What Is the Current State of the Indianapolis Office Market?
The Indianapolis office market presents a nuanced picture heading into 2026, one that creates both challenges and opportunities for investors and owner-occupants seeking financing. The broader metro office vacancy rate sits at approximately 21.7%, with the downtown/CBD submarkets registering 20% to 24% vacancy. These headline numbers tell an important story, but they do not capture the full complexity of a market that varies dramatically by submarket, building class, and tenant profile.
Net absorption stabilized in the second half of 2025, turning positive at 13,000 square feet after recording negative 75,000 square feet the previous year, a 116.7% improvement. Total leasing activity through Q3 2025 reached 1.3 million square feet, driven primarily by northern suburban submarkets like East Carmel, the I-69 Corridor, and the Meridian Corridor. This suburban strength signals that the Indianapolis office market is bifurcating rather than uniformly declining.
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The bifurcation creates distinct lending environments. Stabilized, well-located suburban office properties with strong tenant rosters can access competitive permanent financing. Downtown and older suburban buildings with elevated vacancy face a more challenging lending landscape, though bridge loans and value-add financing strategies remain available. For investors who understand these dynamics, the Indianapolis office market offers compelling entry points, particularly in distressed or repositionable assets that can be acquired below replacement cost.
Eli Lilly's continued expansion, with $13 billion in new investment and over 12,000 Indianapolis-area employees, provides a significant demand anchor for office space across the metro. The Salesforce Tower downtown (48 floors, 2,000 Salesforce employees plus dozens of other tenants) and the broader technology and life sciences cluster create ongoing demand for quality office space. Contact our team to discuss financing options for Indianapolis office investments.
What Office Loan Programs Are Available in Indianapolis?
Office property financing in Indianapolis spans several loan programs, each suited to different property profiles and investment strategies.
Conventional Bank Loans
Local and regional banks remain active lenders for stabilized office properties in Indianapolis, particularly in suburban markets with occupancy above 80%. These loans feature 5 to 25-year terms, fixed or variable rates, and typically require personal recourse. Banks with strong Indianapolis market knowledge, including Indiana-based institutions, often offer relationship pricing that can be competitive for well-leased assets.
CMBS Loans
CMBS loans provide non-recourse financing for larger office properties ($3 million and above) with stable cash flows. These loans are best suited for multi-tenant office buildings with diversified tenant rosters and weighted average lease terms of 5 years or more. CMBS lenders are active in the Carmel, Fishers, and Meridian Corridor submarkets where office fundamentals are strongest.
SBA Loans
Owner-occupants can access favorable terms through SBA 504 loans, which offer up to 90% financing with below-market fixed rates and 25-year terms. These loans are ideal for medical practices, professional services firms, and small businesses purchasing their own office space in Indianapolis. The owner must occupy at least 51% of the building.
Bridge Loans
Bridge loans are essential for investors acquiring office properties with elevated vacancy, near-term lease expirations, or repositioning needs. With downtown vacancy at 20% to 24%, bridge financing allows investors to acquire below replacement cost and execute lease-up strategies before transitioning to permanent financing.
Life Company Loans
Life insurance company loans offer some of the best terms for premium, stabilized office assets. These loans feature low fixed rates, long terms (10 to 30 years), and non-recourse structures. However, they require institutional-quality properties with high occupancy and credit tenants, which limits their applicability in the current Indianapolis market to the best suburban assets.
What Are Current Office Loan Rates in Indianapolis?
Office loan rates in Indianapolis reflect the broader challenges facing the sector nationally, with lenders pricing in higher risk premiums than for multifamily or industrial properties. Here is a snapshot of current rate ranges.
The spread between office loan rates and rates for other property types has widened since 2023, reflecting lender caution about office market fundamentals. Borrowers financing well-leased suburban office properties can access rates comparable to other commercial property types, while downtown or value-add office projects face a premium of 50 to 200 basis points.
Cap rates for Indianapolis office properties range from 7.0% to 9.0% for stabilized suburban assets and 8.5% to 12.0% for value-add or downtown properties with elevated vacancy. The spread between cap rates and financing costs creates positive leverage opportunities, particularly for investors who can execute lease-up strategies that compress cap rates over their hold period. Use our commercial mortgage calculator to model different financing scenarios.
How Are Indianapolis Office Submarkets Performing?
Understanding submarket dynamics is critical for office loan underwriting in Indianapolis. The metro's office performance varies dramatically by location.
Downtown Indianapolis (CBD)
Downtown faces the most challenging conditions, with vacancy in the 20% to 24% range. The Salesforce Tower anchors the skyline, but several large blocks of vacant space weigh on the submarket. However, Eli Lilly's campus expansion and the ongoing revitalization of neighborhoods like the Wholesale District and Indiana Avenue create long-term demand drivers. Investors with patient capital and value-add expertise can find compelling downtown office acquisitions at significant discounts to replacement cost.
