $19 to $22.50, according to the most recent IBJ statistics.

Sourwine also owns the three-building 9100 Meridian Square office complex at 91st and Meridian streets.