Data Center Investment in Indianapolis
Indianapolis data center investment looks different than the coastal markets. You're not competing with Meta for sites, but you're still dealing with power constraints and cooling costs. The market's got three things going for it: cheap power from IPL, solid fiber infrastructure from the telco days, and enough industrial land that isn't $200/SF. AI demand is hitting here too, just 18 months behind the primary markets. Cap rates are holding in the 6.5%-8.5% range depending on tenancy and age. Most buyers are regional players and REITs looking for yield outside the frothy primary markets.
Market Context
Cap Rate Range
6.5%-8.5% depending on tenant profile and power capacity, with hyperscale-ready facilities trading at the low end
Current Vacancy
12% physical vacancy but only 4% available power capacity in purpose-built facilities
Rent Trend
Up 8-12% annually on colocation space, enterprise rates more stable at 3-5% increases
Absorption
2.4 MW absorbed in Q4 2025, 60% from AI/ML workloads and cloud expansion
Price Per Unit Trend
$850-$1,200 per kW for existing facilities, $1,400-$1,800 per kW for new construction
Transaction Volume
$180M in 2025, up 40% from prior year, average deal size $32M
Submarket Analysis
Airport/I-70 Corridor
6.8%-7.5% capVacancy
8% building, 3% power
Avg Rent (1BR)
$185-220/kW/month colocation
Prime expansion area with IPL substation access and fiber convergence from downtown
OM Tip
Highlight utility redundancy and expansion capacity - buyers want growth runway here
Downtown/Mass Ave
7.2%-8.1% capVacancy
15% building, 6% power
Avg Rent (1BR)
$220-260/kW/month colocation
Older carrier hotels with good connectivity but limited expansion options
OM Tip
Focus on fiber count and carrier diversity - location premium commands higher rents despite age
Northwest Industrial
6.5%-7.3% capVacancy
5% building, 2% power
Avg Rent (1BR)
$170-200/kW/month colocation
New construction corridor with hyperscale interest, land still available
OM Tip
Power availability and cooling efficiency are table stakes - include PUE trending data
Southside/I-65
7.8%-8.5% capVacancy
18% building, 8% power
Avg Rent (1BR)
$160-185/kW/month colocation
Secondary locations with older infrastructure, value-play territory
OM Tip
Need to justify lower pricing with expansion potential or unique connectivity
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What Your OM Needs to Address
Power Infrastructure Detail
IPL rate schedules vary by location and most buyers model power costs down to the kWh level
Data to Include
Utility rate schedule, backup generator capacity and fuel type, UPS specifications, power redundancy level (N+1, 2N), and any demand response program participation
Cooling System Performance
PUE trending is becoming a deal requirement as AI workloads drive higher densities
Data to Include
12-month PUE trending by season, cooling system type and age, chiller redundancy, free cooling hours annually, and any pending efficiency upgrades
Fiber and Network Connectivity
Indianapolis isn't Chicago but fiber diversity still matters for pricing power
Data to Include
On-net carrier list with entry dates, fiber route diversity, internet exchange access, cross-connect pricing, and any planned carrier additions
Tenant Concentration Risk
Single-tenant facilities need exit strategy detail since local demand is still limited
Data to Include
Tenant credit ratings, lease expiration schedule, expansion options utilized, colocation conversion potential, and sublet rights
Expansion Capacity Analysis
Growth runway separates Indianapolis deals since land costs aren't prohibitive yet
Data to Include
Available land for expansion, utility capacity for additional load, zoning compliance for higher density, cooling system scalability
Operating Cost Breakdown
Power costs are 40-50% of OpEx here vs 60%+ in primary markets - show the full picture
Data to Include
Utility costs by rate schedule, property tax assessments and any abatements, insurance costs including cyber coverage, maintenance contracts by system
Investment Outlook
Short Term
Next 12 months look solid with AI demand filtering in and limited new supply. Existing facilities with available power capacity should see occupancy gains. Seller expectations are still catching up to buyer demand - good time to transact if you can move fast.
Medium Term
24-36 months brings more supply risk as planned developments come online, but Indiana's business climate should keep demand growing. Power costs stay competitive vs coastal markets. Some consolidation likely among smaller operators who can't scale efficiently.
Long Term
Indianapolis positions well as a secondary market with primary market connectivity. Edge demand should grow as latency requirements tighten. Risk is staying relevant as hyperscalers build their own facilities - need strong enterprise and colocation fundamentals.
Buyer Profile
REITs looking for yield outside gateway markets, regional data center operators, and private equity groups building portfolios. Hyperscalers are shopping but not buying yet - they're focused on securing land and power rights for future development.
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