HEARTLAND SNAPSHOT, MARCH 2009

Des Moines, Iowa Industrial Market

Kevin Sullivan and JR Textor, vice president and sales associate, respectively, with Des Moines-based CB Richard Ellis|Hubbell Commercial recently answered Heartland Real Estate Business’ questions regarding the 43 million-square-foot Des Moines industrial market.

What trends are you currently seeing in industrial development?

We are currently seeing a spike in local and regional interest in the high-cube warehouse market. At the same time, the demand for flex office space has waned. Manufacturing sectors are watchful of the impact by the more frugal consumer and slowing economy. Rental rates remain stable and occupancy rates continue to hold despite economic headwind.

What are some significant industrial developments that have or will take place in the area, and the impacts they will have on the market?

The Grimes Distribution Center contains one 110,000-square-foot facility and will eventually add 400,000 square feet of warehouse to the market. The warehouses have a 24-foot clearance, which is becoming a necessity for more occupiers. The distribution center sits on a 17-acre site in Grimes, Iowa, a northwest suburb of Des Moines. This submarket is experiencing more development of this type due to available land and the exceptional access to the intersection of interstates 80 and 35.

Where is the majority of industrial development taking place? Why?

Most of the industrial development in the Des Moines market is taking place in the northwest quadrant. This is due to its proximity to interstates 80 and 35, which are at the crossroads of the nation. The availability of an industrial tax abatement in Grimes has also helped attract developers to that city. The Des Moines market is logistically desirable to businesses that transfer goods between Kansas City and Omaha, Nebraska. Many companies based in those cities have become major users in the Des Moines area.

What leases have recently closed?

Cintas recently closed a lease on a 15,000 square-foot space at the Grimes Distribution Center.

What is the range for rental rates in Des Moines?

The going rental rate for industrial space in the Des Moines area is $1.50 to $4.95 per-square-foot triple net.  Newer product tends to command the higher end of that spectrum.

How are the vacancy rates?

The overall warehouse market in Des Moines is approximately 92 percent occupied, with post-1970 maintaining a 96 percent occupancy rate. Manufacturing space is approximately 97 percent occupied, and flex space is approximately 87 percent occupied. All industrial space is at approximately 93 percent occupied, versus 88 percent nationally.

How is the industrial market faring in the midst of economic uncertainty?

The Des Moines industrial market is in better shape than most in the country. The area continues to see low unemployment rates, although vacancy rates are rising slightly. Owners are tending to be more careful in their tenant mix. The relative strength of the local economy and lower cost of living, as well as the lack of a prior boom in the market, are all factors helping Des Moines weather the economic downturn.

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