Indianapolis Commercial Office Space for Rent

Q4 2025

Indianapolis Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Indianapolis commercial real estate (CRE) market is entering late 2025 with improving balance as supply pressure eases and demand holds above historical norms [2]. The Office sector is stabilizing as modest rent growth and relative affordability support market resiliency [2]. Industrial markets are demonstrating a steady recovery, marked by a significant reduction in vacancy and stabilized leasing activity [1]. Retail demand is resilient, with low vacancy rates and net absorption turning positive in Q3 [4]. Multifamily continues to be a relocation leader among Midwest markets, with robust demand exceeding ample deliveries [5].

TenantBase Proprietary Data [16] highlights the distribution of active tenant demand over the last 90 days (233 total deals):

  • Retail/Storefront dominated market activity with 63.09% of all searches [16].
  • Warehouse was the second most active sector at 25.32% [16].
  • Office accounted for 12.88% of total search volume [16].

Office Market

Market Overview Indianapolis's office market is stabilizing, with fundamentals poised to firm gradually as new supply is absorbed and demand remains above long-term averages [2].

  • Vacancy & Availability: The vacancy rate increased slightly by 19 basis points to 20.0% in Q3 2025 [3]. Direct availability contracted to 7.37 million SF after near-record highs, while sublease space remained largely flat [3].
  • Net Absorption: Absorption decreased to negative (56,164) SF in Q3, a contraction from the positive figures seen in Q2 [3]. Negative absorption was largely driven by specific move-outs, such as Parkstone Office Center 2 [3].
  • Rental Rates: Asking rates continued to contract, decreasing by $0.04 to $22.16 per SF [3].
  • Market Drivers: Demand is holding up across the metro with broad-based leasing strength, especially in Hamilton County [2].

TenantBase Activity [16]

  • Demand Share: Office accounted for 12.88% of total search volume [16].
  • Lease Term Preference: Demand is predominantly for short-term flexibility [16]:
    • Less than one year: 42.31% of deals [16].
    • 2-3 Years: 34.62% of deals [16].
    • 3-5 Years: 19.23% of deals [16].
  • Size Requirements: Tenants seeking shorter commitments prefer smaller spaces. The average lower SF required for a Less than one year term is 1,000 SF, compared to 1,333 SF for a 3-5 Years term [16].

Industrial & Warehouse Market

Market Overview The Indianapolis industrial market is demonstrating a steady recovery, with a notable reduction in vacancy and stabilized leasing activity [1].

  • Vacancy & Rent: Overall vacancy dropped to 10.3% at the end of Q3 2025, a 110-basis-point reduction from Q1 [1]. Average asking rents rose 1.5% quarter-over-quarter to $6.10 per SF [6].
  • Demand & Supply: Net absorption was positive 4.6 million SF in Q3, a significant increase from the previous quarter [6]. The development pipeline continues to shrink, down 37% from year-end 2024 [1].
  • Leasing Activity: Leasing activity gained momentum, totaling 9.2 million SF in Q3, an increase of 2.7 million SF over the prior quarter [6].

TenantBase Activity [16]

  • Demand Share: Warehouse accounted for 25.32% of total search volume [16].
  • Lease Term Preference: Demand is spread across short and mid-term options [16]:
    • 3-5 Years: 32.00% of deals [16].
    • 1-2 Years: 28.00% of deals [16].
    • 5+ Years: 16.00% of deals [16].
  • Size Requirements: The average lower SF required for a 3-5 Years term is 16,429 SF, reflecting demand for larger industrial spaces compared to other sectors [16].

Retail Market

Market Overview Indianapolis's retail market remains resilient, with demand improving and vacancy rates holding steady at historically low levels [4].

  • Vacancy & Availability: The overall vacancy rate decreased by 50 basis points quarter-over-quarter to 5.0% [9]. Total available space decreased 8.0% to 2.5 million SF [9].
  • Net Absorption: The market recorded 240,000 SF of positive net absorption in Q3, with the Lafayette Square trade area leading the way [9].
  • Rental Rates: Asking rents are rising across the market, reflecting tight conditions [9].
  • Market Drivers: Despite economic headwinds, demand for retail space has improved, and limited new construction is helping to cap downside risk [4].

TenantBase Activity [16]

  • Demand Share: Retail/Storefront activity dominated with 63.09% of all search volume [16].
  • Lease Term Preference: Retail tenants show a strong preference for longer commitments [16]:
    • 3-5 Years: 23.08% of deals [16].
    • 5+ Years: 23.08% of deals [16].
    • 2-3 Years: 21.54% of deals [16].
  • Top Locations: Tenant interest is highest in Indianapolis (City) (36 deals) and Fishers (5 deals) [16].

Multifamily Market

Market Overview Indianapolis continues to be a relocation leader, with robust apartment demand exceeding ample deliveries for a second straight year [5].

  • Vacancy & Occupancy: Apartment occupancy increased 100 basis points to 95.4% nationally, a trend mirrored in Indianapolis where demand is strong [11].
  • Rents: Rent growth has softened but remains positive, with Indianapolis ranking fourth among major markets in rent-to-income ratio affordability [5].
  • Construction: The supply wave has crested, with deliveries down 27% year-over-year nationally, signaling a slowdown in new supply that will support fundamentals [10].
  • Demand: Net in-migration is expected to reach record levels for a second consecutive year, driven by local affordability and job growth [5].

2026 Outlook

Looking ahead to 2026, the Indianapolis market is poised for continued stability and growth.

  • Industrial Strength: The industrial sector will remain a top performer, with vacancy expected to compress further as the development pipeline moderates [14].
  • Retail Resilience: Service-based retail and experiential concepts will dominate, with low vacancy rates continuing due to limited new supply [13].
  • Investment Opportunities: "Turnkey" properties will outperform fixer-uppers as investors seek stabilized assets to reduce downtime [13].

Sources

  1. Avison Young: Indianapolis Industrial Real Estate Market Reports | Q3 2025
  2. MMG Real Estate Advisors: Indianapolis Q3 2025 Market Report
  3. CBRE: Indianapolis Office Figures Q3 2025
  4. Cushman & Wakefield: U.S. Shopping Center MarketBeat Report
  5. Marcus & Millichap: Indianapolis Multifamily Market Report
  6. CBRE: Indianapolis Industrial Figures Q3 2025
  7. CRE Daily: Industrial Demand Rebound Drives Market Stability In Q3 2025
  8. Lee & Associates: 2025 Q3 Indianapolis, IN - Retail
  9. Cushman & Wakefield: Indianapolis Retail MarketBeat Q4 2024
  10. Cushman & Wakefield: marketbeat - united states - multifamily q3 2025
  11. Berkadia: Multifamily Market Reports
  12. Hardware Retailing: Multifamily Housing Market Confidence Rises in Q3 2025
  13. Talk to Annie: Commercial Real Estate Trends 2026
  14. Cara Conde: Explore the top trends driving Indianapolis commercial real estate in 2026
  15. Connect CRE: "Relatively Stable" 2026 Economic Outlook Bodes Well for CRE
  16. TenantBase Proprietary Market Data (Indianapolis - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.