Des Moines Commercial Real Estate Market Shows Resiliency amidst Economic Downturn, Brokers Say
WEST DES MOINES, Iowa (February 26, 2009) – CB Richard Ellis/Hubbell Commercial, the leading commercial real estate broker in Iowa, announced today results of its 12th annual Greater Des Moines Real Estate Market Survey prepared by Frandson & Associates, L.C. and the 39th annual Metro Des Moines Apartment Survey, prepared by Carlson, Gunderson & Associates, Inc. Results of the presentations by CB Richard Ellis/Hubbell Commercial professionals indicate that the main property types that make up the greater Des Moines market (Office, Retail Industrial, Multi-Unit Housing, and Investment) are showing signs of resiliency in the face of a global economic downturn. Expert panelist members from CB Richard Ellis/Hubbell Commercial included: • Heath D. Bullock, CCIM, SIOR Vice President Office Market Analysis • Bob Stewart, SIOR Senior Broker Associate Industrial Market Analysis • Colleen Johnson Vice President Retail Market Analysis • Linda Gibbs, CCIM, SIOR Senior Vice President - Private Client Group Investment Property Analysis • Tim Sharpe, CCIM, SIOR Senior Vice President - Private Client Group Investment Property Analysis COMMERCIAL MARKET Conducted for CB Richard Ellis/Hubbell Commercial by Frandson & Associates, an appraisal and consulting firm, the commercial real estate market survey analyzes office, flex, industrial and retail space by geographic market area in Greater Des Moines. Information was gathered from owners, managers and brokers throughout the Greater Des Moines area during the first quarter of 2007, 2008 and 2009 to provide business and city leaders current and useful commercial real estate information such as lease rates, occupancy trends and major events impacting their local commercial real estate decisions. OFFICE “Despite the national economy, the Des Moines metro office market posted remarkable gains in 2008," states Heath D. Bullock, CCIM, SIOR, office expert for CB Richard Ellis/Hubbell Commerical. “The market experienced a net increase of 1.1 million square feet of office space, with positive absorption of 352,800 square feet.” Absorption is the net increase or decrease in actual space occupied Highlights: • The local office market vacancy rate hit 10.4% this year, an increase of 2.8%. Des Moines continues to outperform the national market, which now stands 14.7% vacant. • The Western Suburbs submarket experienced a net increase of office space of 455,000 square feet with the addition of 10 new Class A and B buildings collectively. Unfortunately this submarket also experienced negative absorption of 65,100 square feet during 2008. • The Des Moines Central Business District submarket enjoyed a net increase of 520,000 square feet of new office space, with positive absorption of 352,800 square feet. INDUSTRIAL “Following two dynamic years where the Des Moines warehouse market absorbed 1.5 million square feet of space per year, activity leveled off considerably in the past two years, with only 154,000 square feet absorbed in 2008," states Bob Stewart, industrial expert for CB Richard Ellis/Hubbell Commercial. Highlights: • Warehouse and manufacturing occupancy remains stable at 91% and 97% respectively. The Greater Des Moines industrial market continues to outperform the national occupancy rate of 87.9%. • The industrial sector grew by 556,000 square feet, or approximately 1%, which included nine new buildings across the metro. • The Northwest Suburbs submarket experienced the highest amount of speculative development in 2008, specifically at the Grimes Business Park in Grimes and the Meredith Business Park in Urbandale. RETAIL “Significant new construction in neighborhood and community shopping centers throughout the metro area, coupled with slowing expansions of national retailers in the last half of 2008, has resulted in the highest vacancy levels in retail centers in this decade,” states Colleen Johnson, retail expert for CB Richard Ellis/Hubbell Commercial. Highlights: • Over 528,000 square feet of new retail space was constructed in 2008, including 22 neighborhood and community centers. • Neighborhood and community centers occupancy declined 2.4% to 76.4% in 2008. • The four regional malls experienced a combined 1.5% decline in occupancy to 88.8% overall. • Iowa has the sixth highest employment rate in the US, which continues to uphold consumer confidence, and consequently, demand for reasonably-priced goods and services. INVESTMENT PROPERTIES “With our financial system’s heighted tension, investors continue to remain selective with their investments due in part to conservative lenders. The market is faced with a crisis of confidence. Investors are wary of how to price their commercial real estate and uncertain of when the money will start flowing again,” states Linda Gibbs, CCIM, SIOR, investment properties expert for CB Richard Ellis/Hubbell Commercial. “While headlines remain negative, the hope is that the stimulus programs announced by the federal government will be used to jumpstart the securitized and secondary lending arenas. “The days of loose underwriting and overleveraging are a thing of the past,” states Tim Sharpe, CCIM, SIOR, investment properties expert for CB Richard Ellis/Hubbell Commercial. “The return to some semblance of order and discipline will be welcomed by the industry. There is no question that the next 12 months will be challenging—but it is important to remember that never in the past 30 years could you not make money in real estate. There is always opportunity for real estate investors—you may just have to look harder to find them.” Highlights: • 2008 experienced $184 million dollars in investment sale transactions over $500,000 in Polk, Dallas and Warren Counties. Although this represents a decrease of 45% over the previous year, it is certainly better than the 76% decrease nationally. • The disconnect between sellers’ expectations and market realities continued throughout 2008, creating a large bid gap between buyers and sellers • Multifamily was the bright spot in the local market reflecting a vacancy of 7%, down from 8.5% in January 2008 • Average rents per unit type in the past year increased across the board for the second year in a row. • Cap rates increased by 50-85 basis points in 2008 in all investment segments in the Midwest tertiary markets. For more information on CB Richard Ellis/Hubbell Commercial, or for a complete copy of the 2009 Market Survey and the 39th Annual Apartment Market Survey, call (515) 224-4900, or visit www.cbrehc.com. Pictures from the event are available by calling Jarad Bernstein at (515) 419-7619.