When you think about a “tech hub,” do you think about Indianapolis? If not, you should. While markets like the San Francisco Bay Area, New York and Boston receive the lion’s share of attention, the tech boom has had a surprisingly widespread reach.
Indiana has long been known for its auto industry and life sciences sector as well as its standing as the birthplace of David Letterman, Kurt Vonnegut, the Indy 500 and the Peyton Manning-era Colts. But thanks in part to its top-caliber universities producing highly skilled employees, Indianapolis is also a market to watch in terms of tech.
In fact, a 2015 Fast Company study ranked Indianapolis number six on their “Next Top 10 Cities for Tech Jobs” list. DataFox listed the city as number two of “10 Cities That Are Secretly Great for Tech Grads” and a joint report by Trulia and LinkedIn ranked Indianapolis number two in the “Graduate Opportunity Index of Top 10 Metro Areas for Young College Graduates.”
Research from Colliers’ Indianapolis office points out that there are at least 26 tech-related firms within a quarter-mile radius of central downtown Indianapolis—and more than half of them opened offices after 2014. But if you’re thinking these are all nascent firms occupying minuscule footprints, think again.
Workforce management software company Kronos, Inc. occupies 40,000 square feet in the city. Salesforce.com has tallied 250,000 square feet in their new regional headquarters at 111 Monument Circle—soon to be renamed Salesforce Tower Indianapolis. It is very telling of tech’s impact to see this type of firm secure the naming rights to the tallest Class A+ skyscraper in a Midwestern central business district (CBD), rather than a financial or insurance firm. In addition, Salesforce.com has plans to add 800 new jobs in Indianapolis over the next five years.
THE ORIGINS OF TECH IN THE INDIANAPOLIS CBD
But before these firms, there was ExactTarget—the genesis of the Indianapolis CBD tech presence. The former digital marketing automation company preferred the older buildings that many companies in other industries avoided—locally referred to as “creative” or “character” buildings. Their entry to the market and desire for that class of building helped to stabilize vacancy in a CBD market that had been struggling to gain traction.
Further emphasizing the impact on the office market, the vacancy rate for these creative/character buildings dropped from a peak of 12.9 percent in 2011 to 7.9 percent at year-end 2015. In comparison to this 500 basis point drop, the overall CBD office vacancy rate dipped just 180 basis points over the same period
Source: Colliers International
INDY TECH CONTINUES TO GROW
When ExactTarget was acquired by Salesforce in 2013, many of the executives left to start new tech and venture capital funds in the area. Strong support, advice and capital from the first wave of entrepreneurs in the area has helped to fuel continued tech growth. Consider the stories of just a few of the pioneers incubating emerging tech firms and driving momentum in Indianapolis:
- Former ExactTarget co-founder and CEO Scott Dorsey later co-founded High Alpha, which has a program to nurture start-ups as well as a venture capital arm. In addition, he sits on several boards dedicated to promoting the tech scene in Indiana.
- Mark and Karen Hill have become some of the area’s most active angel investors following the sale of their banking software start-up Baker Hill to Experion.
- Bill Godfrey sold the marketing automation software company he started (Aprimo) to Teradata for $525 million in 2010 and also became an angel investor, investing in nine companies and sitting on the boards of several of those firms.
Today, Indianapolis is drawing a diverse set of tech tenants from a broad range of geographies. Austrian digital marketing firm Emarsys chose the Indianapolis CBD as the location of its North American headquarters. Cloud services firm Appirio recently moved its corporate headquarters from San Francisco to Indianapolis, citing a booming tech community, business-friendly environment and the value of being surrounded by more than 75 colleges and universities—many of which have strong engineering programs. Chicago-based Geofeedia (a startup that pulls real-time, location-based data from social media) committed to add 336 employees in their Indianapolis office by 2020 and is now considering moving its headquarters there as well.
Indianapolis is just one of the many non-coastal markets with a strong and growing tech presence. While the east and west coasts remain dominant players in the tech scene, growth in this sector has spread far beyond the traditional markets, bringing with it opportunities for real estate revitalization.
For more insight into the ways technology is influencing commercial real estate trends, read the recent Colliers report, Impact of “New Tech” Tenants on U.S. Office Leasing.