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Momentum Continues in the Des Moines Commercial Real Estate Market

CB Richard Ellis/Hubbell Commercial Reveals 2006 Commercial Real Estate and Apartment Market Survey Results WEST DES MOINES, Iowa (March 30, 2006) – CB Richard Ellis/Hubbell Commercial, the leading commercial real estate broker in Iowa, announced today results of its ninth annual Greater Des Moines Real Estate Market Survey prepared by Frandson, Knapp & Associates, L.C. and the 36th annual Metro Des Moines Apartment Survey, prepared by Carlson, McClure & 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 healthy. The office market is expanding both on an owner-occupied and speculative basis. Office product that has been converted to residential has improved this market. The industrial market is in a recovery cycle as demand has improved. In some industrial submarkets, speculative construction is a strong possibility in the near term. The retail market clearly continues to expand at a strong pace across the metro area. The multi-unit housing market has improved as overall vacancy rates have declined. In addition, investment properties remain highly desirable and transactions continue at a rapid pace. The keynote speaker this year was a Des Moines native and attended Dowling High School. Larry Melody, Chairman of CBRE|Melody in Houston, TX, addressed hundreds of city and business leaders gathered in West Des Moines regarding the state of the national investment properties market. In 1978, Melody founded L.J. Melody & Company (now CBRE|Melody), which was acquired by CB Richard Ellis in 1996 and operates as a wholly owned subsidiary. After successfully building two national commercial mortgage banking companies (Northland Mortgage and L.J. Melody & Company) during his career, Melody was charged with the responsibility of merging CB Commercial Mortgage with L.J. Melody & Company to create one of the industry's largest commercial capital intermediary companies. Other featured presenters included: Tom DeWaay, Sales Associate, CB Richard Ellis/Hubbell Commercial Multi-Unit Housing Market Analysis Heath Bullock, CCIM, SIOR, Vice President, CB Richard Ellis/Hubbell Commercial Office Market Analysis Dick Powell, Vice President, CB Richard Ellis/Hubbell Commercial Industrial Market Analysis Colleen Johnson, Retail Sales Associate, CB Richard Ellis/Hubbell Commercial Retail Market Analysis Linda Gibbs, CCIM, SIOR, Vice President, CB Richard Ellis/Hubbell Commercial Private Client/Investment Analysis Tim Sharpe, CCIM, SIOR, Vice President, CB Richard Ellis/Hubbell Commercial Private Client/Investment Analysis “We understand the information that city and business leaders, property owners and occupiers need,” said Rick Tollakson, President and CEO of CB Richard Ellis/Hubbell Commercial. “It is important for decision-makers to look at the entire real estate picture when evaluating the condition of the market. We offer a complete snapshot of the condition of the commercial real estate market in the Greater Des Moines area,” Tollakson said. “The commercial real estate market survey and the apartment survey are strong indicators of Greater Des Moines’ economic condition,” said Kyle Gamble, Senior Vice President and Managing Director of CB Richard Ellis/Hubbell Commercial. “We view this detailed analysis of the commercial real estate market as an important resource for leaders in this community.” COMMERCIAL MARKET Conducted for CB Richard Ellis/Hubbell Commercial by Frandson, Knapp & 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 2004, 2005 and 2006 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 The results of the 2006 office survey prove that the greater Des Moines office market is active and growing. New speculative and owner-occupied construction signals that the market has moved from a recovery cycle into an expansion cycle. In addition, some Class C office buildings have been removed from the market for residential use, which improves the overall health of the market. Highlights:
  • The overall occupancy rate for the Greater Des Moines office market has improved from 90.6 percent to 92.2 percent signaling a strong market.
  • Aggregate office absorption for the Greater Des Moines area was significant in 2006, with a total of 820,563 square feet absorbed since the first quarter of 2005. Close to one million square feet was absorbed in the western suburbs alone.
  • The CBD Core continues to develop new and expanded headquarters for insurance and financial institutions.
  • Some Class C office buildings have been removed from the market to be converted to residential.
