HEARTLAND SNAPSHOT, SEPTEMBER 2008

Quad Cities

While much of the country continues to be impacted by banking issues and a depressed economy, it is a comparatively good time to be in business in the Midwest. With little price erosion in the market, reasonable absorption and somewhat conservative bankers, each sector of the Quad Cities region is moving in a positive direction.

There is good activity in retail land development and redevelopment of existing retail locations. The activity includes acquisition of greenfield and infill land sites to accommodate neighborhood retail strip centers serving new residential development.

Additionally, there is an adequate supply of new office product to accommodate the next 12 to 24 months, particularly in the Iowa half of the Quad Cities region. The Illinois portion of the market seems to be experiencing less development of new office product, and the supply seems to be sufficient at present. Leasing of existing office product seems to have picked up. Many average sized Class A and B office suites, which were vacant in the last 2 to 3 years, have been re-tenanted in the last 6 months.

In the industrial sector, there is still a great demand for 7,000 to 100,000-square-foot freestanding, modern industrial facilities for purchase. The large multi-tenant facilities have experienced slow-to-moderate leasing activity, with a steady supply of inquiries.

There is little variance in vacancy rates among all of the Quad Cities commercial sectors. Class A office facilities had a 15 percent vacancy rate in 2007. In the industrial sector, bulk warehouses and manufacturing facilities both reported vacancy rates of 20 percent. In the downtown areas, retail had a 10 percent vacancy rate, while neighboring service centers fared slightly better, with only 7 percent. Additionally big box centers and regional malls had 15 percent and 10 percent vacancy rates, respectively, in 2007.

Likely because of greater equity requirements by lenders, the entrepreneurial investment market has softened. Though they are more selective than they were 12 months ago, there is still good interest in quality, occupied investment product from large private funds and institutional investors.

There also is some interest and impending activity in potential new multifamily developments to accommodate changing financing availability for homebuyers. The theory is that there is lack of high-quality rental housing for singles and families seeking modern product. 

The majority of development taking place continues to be in northeast Davenport and northwest Bettendorf, Iowa. These locations offer excellent demographics, interstate access and excellent proximity to much of the new housing available in the market. A great deal of the development underway in other areas is based on community efforts to enhance downtown areas, with incentive packages attractive to developers.

One of the most talked about projects in the Quad Cities right now is the former Joe Van site, which is located at Middle Road and Interstate 74 in Bettendorf. The site is positioned near the redeveloped Duck Creek shopping mall, which has enjoyed great success and record-breaking rents since its redevelopment approximately 4 years ago. Situated in the heart of Bettendorf, the Joe Van site was a former grocery-anchored center, with surrounding retail. The anchor spaces have been vacant for many years and the buildings have been deteriorating.

Currently being marketed as The Shops At Duck Creek, several of the buildings have been demolished to make way for approximately 200,000 square feet of new retail product on 12 acres, which will accommodate retail shops, restaurants and other uses. Among other investors, the project is being developed by Curtis McDonald of McDonald Properties and Kevin Koellner of Build To Suit, Inc. The city of Bettendorf has executed a Tax Increment Financing-based development agreement to stimulate the redevelopment of this highly visible and accessible site. NAI Ruhl & Ruhl Commercial Co. is serving as leasing representative for the new center.

Burlington Coat Factory will anchor the center, occupying approximately 80,000 square feet in the former ShopKo building, which will be completely remodeled. Several other new tenants have committed to the site but have not been announced. Rents will be consistent with the rents across the street at the Duck Creek project, and will fall in the $28 to $36 per square foot range on a triple-net basis for small shop space.

In the office sector, a multi-story project has been announced in Moline, Illinois. The building will consist of approximately 20 stories, and will be located within downtown Moline’s Bass Street Landing area. The facility will include retail uses on the street level, Class A office space and several stories of residential condominiums. The anchor tenant has been announced as Kone, an elevator company currently headquartered in Moline. It is currently estimated that Kone will occupy approximately four floors of the building. The developer is Rodney Blackwell, a Quad Cities-based office and retail developer. Groundbreaking for the project is anticipated to be this year.

The city of Moline has worked closely with the developer in drafting a development plan that includes a sizable Tax Increment Financing package, as well as the developer’s purchase of Kone’s existing properties.

Another major development underway in the area is The Davenport Municipal Airport renovation. The city-owned airport has recently announced, in cooperation with private developers, that a new terminal will be constructed to replace the aged and obsolete existing terminal. New hangar space will also be constructed by a private developer to house private and corporate aircrafts based outside of the area.

There is also a runway extension currently in the planning stages, which will enhance the use of the facility, accommodate larger aircraft, and attract additional usage by private pilots and corporate users seeking an alternative facility to the Quad City International Airport in Moline.

With so much new development spreading throughout Quad Cities, the area is seeing an influx of new retailers to the market, including Burlington Coat Factory, Hollister, Steve & Barry’s, Quad Cities Suzuki, Cartridge World USA and Premier Home Furnishings. Many restaurants are also moving into the area, including Jimmy John’s Gourmet Sandwiches, Red Robin, Sonic, Chick-fil-A, Osaka Steak House and Noodles & Company. Anytime Fitness, Midwest One Bank and StayBridge Suites Hotels have also opened locations in the market.

In the future, the Middle Road and I-80 corridor is an area to watch. Great attention is being given to this area by the city of Bettendorf, Bettendorf Development Corporation and The Quad City Development Group. There is discussion of extending full utility services to the area, and the on-ramp and off-ramp are being redesigned by the DOT. There are efforts underway to assemble large tracts of land to accommodate development of research-type facilities, large office users and supporting retail. The area is neighboring much of the new executive level housing and is considered a gateway to the Quad Cities. Bettendorf has long been known for its forward-thinking attitude in terms of land planning, and this is clearly a great opportunity for the Quad Cities as a whole.           

— John G. Ruhl is vice president and sales manager for Davenport, Iowa-based NAI Ruhl & Ruhl Commercial Co.

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.