HEARTLAND SNAPSHOT, AUGUST 2004

Des Moines Office Market

The major trend in the Des Moines, Iowa, market is for traditional office lessees to build their own corporate or headquarter facilities, according to Dean Weitenhagen, an associate with the Office/Investment Advisory Services of Grubb & Ellis|Mid-America Pacific. “This affects the office market in two ways — it places formerly non-competitive space into the market, and it removes viable tenants from the competitive marketplace,” he says.

The groundbreaking for a new 1 million-square-foot Wells Fargo Mortgage office complex, which is located in the Jordan Creek area of West Des Moines, has created a stir in the market, although it is two years away from completion. First, it has created the need for Wells Fargo to renew current leases with much shorter term lengths — putting pressures on landlords to decide between short-term leases or large vacancies. The development also has put a damper on new speculative office construction. “Developers are cautious because Wells Fargo will leave thousands of square feet of space on the market when its facility is completed,” Weitenhagen says.

New office product is expected to develop around the Wells Fargo Mortgage campus, and there have been major medical office developments along University Avenue and Westown Parkway corridors in West Des Moines and Clive. “This area we can expect to see several hundred thousand more feet of this type of product come on line after the vacancy rented by Wells Fargo has begun to be absorbed,” he says.

“While no new office developers have come to the Des Moines market at this time, smaller local builders are stepping into the office development scene,” Weitenhagen says. The most recognized local names are Mid-America Group, R&R Realty Group, Ladco Development, Knapp Properties and Terrus Realty.

Wells Fargo Mortgage, in preparation for its campus, has been very active in the market — tying up short-term space in existing leased buildings as well as negotiating new short-term leases in larger, vacant office buildings. “Several other large users are currently looking at their positions in the market to determine how to meet their long-term needs,” he says.

According to Grubb & Ellis|Mid-America Pacific’s preliminary market overview, vacancy rates range from 21.3 percent for Class B space in the CBD to 9.6 percent for Class A space in the western suburbs. Class A office rents vary from $17.42 per square foot, full service, in the CBD to $18.33 per square foot, full service, in the western suburbs.

Mid-America Group’s North Park office development along Interstate 80/35 and 100th Street in Urbandale, already the site of a Class A corporate campus, will continue to attract developers to the area, as will the Wells Fargo mortgage campus. “The new office park being developed around the Wells Fargo Mortgage campus will generate great interest in the future,” Weitenhagen says. “Its access to the Interstate system, as well as shopping and housing, will keep it high on the list for future development.”

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