  • Both speculative and owner occupied office buildings were delivered to the market in the western suburbs.
  • 2006 expectations: Continued flight to quality; continued construction of institutional owner-occupied facilities; continued construction of speculative office buildings in the western suburbs; and stable lease rates for the second-generation office space.
INDUSTRIAL “In reviewing the 5 year averages, Des Moines’ growth is strongest in manufacturing and warehouse with our weakest occupancy rates seen in the flex-space market,” states Dick Powell. “Our overall vacancy rate is less than 10 percent, which equates to approximately 4.4 million square feet. Based upon our 2006 absorption of 1.5 million square feet, it gives us approximately three years of inventory. Traditionally, the Des Moines market has carried a 3-4 year supply of inventory.” Highlights:
  • The industrial market is in a recovery cycle as demand has improved.
  • Occupancy rates in both the warehouse and manufacturing submarkets occupancy rates are at their highest point in the last three years.
RETAIL “Retail continues to be the growth market in commercial real estate,” said Colleen Johnson. “We’re expecting strong retail growth not only in Des Moines suburbs, but also within the central business district. The downtown core will enhance street level retail opportunities in East Village and Court Avenue through new and renovated buildings, opening key streets to two-way traffic, and attracting new entertainment and shopping venues,” Johnson added. Highlights:
  • Overall occupancies in regional shopping centers increased by 6 percent to 87.6 percent, with Southridge Mall showing the most significant increase from 60 percent in 2005 to 77 percent in 2006.
  • In 2005, Greater Des Moines experienced an explosion of new construction in the Neighborhood and Community Center category. Nearly 400,000 square feet in 23 centers were constructed throughout the Metro.
  • Inventory and occupancies in the Big Box Retail category noted little change from 2005, with only a new Hy-Vee Store and an Office Depot, both in West Des Moines, completed in the last year. However, there is significant activity planned for Big Box growth in the coming year.
INVESTMENT PROPERTIES “2005 was another banner year for investment real estate,” stated Linda Gibbs. “The demand for all types of investment real estate continued to exceed the supply. We continue to experience an increase in buyers from all over the United States interested in the stability of the Iowa market,” Gibbs added. Highlights:
  • Continued flight to hard assets.
  • More capital, higher prices, bigger deals, lower cap rates.
  • Severe liquidity yielded record volume and prices.
  • Multi-unit housing was the leading sector in the number of transactions that occurred in the market place. The average price per unit was $34,569 reflecting an increased interest in Class B & C properties.
  • The retail sector again was very active with the sales of four major anchored community centers.
  • Condominium converters dominated Class C office transactions.
  • The industrial sector noted a 731,000, three building portfolio sale in 2006.
”In 2006 we will continue to see large amounts of capital earmarked for commercial real estate,” stated Tim Sharpe. “Despite the anticipation of an up-tick in cap rates, values will still remain strong given the improvement of basic market fundamentals in most sectors.” APARTMENT “The overall outlook for the Des Moines multi-unit housing market continues to look very positive,” DeWaay said. “These improvements in apartment fundamentals can largely be attributed to increasing mortgage rates which pushed many potential home buyers back into renting, as well as the absorption of a large number of new units that had over-saturated the market several years prior.”
  • For the second year in a row, overall apartment vacancy rates in Greater Des Moines decreased to a rate of 8.1 percent, a 1.1 percent reduction from last year. Nationally the rate is slightly higher at 9.5 percent.
  • All unit types surveyed, from efficiencies to 3-bedroom units, had increased their overall average rents, something not seen in 2004.
  • During 2005, just over thirty apartment transactions greater than $500,000 took place within the Des Moines Metro area.
  • Many tax incentives, continued relatively low interest rates, rising downtown employment numbers and the completion of the new MLK Parkway continue to push the development of downtown housing. Nearly 1,200 new housing units are expected to be added to the downtown market by the end of next year.
For more information on CB Richard Ellis/Hubbell Commercial, or for a complete copy of the 2005 Market Survey and the 36th Annual Apartment Market Survey, call (515) 224-4900, or visit

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