Desks, chairs and cabinets sit scattered around the Circle Tower’s 11th floor, remnants of a coworking space killed off by the pandemic.
They’ll be replaced by a large bar with seating areas that offer prime views of Monument Circle and its blue fountain pools. Rusty ventilation tubing on an adjacent roof will make way for a 40-seat patio.
“It’s not pretty now, but give it a couple [of] years, and it will look different,” said Grant Riordan, a development manager with Holladay Properties, which is working with Fishers-based Dora Hospitality to convert the historic office building into an AC Hotel by Marriott.
A key theme has emerged in the hotel-building boom playing out downtown: What’s old is new. Developers have started or are planning several projects that will convert office space into hotels. The Circle Tower will be joined by the nearby Odd Fellows and King Cole buildings among conversions expected to be completed in the next few years.
But the success of these adaptive-reuse projects will ultimately depend on whether the city can draw enough travelers downtown to consistently fill the additional beds.
These buildings will start with at least one advantage as they embark on their new lives. They’re all in the center of downtown.
“It’s all about location,” said Jack Paruta, a project director at the San Francisco-based global architecture and design firm Gensler. “Business travelers, leisure travelers want to be in the heart of the city they’re coming to visit.”
Ample supply
An abundance of empty office buildings with some unique features is helping to fuel the trend.
Paruta, who is working with developers of the Odd Fellows building at the corner of Pennsylvania and Washington streets said his firm has been involved in adaptive-reuse projects for at least 15 to 20 years. But the trend picked up nationwide after office workers headed home during the pandemic.
Many haven’t come back or have returned only a few days a week.
“There’s a large swath of available office space in downtown cities,” Paruta said, noting that vacancies are popping up in newer buildings as well as historic locations.
Shiel Sexton President and CEO Kevin Hunt said downtown office buildings in many cities are 40% or 50% vacant and “not looking to be filled anytime soon.”
Hunt’s Indianapolis company is in early-stage planning for some adaptive-reuse projects — though he declined to name them.
Developers see several desirable features in these older office buildings. They already have plenty of windows, which hotel rooms need, and they come with elevators. Those can cost $30,000 to $40,000 per stop to install.
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Then there are the style points.
The Circle Tower, built in 1930, features a stepped-back façade designed to avoid casting a shadow on the Soldiers and Sailors Monument. It comes with an ornate lobby with marble walls and terrazzo floors.
Holladay Properties executive Jordan Corbin said his South Bend company’s contractor estimates this type of building might cost $55 million or $60 million to construct today. Holladay closed a deal in February to buy it for $8.6 million.
“You can’t re-create that shell and structure for what I bought it for,” said Corbin, a vice president for development. “It’s not even close.”
Plus, current commercial tenants will provide income to help make the project feasible, he noted.
Holladay Properties plans to start construction on the $53 million project later this spring with an anticipated opening late in 2027 or early in 2028.
The Odd Fellows building a block and a half away has stood for more than a century. It also was built in ways that would be tough to replicate at a competitive price, according to Dale Johns, a principal with Silverstone Development.
Indianapolis-based Silverstone is leading that building’s conversion into a 167-room Kimpton Hotel, a luxury brand owned by London-based IHG Hotels & Resorts. That $110 million project will wrap up later this year.
The building’s features include an ornate plaster ceiling in a 15th floor theater that will be converted into a ballroom for events including weddings. Developers had to bring in experts from Chicago to restore the ceiling.
“There’s not a lot of plaster guys around anymore,” Johns said.
He noted that features like the ceiling add character that can be attractive to guests who have become used to the standard appearance of modern hotels.
“The typical traveler is now looking for something a little bit different. They’re looking for that Instagram-worthy moment for their weddings or their events they want to host,” he said.
In addition to the building attributes, millions of dollars in historic tax credits might be available for some projects.
“Often, the reuse of older buildings would not work without historical tax credits,” said Jerry Zeitner, CEO of Chicago-based Ridgeline Development Partners, which is turning the King Cole building on Meridian Street just south of Monument Circle into a 116-room Motto by Hilton. That $60 million project is slated to open next March.
Facing challenges
Older buildings come with obstacles in addition to their advantages.
The columns holding them up might be spaced together closely, meaning they weren’t designed to house large, multipurpose rooms that a hotel needs. Planners might have to figure out how to remove some columns while still supporting the building above them.
“Sometimes, you don’t know what you have,” Paruta said. “Taking them apart, putting them back together, there’s surprises.”
The Odd Fellows building once had big, arched windows that were covered by mechanical louvers for ventilation. Those have to be removed and custom glass installed.
The heating and ventilation systems in these conversions are another frequently cited challenge. They have to be changed to serve individual hotel rooms instead of bigger office spaces.
“When you’re using historic tax credits, you can’t just punch holes in the outside of the building,” Corbin said. “You’ve got to figure out ways to get fresh air in and older air out.”
Bathrooms also must be added for each guest room, Hunt noted.
“You’re cutting holes in the slab and running plumbing lines and draining it out the building,” he noted.
In addition to those challenges, construction costs climbed during the pandemic, and developers had to deal with supply chain disruptions and labor shortages, said Alexandra Miller, a spokesperson for Indianapolis-based Keystone Group. Miller’s company spent around $121 million converting the historic Illinois Building, which had been vacant more than a dozen years, into an InterContinental hotel.
The 170-room hotel on West Market Street between Monument Circle and the Indiana Statehouse opened last year.
Enough guests?
An IBJ analysis last year found that the current hotel pipeline could add 2,300 rooms to downtown’s current total of 8,500, a 27% increase, if every planned development moves forward.
Developers say older office buildings converted to hotels will have an advantage in attracting customers.
“Historic buildings tell a story,” Paruta said. “There’s a large segment out there that loves to stay in historic buildings. The look, feel and character is something very attractive.”
But charm gets you only so far. People also need reasons to travel to Indianapolis. Developers are confident those will grow.
Miller noted that organizations including Visit Indy are working to elevate the city’s profile and draw more large-scale conventions and sporting events.
“The growth in hotel supply is not happening in isolation,” Miller said in an email. “It is part of a broader, intentional effort to expand Indianapolis’ capacity and competitiveness on a national and international stage.”
The growing number of rooms downtown will give visitors more chances to stay near the Indiana Convention Center instead of booking in the suburbs or near the airport, Johns noted. The additional hotel capacity will help the convention center draw more business and larger groups, too, he added.
“Indy’s gonna book business that it can’t today,” he said.
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