Multifamily housing remains at the top of the commercial real estate food chain in Greater Des Moines, with ample signs that the overall market is improving.
That was the consensus of a panel of speakers Tuesday at a commercial real estate forecast hosted by the Iowa chapters of the Institute of Real Estate Management and the CCIM Institute.
"Overall, indicators show surprising optimism with regard to the commercial real estate sector, with regard to leasing, investment appetite and market sales," said Kevin Crowley of Iowa Realty Commercial.
Crowley predicted that office vacancies in downtown Des Moines could be absorbed in five to seven years, whereas other estimates have placed the time to fill vacant space at 10 years. He noted that the office vacancy rate elsewhere in Greater Des Moines has dropped to 15 percent from 23 percent.
"It's all about the recovery of the economy and job development," he said. "There is a lot of great activity in the office market."
Chris Pendroy of Terrus Real Estate Group LLC said the main problem with the industrial market is that there is little space - 43 million square feet in 858 buildings, with 89.5 percent of the warehouse and 95.1 percent of the manufacturing space occupied. He anticipates total occupancy will rise to 95 percent this year.
Pendroy also broke out numbers for flexible-use buildings, which can host office, retail, warehouses and showrooms. That sector has too much space available, he said, creating a tenant's market with owners offering incentives and rent conessions.
Tyler Dingel of CBRE/Hubbell Commercial said regional malls are well occupied and expressed optimism that downtrodden Southridge Mall will show signs of life this year, with work expected to begin on a streetscape concept that would allow shoppers to park near the stores they patronize. The concept is working at Merle Hay Mall, he said.
Jordan Creek Town Center is 98 percent occupied, Dingel said. The 3,000-square-foot Apple Inc. store at the mall generates about $25 million in sales, nearly the same amount as large anchors. Valley West Mall is 93 percent occupied and Merle Hay Mall is 92 percent occupied, he said.
"It seems like everybody wants to own multifamily," said Rick Krause of CBRE/Hubbell Commercial. Investor interest in the sector is topped only by the interest in farmland, he said.
At the end of last year's third quarter, apartment vacancies stood at 3.7 percent and rents had increased 1.1 percent.
However, sales in Greater Des Moines were flat, with 29 properties selling for $27 million in Dallas, Polk and Warren counties. Distressed sales accounted for 12 of the transactions. In 2010, 56 properties sold at $38 million, and in 2009, 77 sold for $58 million.
"There are lots of buyers and too few sellers," Krause said.