Bounce the Market: Demand for Condominiums Rebounding in Indianapolis

In 2007, after a healthy surge in condominium development in Indianapolis, buyers got cold feet. Many completed units failed to sell and stood empty. But today, a growing interest in owning urban property, rather than renting, has returned. The renewed interest is partially a response to downtown’s housing sector proving itself as a vibrant livable community, attracting an influx of new residents in the process. The other part of the equation is a better understanding of what the market can bear.

After building several downtown apartment projects, Milhaus has gained insight into what urban dwellers want in terms of quality and price. They’ve done their homework, researching resident needs and working with communities to offer neighborhood-appropriate housing solutions. Jake Dietrich, Director of Development at Milhaus, says, “While we still see great demand and opportunity for apartments in and around the urban core, we are simultaneously seeing a growing demand for for-sale housing as well.” Milhaus is not wasting any time responding to the market. “We are already in the process of obtaining zoning and design approvals on a few properties right now. One of these we know will be a condominium development and another one is a possibility as well.”

Milhaus plans to start small and test the waters. “We recently announced plans for a 2-acre property at 10th and Broadway in the Chatham Arch neighborhood, a desirable, mostly owner-occupied urban neighborhood within walking distance to Mass Ave. – a perfect location for condo development.” The five-building project will house about 80-90 units of both three-story flats and townhouses. “The ability to offer several different product types should give us some insight into what the market is looking for.”

Jeremy Stephenson, Executive Vice President at Milhaus, says, “I think people were surprised to see that announcement, given the tough financial market for housing today and the fact that no condos have been started in downtown Indianapolis since 2006-07.” But now is as good a time as ever for condos to make a comeback. Dietrich adds, “Although the ‘American Dream’ has moved away from a suburban ownership type of lifestyle to shared environments, there are still people who want to live downtown and who want to own – especially if their monthly payment is comparable to a rent payment.” The recession that froze the urban buying market has thawed somewhat and there is a strong pent up demand for sale units. “Buyers are beginning to trust again. In a year or two, we forecast the demand growing substantially. Right now, no one is building multi-family for-sale,” says Dietrich.

Contrary to thought, Condominiums are not just apartments you own. Stephenson points out that “condos require attached parking in Indianapolis, or at least all of it covered and close by. They also demand more storage in number and sizes of closets. Finishes are usually nicer, too. Owners expect more private outdoor space per unit - something not standard in apartments. For the developer, apartments have a much longer investment horizon; they are built all at once, require a large amount of equity and debt, and have a lot of competition on a national scale in the capital markets for investors. Small condo sites, like 10th and Broadway, require less equity and debt and the timeframe is much shorter.”

Dietrich says, “Milhaus is not just a developer of apartments, but rather we are a developer of neighborhoods. Sometimes, apartments make a lot of sense in a particular neighborhood, and other times condominiums are a better choice.” Both products are needed to strengthen downtown residential neighborhoods and provide more places for people to live.