MIDDLE MARKET HIGHLIGHT, MAY 2006

WATERLOO/CEDAR FALLS, IOWA
Karen Stone, CCIM

Located in northeast Iowa, Waterloo and its sister city, Cedar Falls, sit within a day’s drive of all major Midwest markets. The Waterloo/Cedar Falls MSA population totals approximately 162,000 people, but the labor market draws 265,000 workers to the area.

The largest employer in the area is Deere & Company, which employs approximately 4,500 people in five facilities. Other major employers include Tyson Foods; UNI, one of three regent universities in the state of Iowa; and two hospitals, Covenant Health System and Allen Memorial Hospital. Many of these companies are currently expanding or have completed expansions during 2005.

Covenant Health System completed a $40 million expansion of its hospital in southwest Waterloo on San Anan Drive in early 2005. The system is currently building a new $10.5 million medical care facility south of Green Hills Road in Waterloo. UNI is expanding one of its athletic facilities, the McLeod Center, to a 6,100-seat arena that will open before the end of the year.

During the recent downturn, Waterloo did not experience any major closings or significant effects because of the tightened economy. “Both Waterloo and Cedar Falls take a very aggressive posture on retention and recruiting of companies,” notes Lisa Scuble, director of marketing for the Greater Cedar Valley Alliance. And both cities had record highs for construction permits in 2005, each topping $100 million in both commercial and residential permits.

Part of this growth can be attributed to increased diversification of the economy that has occurred in the last 10 years. “During this time, the number of service, office-based and distribution companies in the area has grown,” Scuble explains. Today, several of the area’s major employers, such as Principal Financial and GMAC Commercial Mortgage, are in the service sector.

“We learned a lot from the late 1970s and the early 1980s, when the only way for our economy to go was up,” Scuble says. “We realized that the way to ensure a better future was to create the potential for growth through diversification.”

For Waterloo, its economy’s diversification is paying off. “During the last 3 years, we gained more than 2 million square feet of new space that was built by new and expanding businesses,” Scuble notes. “More than 838,000 square feet of this total has been built in the last 15 months.”

 And the growth doesn’t appear to be stopping. In December 2005, plans for an additional $1 billion project — a 750-megawatt power plant — were announced. The proposed plant, which is going through the permitting process, would be located in the city of Waterloo with construction tentatively set to begin in 2007. The plant will be constructed and operated by New Jersey-based Ellis Power, and should become operational during 2011.

The burgeoning distribution has also brought new businesses to the area. Newport News, Virginia-based Ferguson Enterprises, the largest distributor of plumbing products and parts in the United States, recently opened a 608,000-square-foot distribution center located in Waterloo Northeast Industrial Park at the intersection of Martin Luther King Expressway and North Elk Run Road. The $31 million facility began operating in summer of 2005. “Waterloo was on the edge of the radius Ferguson was considering and we had to compete for them,” Scuble says.

Two international companies also moved into distribution facilities in the area during 2005. Swiss-owned Bossard-IIP began operating a 200,000-square-foot distribution center in city-owned Cedar Falls Industrial Park, adjacent to a 1.35 million-square-foot regional distribution center that Target opened 3 years ago. Also, Denso International America, a Japanese company that is a supplier for Deere & Company, opened a 35,000-square-foot facility in the southwest quadrant of Waterloo. In addition, Federal Express opened a 16,625-square-foot ground facility in MidPort America at the Waterloo Airport and Martin Brothers Distribution, a food products distributor located in Cedar Falls Industrial Park, completed a 27,000-square-foot expansion of its distribution facility.

Local office tenants have also been expanding. The Mud Group, a local advertising and public relations firm, is building a 29,000-square-foot, $4.5 million office building in Prairie Tech Park in Cedar Falls. It will house a production studio and it should be completed by the middle of the year. Van G. Miller & Associates is expanding its office in southwest Waterloo by 40,000 square feet at a cost of $10 million.

Businesses and industries are not the only economic drivers growing in the area. Waterloo and Cedar Falls are also experiencing growth in the residential sector. As of third-quarter 2005, Black Hawk County, one of four counties in the MSA, reported a 31.7 percent increase in single- and multifamily housing permits compared to third-quarter 2004.

Waterloo will soon be getting a big economic boost from Biloxi, Mississippi-based Isle of Capri. The gaming facility company is building a new casino that is expected to employ 800 people and generate $80 million to $100 million in annual adjusted gross revenues for the city.

The Waterloo/Cedar Falls retail market has been robust for the last several years. Hy-Vee grocery store just opened a $3.5 million store at Logan Plaza off Logan Avenue in northeast Waterloo. Wal-Mart opened a new Supercenter in Cedar Falls in 2004 and Target expanded to a SuperTarget during 2005. Restaurants such as Applebee’s and IHOP have opened recently, and Waterloo now has its first Starbucks Coffee.

“Our community leaders are very committed to growth,” Scuble says. “We have instituted a number of projects to maintain and increase the attractiveness of our community to current and future residents.” In the last 2 years, the city of Waterloo, in conjunction with the state of Iowa, has begun the Cedar Valley River Renaissance Project, which impacts the west side of downtown Waterloo. This project includes construction of an outdoor plaza, a riverwalk loop and an amphitheater, and improvements to the Cedar River dam, which are designed to enhance the boat access to the river to allow for increased recreational use. The total project cost is estimated to be approximately $20 million.

Projects related to the renaissance initiative include an expansion of the existing youth art pavilion and the art museum, and the opening of the Cedar Valley TechWorks. “A former Deere & Company building is being renovated under the supervision of a non-profit company, the Waterloo Development Corporation, to become a campus-like setting that will encompass 784,000 square feet and provide expo incubator space for bio-technology startup businesses,” Scuble explains. “This will provide a space for collaboration between with bio-products industries and the area’s educational facilities.”

Looking toward the future, Scuble says Waterloo is focused on attraction and expansion on two fronts. “We want to help find homes in our area for manufacturing companies that were not able to expand during the first 5 years of this decade because of the economy. As we continue to diversify our economy, we are also focusing on attracting advance manufacturing, information technology and agri-based biotechnology companies to our area.”

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