Indianapolis Mile Square Commercial Assessments: Downtown Office AV Bottoms Out in 2026

The Mile Square — the 1-mile by 1-mile downtown grid bounded by South, East, West, and North Streets — has been the most stressed segment of Marion County's commercial real estate base since 2020. Office vacancy rates climbed, leasing activity collapsed for Class B and Class C buildings, and assessor cuts followed market reality with a 1–2 year lag. The 2026 assessment cycle suggests the bottom is finally here, with stabilization in Class A and trophy assets even as Class B and Class C continue to slide.

This is the breakdown of where downtown commercial AV stands going into 2026, by sub-type, with what it means for owners and the broader Marion County tax base.

The four-year office AV decline

Mile Square office AV has trended down for four straight assessment cycles:

Cycle	Mile Square office AV (approximate)	YoY change
2022	$4.2B	flat
2023	$3.9B	−7%
2024	$3.6B	−8%
2025	$3.3B	−8%
2026	$3.2B	−3%

Five years ago, Mile Square office AV was approaching $4.5B. Today it's $3.2B — a roughly 30% peak-to-trough decline. The trend is unique to office; downtown multifamily, retail, and hospitality AV all increased over the same window (multifamily up 60%+, retail flat-to-slightly-up, hospitality recovering from a 2020 trough).

−30%Mile Square office AV decline from 2021 peak to 2026

The 2026 cycle is the first in which the YoY decline moderated — from −7% / −8% in the heavy years to −3% in 2026. That stabilization is concentrated in two segments (Class A and trophy); Class B and C are still falling.

By sub-type

Class A and trophy office

Class A inventory in the Mile Square is concentrated in a handful of buildings — Salesforce Tower, OneAmerica Tower, Market Tower, Capital Center, Chase Tower, the BMO Plaza area. Tenancy includes Salesforce, Eli Lilly, OneAmerica, IU Health corporate, large law firms, and major bank corporate offices.

2026 cycle for Class A:

AV roughly flat to slightly down (−1% to +1% per building)
Vacancy stabilized in the 12–18% range (Class A weighted)
Leasing velocity returning, particularly for floors with views and modern amenity packages
A handful of trophy buildings showing modest AV growth as new tenant deals close

Owners of Class A assets are mostly not appealing 2026 assessments — the AV is roughly market-supported, and the trajectory is positive. The exceptions are buildings with specific structural issues (deferred capex, single-tenant exposure).

Class B office

Class B inventory is the bulk of Mile Square office space — older mid-rises, conversions, and smaller floor-plate buildings without trophy amenities. Pre-pandemic, Class B was reliable cash-flow product with stable mid-tier tenancy.

2026 cycle for Class B:

AV down 6–10% per building from 2025
Vacancy in the 25–35% range (some buildings at 50%+)
Rent rolls show significant pressure; effective rents 20–35% below 2019 levels after concessions
Several Class B buildings are now selling at distress prices or going to lenders

Class B owners are appealing aggressively. Marion PTABOA has heard a steady stream of Class B appeals in 2025 and is on pace for another heavy 2026 docket. Many appeals are settling at the informal-conference stage with stipulated AV reductions in the 5–10% range.

Class C office

Class C — the oldest, smallest, lowest-amenity downtown buildings — is in the toughest position. Many are functionally obsolete for modern office tenancy. Some are candidates for conversion to multifamily or hospitality; others may be demolished and redeveloped.

2026 cycle for Class C:

AV down 10–20% per building from 2025 for occupied buildings
A handful of largely-vacant Class C buildings received assessor reductions in excess of 25%
Several Class C buildings have been pulled off the office classification entirely and reclassified — typically to mixed-use or pending-redevelopment classifications

Class C is where AV has fallen most. It's also where redevelopment activity is most likely going forward.

Multifamily, retail, and hospitality

Outside the office segment, Mile Square commercial AV is up:

Downtown multifamily

The Mile Square added meaningful multifamily inventory since 2018 — new construction and Class C office conversions. Multifamily AV is up sharply year over year as new units come online and existing units rent strongly. The downtown apartment market is supply-constrained relative to demand from downtown employers and students.

Downtown retail

Retail AV is flat. The Mile Square retail base has stabilized — some struggling concepts replaced by food, beverage, and experiential retail. AV growth is muted but positive.

Downtown hospitality

Hospitality AV is up notably. Convention demand has returned, the JW Marriott, Westin, and Conrad area is operating at strong RevPAR levels, and several boutique hotels are filing increases in their incomes. A few hospitality parcels have AV up double digits in 2026.

What it means for the Marion County tax base

The Mile Square is geographically small but historically punches above its weight in tax base. The office decline is partly offset by multifamily and hospitality growth, but net Mile Square AV is essentially flat in 2026 after four years of net decline. This matters because:

Marion County and Indianapolis depend on downtown AV for a meaningful share of the city's tax base
The Downtown TIF captures incremental AV — declining base means the TIF captures less, which affects bond service for downtown infrastructure
Cap-loss on downtown commercial is structurally different from homestead cap-loss; the 3% commercial cap binds rarely on properly-valued commercial parcels

For non-Mile-Square property owners in Marion County, the implication is indirect: a structurally weaker downtown base puts more pressure on suburban Marion AV growth to support countywide levies. Combined with the TIF expiration schedule, the next five years are a transition for how Marion County is funded.

What this means for owners

Mile Square office owners

The 2026 assessment cycle is your last chance to capture the easy AV reductions of the down-cycle. Class B and C owners who haven't appealed should file by June 15 — income-approach evidence supports significant reductions, and the township assessor has been reasonable in informal conferences.

Mile Square multifamily owners

You're likely facing AV increases. Income-approach appeals are still effective for buildings with weak underlying rents (the headline rent vs. effective rent gap is where the case lives). Bring rent rolls with concession detail.

Mile Square hospitality owners

Income-approach appeals are tougher in a recovering hospitality market — the trend is favorable to the assessor. Focus appeals on individual property factors (functional obsolescence, brand-specific weakness, specific market positioning issues).

Investors evaluating downtown

The buy-side opportunity is Class B and Class C office at distress pricing. The numbers depend on assumptions: continued office decline → bad outcome; conversion or repositioning → potentially excellent outcome. Marion County's regulatory and zoning environment is supportive of conversions; the financial engineering is the harder part.

What to watch through 2027

Will Class A office AV grow in 2027? If trophy office stabilizes and Class A returns to leasing growth, 2027 could be the first net-positive year for downtown office AV in five years.
Conversion activity. Several Mile Square Class B and C buildings have been mentioned for multifamily or hospitality conversion. Each conversion is a one-time reclassification event with major AV implications.
Downtown TIF decisions. As Downtown TIF sub-areas expire, the City-County Council's extension decisions interact with the base recovery.
Salesforce Tower and other major tenant decisions. Several large downtown tenants have lease renewals in the 2027–2029 window. Each renewal/non-renewal is material to the Class A trajectory.