Companies are increasingly looking north for space, a sign that employers still want in-person offices just not in the downtown high-rises that once drew business. The trend means downtown office space remains in high-supply and low-demand — unless, that is, the office space comes flush with amenities, the market shows.

The overall Indianapolis office market sat at 21.2% vacant at the end of 2025, a slight dip from earlier in the year but an improvement over the year before, according to research published in January by Colliers.

The downtown office market vacancy rate, however, did not budge, remaining at 26%, signaling the challenges landlords face in drawing companies to move to or resign leases in the city’s urban core. Leasing on the north side of the city and Hamilton County largely buoyed the overall health of the Indianapolis metro office market, said Nick Svarczkopf, CBRE senior vice president of office and medical properties.

The reason is relatively simple, tenant representatives say: Companies downsized as employees work more hybrid hours and those who still want office space lean toward shared, untraditional layouts. Most downtown office space, especially in the largest office buildings, tends to be older, more old-fashioned workspaces dotted with cubicles and individual office walls.

The rare exception is Bottleworks, a development off the main strip of Mass Ave. The Hendricks Commercial Properties space is completely filled, with a fully pre-leased building in the pipeline.

In June, law firm Ice Miller signed an 85,000-square-foot lease in the Bottleworks Phase III under development off Mass Ave set to open in 2028. The contract became the largest downtown lease since 2019 and made the firm the largest tenant at the state-of-the-art Bottleworks campus.

Bottleworks offers many of the features workplace real estate experts say employees in 2026 value most: fitness centers, walkable areas and close dining spots to grab lunch. Employers have taken note, paying premium rent to move into office space that has access to these more experiential options, said Rich Forslund, executive vice president at Colliers’ Indianapolis office.

“Downtown has some but the suburbs have quite a bit,” Forslund said. “So people are moving to those spots in order to try to draw folks back to the office.”

Companies put employee experience first

A stroll through the Indiana Members Credit Union’s new headquarters at 835 N. College Ave., part of Bottleworks, reveals all of those aforementioned amenities — plus an employee-only outdoor patio, a custom soda and sparkling water machine and a state-of-the-art golf simulator, saving the company time-consuming and costly bonding outings to Top Golf.

For IMCU employees, the new office represents a drastic change from their old headquarters on the south side that cobbled together several strip mall-like buildings and a surface parking lot into a corporate campus. Roughly 120 of the company’s 467 employees work at the Bottleworks office, where they are required to come at least four days a week. The remaining employees work at customer branches around the city.

President and CEO John Newett said the credit union ran out of space at its south-side location, prompting the need for the company’s move at the start of the new year. To ensure that doesn’t happen again soon, IMCU built in space for additional workers in the new office and hopes the spot just off Mass. Ave. will attract younger employees looking for an up-and-coming place to work as well as draw new employees from other suburbs to the north and west.

Part of that strategy included finding as many “wow factors” in the new space as possible, Newett said.

“It’s a little more fun than the traditional office,” Newett said.

Return to work: Some employers want people in office. Many workers say no. What’s Indiana’s new normal?

Indy lags behind other major downtowns

Across the country, office vacancy is hovering around 20.5% as the U.S. market shows signs of stabilizing after years of growing vacancies following the pandemic. Yet statistics from cities across the nation show that Indianapolis is relatively unique with suburban areas outpacing dense downtown neighborhoods.

While Indianapolis’ downtown real estate market still struggles, other cities are leaning on downtown office space for new leases. Nationwide, downtown districts accounted for 42% of leasing activity in the final three months of the year, despite comprising just 35% of overall supply, CBRE reported. Leasing rose 8% year-over-year in 2025, while suburban activity fell 7% over the same period.

In Indianapolis, those numbers are much lower: Just 17% of leases during the same timeframe were located downtown.

The stats are not too worrisome to experts, as Indianapolis typically lags behind the bigger coastal markets, Forslund said. But Indianapolis will need to decide where it wants to go in the future, whether that means upgrading older buildings or converting more empty space to apartments and hotels.

“I refer to it as we are still in our teenage years, trying to figure out what we want to be,” Forslund said.

Indy employers will have to get more creative, or less picky, in the near future as supply dries up on the booming north side market. For instance, Midtown Carmel sits virtually full. And just one commercial office building for rent is under construction in Hamilton County, the Union at Fishers District, a mixed-use development with luxury office space set to open in early 2027 next to IKEA.

Elsewhere around the area, companies are constructing build-to-own properties but those won’t be available to other companies looking for open space and workstations for their employees. Those projects include Republic Airways’ corporate headquarters expansion in Carmel, a Merchants Bank project in Carmel and Elanco’s new headquarters, which opened in October on the west side of Indianapolis.

More: Heading into 2025, Indianapolis businesses want office space — and lots of amenities

As building new office space has become more and more expensive, more landlords are choosing to reinvest in and upgrade their existing offices in a bid to make them more attractive, Svarczkopf said.

“Based on the way the market is right now, they have to upgrade in order to compete,” Svarczkopf said. “The ones that have been successful have gone through the process of reinvesting in the property.”

Even with upgrades, the competition will be hot. At Indiana Members Credit Union, employees have responded well to the new office, executives said. Many amenities, like indoor parking that is patrolled, are not available elsewhere downtown.

“It just answered a lot of the questions we had and the amenities we wanted to provide for our team,” Newett said.

Alysa Guffey writes business and development stories for IndyStar. Have a story tip? Contact her at amguffey@usatodayco.com.

INDIANAPOLIS (WISH) — A 21-year-old man was arrested and accused of raping a University of Indianapolis student on campus.

Police say the investigation began on Jan. 24 when University of Indianapolis Police received a call from a woman who said she believed she was drugged at a bar in downtown Indianapolis and then raped in her dorm room.

Court documents say she met Marwan Khalaf of Noblesville at the Metro Bar on Massachusetts Avenue and went back to her dorm room, where he repeatedly raped her. When she woke up one of the last times, he was gone.

According to court documents, she next went to shower and passed out again. She woke up in the shower at 7 a.m. Jan. 24 and called 911.

The student told investigators she had gone out alone on Jan. 23 and took an Uber to a few bars downtown before arriving at the Metro Bar at 12:51 a.m. Jan. 24. Court documents state that’s where she met Khalaf and they danced together.

Court documents say the bar refused to serve the student a drink because she was already intoxicated when she arrived. Khalaf then bought her a shot and they asked her to leave. She says Khalaf left with her and offered to take her home.

The student says she recalls his car being “parked directly across the street from Metro.” According to UIPD Detective Jay Arnold, the student’s identification card was used to enter the dorm at 2:13 a.m.

In an interview with detectives, Khalaf admitted to being at the bar and kissing her, but denied having sexual contact with the student. He told detectives he took care of her because she was drunk and said he left the dorm when it became light outside because his mother was calling him.

Khalaf has been charged with two counts of rape and one count of sexual battery.