Known as the crossroads of America, Indianapolis offers a unique intersection of affordability, industry and Midwestern charm. According to research from Indiana University’s Kelley School of Business, 2.14 million people — or nearly one out of every three Hoosiers — lives in the Indianapolis metro region. Indianapolis’ growth rate last year outpaced Cincinnati, Louisville, Kentucky, Cleveland, Detroit and Chicago. It’s not hard to see why, especially when looking at the economic opportunities within the region and the state as a whole.
Several Fortune 500 companies, such as Eli Lilly, the global pharmaceutical company, and Anthem, an insurance provider, have established their headquarters in Indianapolis. According to research from the Bureau of Labor Statistics, employment grew by 2.7 percent in the Indianapolis-Carmel-Anderson metro area in 2023, outpacing the national average of 2 percent.
Indiana has experienced back-to-back record-setting years for investment and is on pace for another record-breaking year in 2024. According to the Indiana Economic Development Corp., 124 companies have committed to locate or expand in Indiana, investing approximately $38.3 billion in their operations.
One of those commitments includes Eli Lilly, which recently announced a $13 billion pharmaceutical research and manufacturing project in the area, further establishing the company’s presence. IU Health is also currently building a new $4.3 billion hospital, while the Indiana Convention Center and Hilton have begun construction on a new expansion that will connect the convention center with a new 800-room Signia by Hilton.
For multifamily housing, this population and job growth can translate well into sustained demand for new rental homes.
Renter Demand Peaks in Hamilton County Submarkets
The Hamilton County cities of Westfield, Carmel and Fishers are consistently recognized as some of the best places to live in the country. In 2024, Niche.com, a company that ranks and reviews primary and secondary public and private schools as well as colleges and universities, ranked the Indianapolis suburb Carmel as the best city for quality of life in America.
Livability.com, a website that ranks small and mid-sized cities, also rated Carmel as the best place to live in America, with Fishers and Westfield, two additional Indianapolis suburbs, each ranking near the top, coming in at No. 4 and No. 10, respectively.
Indeed, these areas are understandably appealing with their proximity to high-quality schools, low crime rates and plentiful job options. While they have characteristically had more owner-occupied housing, significant multifamily development has occurred over the past few years.
According to research from RealPage, the new supply in Indianapolis has recently registered at its highest level since the company started tracking the market 25 years ago. Between the second quarter of 2023 and 2024, developers opened 5,725 units, with nearly half of those built in Hamilton County.
Additionally, during the second quarter of 2024, more than 1,900 units were absorbed, the largest quarterly absorption since mid-2020. Overall, rent growth in the region has increased by 2.5 percent over the past year, while occupancy sits at 93.5 percent.
Thompson Thrift’s The Union at Fishers District will commence construction in March 2025. The Union will not only include 250 luxury apartment homes but also 150 luxury boutique hotel rooms, 60,000 square feet of Class A office space, approximately 55,000 square feet of retail, restaurant and entertainment space and 805 structured parking spaces. The community’s design will also complement the existing Fishers District design to create a cohesive and lively atmosphere across the expansive master-planned development, further adding to the appeal of the area.
Metro Rents Have Room to Grow
Between the first quarter of 2022 and the second quarter of 2024, Indianapolis has had rent growth of 13.8 percent compared with the U.S. growth rate of 11.4 percent for the same time period.
While Indianapolis rent growth has outperformed the U.S. average, it still only stands at an average asking rent of $1,300 per month, well below the national asking average of $1,730 per month, according to CoStar.
Even the markets of Fishers/Noblesville and Carmel/Zionsville/Westfield, which feature the highest asking rents in the region at $1,560 per month and $1,640 per month, respectively, are still below the national average. While rent growth has softened nationwide, the region’s affordability suggests the potential for growth to continue.
The average Hamilton County renting household spends approximately 15 percent of its annual income on rent, well below the widely accept 30 percent benchmark The U.S. Department of Housing and Urban Development (HUD) uses to define cost-burdened households.
This may be especially appealing to those who want to avoid the high interest rates or other responsibilities of home ownership. It may also be attractive to renters looking to sock away some savings for an eventual home purchase. Given its Midwest location, however, these renters may still desire some of the space that traditionally comes with a house.
Indianapolis is a big city that still feels like a small town, and both downtown and its submarkets offer developers and investors unique opportunities and challenges. Developers may capitalize on the job growth and economic expansion, but they must be careful of oversupply in certain submarkets. Investors should select experienced developers who know these possible obstacles and know how to overcome them.
Overall, however, with its strong employment options, increased demand and general affordability, Indianapolis seems poised for continued strength in the market, resting comfortably at the crossroads of America.
— Brian Southworth is vice president of acquisitions and partner with Thompson Thrift, a commercial real estate development, construction, leasing and management company with offices in Indianapolis and Terre Haute, Indiana, Denver, Houston and Phoenix.