Despite the challenges created by higher interest rates and economic uncertainty, industrial development in the metro has continued and is expected to see additional growth in 2024, industry leaders said.

Industrial projects, from warehouses to data centers, have sprouted up across the metro, and developers said Central Iowa remains ripe for that development to continue in the months and years to come, despite a drop in building permits issued for the region in 2023.

In 2023, there were 156 permits issued for new commercial construction in Polk County and 13 in Des Moines-area communities. That is down about 40% from 2022, when 251 permits were issued. In 2021, there were 253 issued.

Despite that drop, the tide may be turning, according to Creighton Cox, managing owner of C2 Consultants Inc., who said he’s noticed an increase in the purchase of undeveloped land in Polk, Warren, Dallas and Madison counties. There has also been an increase in visits to the area by site selectors and more serious talks between landowners and potential buyers, he said.

“We’re seeing some of those larger transactions actually close,” Cox said earlier this year. “The architects are all comfortably busy.”

Among those who have purchased land are Microsoft Corp., which bought more than 375 acres of farmland in Van Meter in January. The technology giant also bought more than 100 acres in West Des Moines in December. The company plans on building data centers on the two sites.

In 2023, West Des Moines issued three building permits for data centers at Microsoft’s Ginger East, Ginger West and Osmium campuses, records show. The value of the three permits totaled more than $1.043 billion, or 57% of the more than $1.8 billion in valuation of all of 2023’s new commercial building permits.

“Data center development will continue to be prevalent in 2024,” Cox said.

On the other side of the metro, there has been a boom in warehouse development.

The Graham Group Inc. plans to develop land for three build-to-suit warehouses in Altoona, just north of Facebook’s data center campus. The initial plan is to build 1.3 million square feet of warehouse space on the 75-acre site.

The warehouses will range from 340,000 square feet to nearly 550,000 square feet.

Doug Den Adel, Graham Group’s president, said that while the plan is for three buildings, there is flexibility to meet a tenant’s needs.

“Right now, we’re proposing a three-building complex, but if somebody came and said we want a bigger building, we’d change it up,” Den Adel said earlier this year.

Nearby, work continues on a site that will expand JT Logistics’ presence in the area.

The development of three warehouses for JT Logistics in Altoona is continuing, with the final building expected to be completed next fall, the contractor on the project said.

Jesse Rognes, president of Synergy Contracting LLC, said the development, owned by Hawkeye Investment Groups of Chicago, will have an estimated value of about $130 million once completed.

The first building was completed and occupied by JT Logistics in January. The second building is scheduled to be completed in June or July, with the third building expected to be finished in October or November, Rognes said.

He said JT Logistics will lease all three buildings — which will total about 1 million square feet — to serve a variety of different customers. The site is on 21st Street, north of Interstate 80.

Just to the north, in Bondurant, the City Council approved preliminary plans in January for the development of 19 industrial lots south of U.S. Highway 65 and adjacent to the Bondurant Business Park, on the city’s northeast edge.

Jamie Myers, president of Paramount Land Development Co., the company behind the project, said the plan includes space for outdoor storage.

According to city documents, the new development will include lots ranging in size from about 0.8 acres to more than 8.6 acres.

Myers said that flexibility makes the site attractive for development.

“If that’s what the customer wants to do, we leave it open,” he said earlier this year. “If they would like to buy and build their own, that’s fine, but if they’d rather lease a facility, then we’ll work with our architects and engineers to design a building that suits their needs and build it for them and lease it over a 10-year period or something with an option to renew.”

Folks involved in all three projects cite accessibility to the metro’s northeast corridor as to why it’s attractive for industrial growth.

“It has visibility for companies who might have a need for a customer to find them,” he said of the Bondurant site. “Secondly, it has easy access for employees to get to work and back onto the highway, and then there’s that outdoor storage potential.”

Den Adel said the northeast corridor is ideal for what he described as “true industrial warehouse” development.

“If you look at the big bulk of bigger boxes and so forth, that’s kind of in the northeast corridor of that Ankeny, Bondurant, unincorporated Polk County, that type of area,” he said earlier this year. “So that’s why we’re focused … that way because that’s where we think the warehouse labor is at.”

Rognes said the proximity to the interstate system is one factor spurring industrial growth in the area.

“And you have Amazon just up the road with two big large warehouse facilities, and you have the Meta facility, along with renewable energy incentives through MidAmerican Energy that some of these companies have been able to work with, so I think there’s multiple drivers there that have helped promote this kind of industrial development,” he said.

Rick Tucker, senior project manager with Opus Group, which is also working on the JT Logistics site, said data centers in the area are helping drive much of the growth.

“Those buildings require a lot of support. I think that’s why there’s a big influx of that development in that area right now,” he said. “And just the access to I-80 right there is great, and you’re seeing just kind of a perfect storm being pro-development and good access and visibility.”

The industrial sector isn’t the only one seeing growth, said Brian Clark, founder and president of Sonar Development Partners, a real estate advisory firm.

UnityPoint and the Iowa Clinic are opening new medical clinics and surgery centers in Waukee in 2024, and Iowa Orthopedics is building a foot surgery center and medical campus in Grimes. Also, Dr. John Tentinger, a local radiologist, plans to develop a regional medical campus in Urbandale. The campus will provide preventive and diagnostic services, as well as treatment.

“Growth in medical and health care campuses is one of the trends I think will continue occurring,” Clark said earlier this year. “People are leaving big hospitals to start their own practices. They are going to where their patients and clients are. We are going to see more expansions like what [is occurring in Waukee] occur in Ankeny and other surrounding suburbs.”

Another trend to watch is the repurposing of office buildings, which have struggled to maintain occupancy since the pandemic, said Erin Knupp, director of business development for Boyd Jones.

“There will also be a strong focus on repurposing some of the larger office spaces that are now vacant or partially vacant,” she wrote in an email earlier this year. “Finding creative ways to fund and incentivize these projects to happen will be key to their success.”

No matter the development, developers will remain cautious in 2024, Knupp wrote.

“I don’t think the hike in rates has been fully felt yet in Iowa,” she wrote. “There’s still plenty of capital out there. It’s just going to be a matter of due diligence to piece together equity, grants and incentives.”