HEARTLAND SNAPSHOT, MARCH 2007

Quad Cities Office Market

Office users in the Quad Cities appear to be inclined to pursue build-to-suit for-lease or to-own properties in the market. That tendency has resulted in a growing inventory of vacant office space primarily concentrated in the central business district (CBD). A number of older office and industrial properties in the CBD have been, or are in the process of being, converted to residential apartments and condominium uses. The sweet spot with regards to the current office market appears to be 1,200 to 2,000-square-foot Class A and B properties.

Significant office property developments in the market have generally been related to the healthcare industry. Seven separate professional healthcare developments have been completed within the last 40 months, representing approximately 260,000 square feet of new office space. Each of those developments was stimulated by the interest of healthcare providers in delivering services in closer proximity to patients.

One significant office development in the Quad Cities market was announced at the end of last year. Cingular Wireless presented a plan to construct a 74,250-square-foot inbound call center in northeast Davenport, Iowa. Construction on the center, which will ultimately employ 500 people, is slated to begin this year.

New office development is generally occurring outside of the market’s central business districts in those areas of the community that are experiencing new residential growth, including the northeastern quadrant of Davenport and Bettendorf, Iowa, along the 53rd Street corridor, and in Moline, Illinois, along the John Deere Road corridor.

Net rental rates for Class A office space in the Quad Cities CBD average $13.50 per square foot. Similar properties in the suburban portions of the market average $15.00 per square foot. Office vacancy rates in the CBD are 15 percent, while suburban rates are 12 percent.

The Davenport/Bettendorf 53rd Street and Moline’s John Deere Road corridors are expected to remain strong for commercial development due to the existence of available land, close proximity to new residential development and easy access to Interstate 74, which is a major highway connector within the community.  Further out on the horizon will be commercial development in Milan and Rock Island, Illinois, along the Rock Island/Milan Parkway. New activity is expected to be generated by completion of the Veterans Memorial Bridge at Carr’s Crossing across the Rock River, which will open up countless acres of new development land in southern Rock Island County.

— Michael Krach is a commercial real estate sales associate with NAI Ruhl & Ruhl Commercial Company in Davenport, Iowa.


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