A Cedar Rapids-based real estate investment firm has purchased two buildings in the Russell Industrial Park in Davenport in what those close to the transaction said was one of the biggest industrial real estate transactions in the Quad Cities.

Midwest Equity Investors bought the two buildings totaling 380,000 square feet for $42.6 million from Russell, an Iowa-based construction and development firm. Nestle Purina is a current tenant in the larger, 301,320-square-foot building. Crescent Electric, PODS, and Tube and Solid Tire are tenants in the second building, which totals about 79,600 square feet.

JLL’s Des Moines office represented Russell in the transaction.

Michael Minard, JLL senior vice president, said the Russell site was the first speculative industrial site built in the Quad Cities since Caterpillar pulled out in 1986, and the sale of the buildings to Midwest Equity Investors is the latest indicator of growth in eastern Iowa.

According to Minard, the Caterpillar departure freed up about 3 million square feet of industrial space, which for the past 40 years has been owned by local groups with low lease rates.

“Those lease rates were so low you couldn’t build space and make the numbers work,” Minard said.

Minard said the industrial vacancy rate in eastern Iowa is about 1.3%, with few, if any, options for more than 50,000 square feet of space. The market loosens up a little in the Cedar Rapids-Iowa City corridor, he said.

By comparison, the vacancy rate in the Des Moines area is 5.9%, said Austin Hedstrom, executive vice president of JLL.

The Central Iowa market saw a record number of properties become available in 2023 “that we’re still trying to chew through,” he said.

There are currently seven or eight Class A industrial buildings over 100,000 square feet that are available in the Des Moines market.

“So there’s a lot more options compared to the eastern side of the state,” Hedstrom said.

Minard said eastern Iowa hasn’t experienced the development that has been seen in Central Iowa, leading to its lower vacancy rates.

“But what we’ve proven in the last three years with Russell is it has definitely piqued the interest of a lot of different groups looking at … different parts of the eastern side of the state and saying, ‘Hey, maybe this is a solution that we can do.’ And just knowing that the vacancy rate is so low, these groups don’t have a lot of options.”

Damon Trebilcock, vice president at Russell, said the 95-acre industrial park along Northwest Boulevard will have six buildings when it’s fully built out and that future expansion is planned.

He said the industrial park and the Quad City market is geographically attractive for companies and attractive for companies looking to lower their operating costs because it’s less expensive to operate in Iowa than in neighboring Illinois and other states.

Minard said the area’s proximity to Chicago, a two-hour drive, and 2½ hours to Milwaukee and four hours to St. Louis, make it attractive to companies.

The presence of Deere & Co. is also a draw for some companies, he said.

“I think they occupy around 15 million square feet in the market, and if you have anything to do with them, you probably need a location there. And I know that is driving a lot of things in the market,” Minard said.

Trebilcock said the price point of the recent transaction caught the attention of a lot of people.

“The purchase price being what it was was a big deal and for the Quad Cities in the industrial world to know that not only did we build it and take the risk to build it, but we got it leased and we sold it,” he said. “The dollar numbers grabbed a lot of people’s minds like, ‘Wow, that can happen in the Quad Cities?’ I don’t think people thought about that.”

Hedstrom said the momentum being seen in eastern Iowa is making the region more competitive.

“The past 12 to 18 months I feel like the momentum has definitely shifted to eastern Iowa,” he said. “The activity is still strong throughout the state, and eastern Iowa has definitely been put on the map. There’s a lot of strong momentum out there.”