Meridian Corridor
The Meridian Corridor has outperformed the broader market, with vacancy at 18.4% and year-over-year improvement of 7.5%. This north-south spine connecting downtown to the northern suburbs benefits from excellent accessibility, a concentration of professional services tenants, and proximity to residential neighborhoods. Lenders view the Meridian Corridor favorably for office loans given its demonstrated resilience.
Carmel and East Carmel
Carmel has emerged as the strongest suburban office market in the metro, driven by excellent infrastructure, walkable mixed-use districts, and a growing employment base in technology, healthcare, and financial services. High demand and limited available options are pushing rents higher and keeping vacancy below the metro average. East Carmel is particularly active for new leasing, and lenders are most competitive when financing office properties in this corridor.
Fishers and I-69 Corridor
The I-69 Corridor through Fishers and Noblesville benefits from rapid population growth and expanding corporate tenancy. The Nickel Plate District and downtown Fishers developments have added modern, amenity-rich office space that attracts tenants seeking a suburban alternative to downtown Indianapolis. Office fundamentals here are among the best in the metro.
Keystone at the Crossing
The Keystone Crossing area, centered around the Fashion Mall and the 86th Street corridor, is one of the metro's most established office nodes. Several institutional-quality office buildings anchor this submarket, and it benefits from strong retail and hospitality amenities that office tenants value.
What Strategies Work for Financing Office Properties in Today's Indianapolis Market?
The current market environment requires creative financing strategies for many Indianapolis office properties. Here are the approaches that are working.
Bridge-to-Permanent Strategy
For properties with vacancy above 15% to 20%, a bridge-to-permanent strategy allows investors to acquire at a discount, execute tenant improvements and lease-up over 18 to 36 months, and then refinance into permanent debt once the property is stabilized. Bridge lenders active in Indianapolis understand this playbook and will underwrite to stabilized value for experienced sponsors.
SBA Owner-Occupant Strategy
Professional services firms, medical practices, and small businesses can acquire their own office space using SBA 504 loans with only 10% down payment. This strategy is particularly compelling in the current market, where landlords may be willing to sell at favorable prices and the borrower locks in long-term occupancy costs below market rental rates.
Office-to-Residential Conversion
Some downtown Indianapolis office buildings may be candidates for conversion to residential use, particularly in a market where apartment demand is strong and office vacancy is elevated. While conversion financing is specialized, construction loans and adaptive reuse programs can support these projects. Not every building is a viable conversion candidate, but those with the right floor plates, mechanical systems, and locations can generate compelling returns.
Medical Office Focus
Medical office buildings in Indianapolis, particularly those near major hospital campuses (IU Health, Community Health Network, Ascension St. Vincent), perform significantly better than general office properties. MOBs benefit from longer lease terms, higher tenant retention, and healthcare-driven demand that is largely insulated from remote work trends. Lenders underwrite medical office at more favorable terms than general office.
What Role Do Major Employers Play in Indianapolis Office Demand?
Indianapolis's office market is significantly influenced by several anchor employers whose growth trajectories affect both tenant demand and lender confidence.
Eli Lilly is the metro's most impactful employer for office demand. With over 12,000 Indianapolis-area employees and a $13 billion expansion underway, the pharmaceutical giant's growth creates direct demand for office space (both on-campus and in surrounding buildings) and indirect demand from the hundreds of vendors, contractors, and professional services firms that support its operations. The broader life sciences cluster of roughly 350 companies and 29,000 jobs amplifies this effect.
Salesforce occupies approximately 600,000 square feet in its namesake downtown tower and employs around 2,000 people in Indianapolis. While the company has reduced its physical footprint nationally, its Indianapolis presence remains significant, and the tower itself houses dozens of additional tenants that contribute to downtown vitality.
IU Health, the state's largest healthcare system, is a major office and medical office tenant across the metro. Community Health Network, Ascension St. Vincent, and other healthcare systems collectively occupy millions of square feet of office and medical office space. The healthcare sector's growth trajectory in Indianapolis is positive, driven by an aging population and the expansion of clinical research tied to Eli Lilly and other life sciences companies.
Allison Transmission, Rolls-Royce (aerospace), Anthem (Elevance Health), and a growing roster of technology companies round out the metro's major office tenants. This diversity provides resilience against sector-specific downturns and gives lenders multiple demand drivers to consider when underwriting office loans.
How Should Investors Underwrite Office Acquisitions in Indianapolis?
Office underwriting in Indianapolis requires careful attention to several market-specific factors that differ from other property types.
Lease Rollover Analysis
With the office market in transition, understanding lease expiration schedules is critical. Properties with significant near-term rollover (within 24 months) face re-leasing risk at a time when tenants have leverage. Investors should model renewal probability, downtime between tenants, and tenant improvement costs for each lease expiration. In the current market, 6 to 12 months of downtime between tenants is a reasonable assumption for general office space.
Tenant Improvement and Leasing Costs
Tenant improvement allowances in Indianapolis range from $30 to $70 per square foot for new leases, depending on building class and lease term. Leasing commissions typically run 4% to 6% of total lease value. These costs can be significant for properties with near-term vacancy and should be factored into acquisition underwriting. Bridge loan budgets should include adequate reserves for TI and leasing costs.
