The Greater Des Moines area, with its growing population and low unemployment rate, is continuing to attract investors in the multifamily sector, according to a recent CBRE Inc. market report.

In the first six months of 2024, 11 multifamily properties with 50 or more units have been sold in the Des Moines area for a total of $216 million, according to the report. In all of 2023, there were 13 transactions of properties with over 50 units for a total of $189 million.

“That just proves the strength of the market here,” said Cy Fox, senior vice president at CBRE, which has an office in West Des Moines. “We’re still generating a ton of interest on deals that we bring to market.”

Des Moines is the fastest-growing large metro area in the Midwest, recent U.S. Census data shows. Between 2020 and 2023, the population in the six-county area surrounding Des Moines grew 3.1%, from 709,512 to 737,164. The unemployment rate in Polk County was 3% in June, according to Iowa Workforce Development. Dallas County’s unemployment rate is 2.7%; Story County’s is 2.3%. The U.S. unemployment rate in July was 4.3%.

The Des Moines area also has many employers that are resilient to large swings in the economy, Fox said. Amenities like Topgolf, Vibrant Music Hall and the water trail system are or have been added, and the Des Moines International Airport is undergoing a multimillion-dollar expansion.

“All of that just alludes to the strength of our economy here,” Fox said.

It’s that strong economy that is attracting buyers to the area, brokers said.

Broadway Heights Apartments at 4216 E. 50th St. in Des Moines was among the multifamily properties sold in the first half of 2024. The property’s seller received 24 offers, and all but three of the offers were from entities outside the state of Iowa, said BJ Connolly, managing director for Greysteel, which has a West Des Moines office. Connolly’s team represented the property’s seller in the transaction, which totaled $16.6 million.

Typically, about half of the buyers interested in a property are from out of state, Connolly said. “Des Moines’ got a very good, steady economy. When there’s a little instability in the primary markets, the Midwestern affordable markets are where the capital wants to be.”

The multifamily sector “is the most attractive asset class,” said Matt Weller, vice president of building development for Hubbell Realty Co. Property owners with debt coming due either look at refinancing or selling and reinvesting the capital other places, he said. Buyers are always looking for places in which to invest capital.

“A multifamily asset, particularly in the Midwest, is a pretty safe place to park some money,” Weller said. “Some investment groups may have assets all over the country. [Properties] may have a little higher risk profile in the Sunbelt than an asset in Des Moines, which is why I think we’re seeing more interest here. … Buyers have been circling Des Moines for three or four years. Now we’re on their radar.”

Construction of new multifamily projects will add even more properties to the market. Currently, 1,948 units are being built in the Des Moines area, the most since 2019, according to CBRE’s report. More than half of the new units are being built in Waukee and the central business district, both with 648 under construction.

An additional 2,729 units are proposed to be built in the Des Moines area in the coming year to 18 months. Over 1,270 of the new units are proposed in the central business district. Included in the planned new downtown units is the conversion from office to residential and commercial of the Financial Center and Ruan II building.

“Downtown in general has proven to be resilient,” Fox said. “It’s performing much better than a lot of other downtowns in primary markets.”

It likely will take two or more years for the new units that are under construction or planned to be absorbed by the market. And while additional new units may boost the vacancy rate, it’s not a cause for alarm, Weller said.

“There is no excess housing in Des Moines, Iowa, right now – or anywhere for that matter,” Weller said. “If we’re absorbing 200 units a month versus 1,000 units, it will likely affect when some of these projects start.”

Other highlights from CBRE Inc.’s report include:

• The vacancy rate for apartment units in the Des Moines area is 5.5%, the highest it’s been in three years. The highest vacancies were in South Des Moines (7.1%) and downtown (6.6%). The lowest vacancies were in the west part of Des Moines (1.8%) and Ankeny (3.1%).
• The average asking rent is $1,120 a month, a 1.8% increase, year-over-year. Average monthly rental rates ranged from $865 in North Des Moines to $1,405 in Waukee.

More online: To read CBRE Inc.’s mid-year multifamily report, click here.