Indianapolis Yield Premium: Cameron Benz on Midwest's Appeal to Coastal Investors

Written by:

Steve Marcinuk

Date:

27 Mar 2025

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“Indianapolis has always had a strong local buyer group,” notes Cameron Benz, First Vice President with CBRE‘s Indianapolis-based Multifamily team, “but with older vintage properties, you see more coastal buyers.” This shift represents a growing trend in commercial real estate that’s reshaping the multifamily investment landscape across the Midwest.

Safety and Cash Flow: The Midwest Appeal

While headlines often focus on rapid growth in Sunbelt markets, savvy investors are increasingly turning their attention to Indianapolis and similar Midwest metros. The reason? According to Benz, it’s a compelling combination of business-friendly policies, stable growth, and most importantly—yield.

“People like the Midwest because it feels more secure and offers stronger cash flow orientation,” Benz explains. “People don’t have to buy solely based on appreciation.”

This stability-first approach has become particularly attractive as interest rates have risen and once-hot markets have cooled. Indianapolis offers investors something increasingly precious: predictability.

Emerging on the Rent Growth Charts

What’s particularly interesting about the Indianapolis market, according to Benz, is that while it hasn’t traditionally been a target for national developers, this restraint has inadvertently created ideal conditions for investment.

“In Indiana, almost all of the apartment product is built by local developers,” Benz points out. “Even when the apartment market was extremely active, people were not traveling across the country to build here. They focused on the Southeast.”

The result? Supply has remained in check even as demand surged, pushing Indianapolis to “top rent growth lists across the country” and attracting national attention from investors who previously overlooked the market, Benz observes.

Coastal Investment Migration

For investors leaving challenging coastal markets, Indianapolis represents a welcome regulatory environment. Benz has observed increasing interest from both East and West Coast buyers since 2019-2020, with a simple logic driving their decisions.

“As people experience more tenant-friendly laws on the coast, rent control, or difficult eviction situations, they ask, ‘Where do we absolutely not have these issues?'” Benz says. “Indiana is very business-friendly, with no risk of rent control implementation. There’s no risk of facing lengthy eviction processes when tenants aren’t paying their rent. We’re open for business, and investors appreciate that regulatory certainty.”

This regulatory predictability, combined with favorable real estate tax treatment that doesn’t increase significantly upon sale, creates a liquid market where investors can quickly establish scale.

Location and Economic Fundamentals

While regulatory advantages matter, Indianapolis also benefits from strong economic fundamentals. Its central location makes it a natural logistics hub, particularly with the second-largest FedEx hub positioned next to the airport.

“People come here to open many fulfillment centers,” Benz notes, adding that the city’s strategic position allows companies to “drive to anywhere in the country within a day.”

Beyond logistics, Indianapolis has cultivated additional economic pillars, from tech employers like Salesforce to healthcare giant Eli Lilly, the city’s largest employer, creating a diverse employment base supporting rental demand.

Focus on First-Year Returns

Despite these advantages, Benz highlights a shift in investor priorities that’s reshaping the market. According to Benz, today’s investors are intensely focused on immediate yields: “If you are an investor with money in a money market account, getting four to 5% on your investment, you’re always asking, ‘Why am I pulling it out to put it into a property if I’m not getting the same yield first year?'”

This emphasis on first-year performance has changed how properties are evaluated, according to Benz. Unlike a few years ago when cap rates were compressed across all property types, today’s market offers meaningful yield premiums for older properties, particularly those built before 1980.

“With less equity out there for those types of deals, there are fewer buyers,” Benz explains. “With less competition, that means you’re probably getting a better price.”

Benz notes that investors in these older properties are now factoring in appropriate capital expenditure budgets from day one, focusing on sustainable cash flow rather than speculative appreciation.

Looking Forward

As 2025 unfolds, Benz sees signs of increasing transaction volume compared to the previous year. His team is also expanding beyond Indiana into neighboring markets like Columbus, Ohio and Louisville, Kentucky, suggesting the Midwest investment thesis is gaining momentum beyond Indianapolis.

While it may lack the headline-grabbing growth of other regions, Indianapolis exemplifies the distinctive strengths of Midwest markets: business-friendly environments, strategic locations, diversified economies, and a yield premium that’s increasingly compelling for national investors seeking stable returns in an uncertain market.

For CRE investors willing to look beyond the Sunbelt, the Midwest yield premium—particularly in markets like Indianapolis—may represent one of commercial real estate’s most compelling current opportunities.