Operating Expenses
Office operating expenses in Indianapolis typically range from $8 to $14 per square foot annually for full-service gross leases. Key expense categories include property taxes (which vary by county), insurance, utilities, janitorial services, and property management. Understanding the property's expense structure relative to market and identifying efficiency opportunities is important for both underwriting and value creation.
Exit Strategy Considerations
Given the current market environment, investors should develop robust exit strategies that account for multiple scenarios. Hold periods for value-add office investments in Indianapolis should be modeled at 3 to 7 years, allowing adequate time for lease-up and market recovery. Exit cap rates should be underwritten conservatively, with 25 to 50 basis points of expansion from entry assumptions.
What Is the Office Loan Process in Indianapolis?
The office loan process follows the standard commercial mortgage timeline, with some additional considerations specific to the current market environment.
Borrowers should be prepared for more extensive underwriting scrutiny than other property types currently receive. Lenders will want detailed tenant credit analysis, lease abstracts, market rent comparisons, and a thorough understanding of the competitive landscape. For value-add acquisitions, a detailed business plan with specific assumptions about lease-up timeline, tenant improvement costs, and projected rental rates will be required.
What Tax Incentives and Programs Support Office Investment in Indianapolis?
Several incentives can enhance office investment returns in Indianapolis.
Indiana's flat state income tax of 3.05% (declining to 2.9% by 2027) benefits investors in pass-through entities. The City of Indianapolis offers Tax Increment Financing (TIF) in several downtown and urban districts that can reduce effective property tax burdens for qualifying developments or major renovations. Opportunity Zones in downtown Indianapolis and other designated areas provide capital gains tax benefits for qualifying investments.
For adaptive reuse projects, historic tax credits may be available for qualifying buildings in downtown Indianapolis. These credits can offset 20% to 25% of renovation costs for buildings listed on the National Register of Historic Places, making office-to-residential or office renovation projects more financially feasible.
How Can You Get Started With Office Financing in Indianapolis?
Whether you are acquiring a stabilized suburban office building in Carmel, repositioning a downtown asset, purchasing a medical office building near IU Health, or buying your own office space through an SBA loan, the right financing structure is critical to maximizing your investment returns.
Clear House Lending specializes in office and commercial real estate financing across Indianapolis and Central Indiana. Our team understands the nuances of the current office market and can help you navigate the lending landscape, compare programs, and close efficiently. Contact us today to discuss your Indianapolis office investment.
Frequently Asked Questions About Office Loans in Indianapolis
What loan-to-value ratio can I get for an office building in Indianapolis?
Loan-to-value ratios for office buildings in Indianapolis currently range from 55% to 70% for permanent financing, depending on occupancy, tenant quality, and location. Stabilized suburban properties with strong tenants can access 65% to 70% LTV. Downtown or value-add properties may be limited to 55% to 60% LTV. SBA 504 loans for owner-occupied properties can reach up to 90% LTV.
How do lenders evaluate office building tenants in Indianapolis?
Lenders analyze each tenant's credit quality, lease term remaining, renewal probability, and the rental rate relative to market. Credit tenants (investment-grade rated companies) receive the most favorable underwriting. Small, local tenants may be underwritten at higher vacancy assumptions. Long-term leases with built-in rent escalations are viewed most favorably. Lenders also consider tenant concentration risk and may discount properties where a single tenant represents more than 25% to 30% of revenue.
Can I finance an office-to-residential conversion in Indianapolis?
Yes, conversion projects can be financed through construction loans or adaptive reuse programs. These loans typically require detailed architectural plans, feasibility studies, and evidence of market demand for the proposed residential use. Not all office buildings are viable conversion candidates; floor plate depth, window-to-core distances, and mechanical systems are key feasibility factors.
What is the outlook for Indianapolis office market recovery?
The Indianapolis office market is showing early signs of stabilization, with improving net absorption and strong performance in suburban corridors. Full recovery will take time, likely 2 to 4 years for the downtown submarket and sooner for suburbs like Carmel and Fishers. Properties that offer modern amenities, flexible floor plans, and strong locations will recover fastest. The market's long-term fundamentals are supported by Eli Lilly's expansion, healthcare sector growth, and improving downtown livability.
Are office loans available on a non-recourse basis in Indianapolis?
CMBS and life company loans offer non-recourse financing for qualifying office properties, typically requiring 85%+ occupancy, strong tenant credit, and institutional-quality assets. Most bank loans for office properties currently require full personal recourse. Bridge loans may offer non-recourse at lower leverage levels (60% to 65% LTV) for experienced sponsors.
What DSCR do lenders require for Indianapolis office properties?
Lenders typically require a minimum DSCR of 1.25x to 1.35x for stabilized office properties in Indianapolis, higher than the 1.20x to 1.25x required for multifamily. This reflects the additional risk associated with office tenancy, lease rollover, and the current market environment. Bridge lenders may accept lower coverage (1.0x to 1.15x) for value-add properties with a clear path to stabilization. Use our DSCR calculator to estimate your property's coverage.