Carmel scales back its building boom

Mar 9, 2010 — The Indianapolis Star

Chris Sikich

Mar. 8, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- CARMEL, Ind. -- One of the region's most sustained construction booms appears headed for a breather.

City Center, the 80-acre centerpiece of Carmel's effort to create both a new downtown and regional shopping destination, will open up 78,000 square feet of retail and office space later this year.

But that's where construction will stop. Officials of City Center developer Pedcor say they will wait for demand to increase and the lending market to loosen before beginning work on the second half of the project.

Developers say they are optimistic they will lease the new space. But no leases are signed, and City Center will have to compete with 128,000 square feet of new or soon-to-open commercial space in the city's Arts and Design District.

In this economy, experts say all of that space could take two years or more to fill.

"These are beautiful projects," said commercial real estate agent David Bickell. "Nothing is wrong with the projects. . . . I'm just dealing with reality. It's just the timing and everything like that, you could not have foreseen when you started building and planning five to six years ago."

With a median household income of $96,000, the highest in Indiana, Carmel has long been a bastion of growth, fueled partly by the vision of its four-term mayor, Jim Brainard.

He unveiled his plans to build a new downtown 13 years ago, and City Center began to take shape a few years later with a mix of homes, offices, retail and restaurants a few blocks south of Carmel's old downtown.

By year's end, Pedcor will have reshaped Carmel's skyline with five new buildings -- 256,000 square feet of retail, office and residential space, and a 109,000-square-foot underground parking garage.

Designed with a European flair, the buildings -- among the tallest in Carmel -- will tower over even the rotunda of the nearby Palladium concert hall, scheduled to open in January.

"So many times in this country, buildings are built to be torn down in 20 years," Brainard said. "We want buildings that will last for a hundred years with good architecture, with an eye toward making it very aesthetically pleasing."

Six years ago, when the mayor tabbed Carmel-based Pedcor to develop the rest of City Center, he envisioned something more than twice as large.

Pedcor has invested about $70 million out of $200 million it anticipated spending on City Center, and Carmel has pledged commercial property tax dollars to be collected from the project to pay for parking garages and other infrastructure.

Brainard still wants to see more retail, restaurants, offices and homes in similar buildings on undeveloped property a block to the south.

"It would be nice to wave a wand and see everything done at once," he said, adding that as the recession ends and traffic builds toward the new concert hall, new business will follow.

Resident Jim Fry thinks the mayor has managed growth well.

He and his wife, Mary Lou, look forward to eating at City Center and catching the Carmel Symphony Orchestra -- for which they hold season tickets -- at the concert hall next year.

"Carmel is a very neat town," said Fry. "I give him (Brainard) high marks."

But longtime resident John Campbell, 49, admits he's concerned.

"Look at how many empty office buildings you have in this place," he said. "People are going to come into Carmel and say, 'Gee, what's going on here?' "

Deals are harder to do

A half-mile north of City Center, within the fledgling Arts and Design District, are two other redevelopments spurred by public-private partnership.

One of them, a mix of apartments and shops due to open early next year, is already more than half-leased, according to the developer. But the other, the 82,000-square-foot Indiana Design Center, is still largely empty since opening in December.

Only two tenants are open for business, although Pedcor says others will be on the way this spring.

Melissa Averitt, Pedcor's director of marketing and sales, said the Design Center is already 40 percent leased to tenants that include an interior-design group, an art and furniture dealer and a family-owned sandwich shop. Another 40 percent is in "serious negotiations," she added, to the point of designing space and working on price.

"The deals have been more difficult to do, but ultimately given that both projects (the Indiana Design Center and City Center) are over the halfway mark in terms of working deals, we're not doing so bad," said Averitt, Pedcor's vice president.

About two blocks away, Indianapolis-based Keystone Construction plans to open the 260,000-square-foot, $50 million Arts District Lofts and Shoppes in early 2011. It will include 202 luxury apartments, 46,000 square feet of retail space and -- as with the City Center and Indiana Design Center -- a city-funded parking garage.

CEO and President Ersal Ozdemir said Keystone already has leases with three restaurants, a fitness center and a salon.

"We won't aggressively try to lease much more, because we have leased more than we needed to," he said. "We won't open for almost another year, and we've already done more than we expected."

Brainard estimates that the redeveloped Arts and Design District is at least 70 percent leased, with a mix of restaurants, studios and living space.

"It's not perfect, but it's not terrible either," he said. "When you are dealing with small businesses, there always will be a slightly higher vacancy rate."

Pedcor says it's also making progress in filling City Center.

Leasing will begin soon for 106 apartments, ranging from 800 to 2,500 square feet and $850 to $2,800 a month. The developer says it has identified tenants for nearly all of the retail, restaurant and office space, though it has signed no deals.

Pedcor is in serious negotiations for about 85 percent of the retail and restaurant space, Averitt said, adding that more restaurants have expressed interest than space would allow.

Tracey Holtzman, a principal with the Indianapolis-based commercial brokerage firm NAI Olympia Partners, says she believes Carmel will be cushioned from the full impact of the recession, and will emerge faster than other communities.

"It's Carmel," she said. "It's high-income. It's high-growth."

Star librarian Barbara Hoffman contributed to this story.

Newstex ID: KRTB-0095-42719489