Building Indiana: commercial real estate development proceeds with caution. Is Indiana in a better position?

• Author: Hromadka, Erik
• Position: REAL ESTATE & CONSTRUCTION

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WHILE THE DECLINE IN residential housing continues to dominate much of the real estate headlines, new development of commercial real estate in Indiana is proceeding cautiously.

Developers seem to have taken note of observations such as those highlighted by Federal Reserve Chairman Ben Bernanke, who delivered an economic forecast in February that outlined risks from housing, labor and credit markets, and indicated even lower interest rates may be needed to help the economy. In his testimony, Bernanke offered no indication that the housing sector is approaching a bottom and he suggested last year's healthy nonresidential construction "is likely to decelerate sharply."

However, Indiana may be in a better position to handle those conditions than other states because its commercial real estate market has not seen the speculative building and soaring prices like other parts of the country. A wide range of commercial real estate projects continue to move forward across the state, bringing new office buildings, health care facilities, retail locations and other mixed-use developments to Hoosier communities.

Green buildings. One of the bright areas in commercial real estate is the growing demand for environmentally friendly construction. According to the 2008 FMI U.S. Construction Overview, a projected $21.2 billion of new nonresidential construction will use green-building principles this year--a 58 percent increase over 2006. Energy-efficient buildings are becoming more popular as a way to counter rising energy prices and legislation at the federal and state levels is encouraging municipal buildings to meet the standards of the Leadership in Energy and Environmental Design (LEED) rating system, the nationally accepted benchmark for high-performance green buildings.

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One such project is taking place in southwestern Indiana, where Industrial Contractors is working on a new building to expand the corporate headquarters of American General Finance in Evansville.

The four-story office building will include 170,000 square feet of space and features glass and metal panels on the exterior set off with limestone bands. The $34 million project will pursue LEED certification and connect to the company's current headquarters building by a pedestrian walkway that connects the second floors of each building.

"Sustainable design and development has moved into the mainstream," says Dan Hoefling, vice president of major projects and pre-construction. "Reducing or eliminating the negative impact buildings have on the environment and on the building occupants has expanded from government projects to private business as a vehicle for differentiating themselves and bolstering their public images. LEED standards and procedures have become an essential prerequisite for designers and contractors when being considered for projects."

Industrial Contractors is also working on a new $18 million student center at the University of Evansville that will house office for student organizations, including the school's newspaper and radio station, as well as dining and entertainment areas. The 90,000-square-foot project is expected to be completed this August in time for the next school year.

In a different type of "green" project, Industrial Contractors is also completing an Amazon Rain Forest exhibit at the Mesker Zoo in Evansville that is scheduled to open this summer. As the general contractor on the project, the company is overseeing construction of a specialized habitat that will provide a climate-controlled home to some 150 jungle animals and exotic plants.

Brownfield development. Another type of real estate development that helps the environment is brownfield development, which takes...