MARKET SNAPSHOT
Stricter debt requirements and rising construction costs have significantly slowed multifamily construction activity in Indianapolis. Although the under construction inventory remains near the 10-year average, it represents only 2.3% of the market’s base inventory and is expected to decline rapidly. Multifamily starts in Indianapolis fell by 70% in 2024, one of the sharpest drops nationwide, with unit deliveries projected to decrease by 60% in 2025. For the first time since 2022, annual deliveries will fall below the historical average of approximately 3,000 units.
In 2024, about half of all apartment completions were concentrated in the Carmel/Zionsville/Westfield and Fishers/Noblesville submarkets, with the former area expected to account for a quarter of new completions in 2025. Meanwhile, Downtown Indianapolis remains active, particularly in areas offering live, work, and play environments near the urban core. The Downtown area is set to see around 300 units delivered in 2025 yet is estimated to maintain stable occupancy levels. Across nearly all submarkets in Indianapolis, development activity is declining, leading to more balanced supply and demand fundamentals throughout the market.
In 2024, the Indianapolis apartment sector absorbed over 5,600 units, a significant improvement from the approximately 2,000 units absorbed in 2023. Despite this increase in demand, roughly 6,400 units were delivered throughout the year, setting a record for the highest annual deliveries and exerting downward pressure on occupancy rates. However, in the most recent quarter, renter demand surpassed new completions for the first time since early 2021. This shift in demand dynamics is expected to stabilize overall occupancy rates, supported by the area’s growing population and strong economic fundamentals, which will further bolster absorption and pave the way for occupancy improvements this year.
Submarket performance over the past year highlights the strongest renter demand in areas around the periphery of Indianapolis. Johnson County, located about 30 minutes south of downtown, absorbed approximately 775 units. Meanwhile, the Fishers/Noblesville submarket, about 30 minutes to the north, recorded the highest renter demand, with roughly 850 units absorbed. These submarkets are expected to maintain stable occupancy rates above the market average in 2025.
Rent growth in Indianapolis, mirroring national trends, softened through 2024, largely due to the impact of new supply. After peaking at 11.1% in mid-2022, growth moderated to 2.3% in the past quarter. However, the market continues to outperform the national average, which remains just above 1%. This resilience is driven by diverse economic factors and the region’s relative affordability. While household incomes are on par with the national average, rents in Indianapolis are approximately 25% lower. Improving supply and demand dynamics are expected to reduce the use of concessions, further supporting rent growth.
Rents are highest in the Carmel/Zionsville/Westfield submarket, followed by Fishers/Noblesville. In these areas, upper-tier properties (4- and 5-Star units) make up more than half of the inventory, contributing to elevated rent levels. These submarkets are expected to see rent growth at or above the market average in the coming year. Meanwhile, the strongest rent growth has occurred in the North Madison County and Anderson submarkets, where rents remain below the metro average but continue to grow at some of the highest rates in the region.
Looking ahead, rents in Indianapolis are expected to stabilize in early 2025, begin rebounding by the second quarter, and reach an annual growth rate of 3.5% by year-end.
12-month period ending November 2024
The Indianapolis multifamily market is poised for stabilization and gradual improvement in 2025, driven by shifting supply-demand dynamics, a strong local economy, and continued population growth. Following a record-breaking year in 2024, with approximately 6,400 units delivered, new supply is expected to decline sharply in 2025, with only 2,545 units projected—representing a 60% reduction. This significant slowdown in construction is anticipated to ease supply pressures, supporting higher occupancy rates across many submarkets and fostering a more balanced market environment.
Rent growth is expected to accelerate, reaching 3.5% annually by the end of 2025. Indianapolis remains an attractive market due to its relative affordability, with average rents approximately 25% below the national average, despite household incomes being on par with national levels. Continued renter demand, fueled by population growth and an improving economic landscape, is projected to outpace the reduced pace of deliveries for the first time in several years. Collectively, these factors indicate strengthening market fundamentals, creating a favorable climate for multifamily investment opportunities in the Indianapolis metro area.
