Leases may reveal future of market
Jared Husmann 
Associate director, KW Commercial  

Please identify one trend in your area to watch in the upcoming year.
I am closely monitoring the supply of new units in the market and the occupancy, specifically units built in 2017 and early 2018 that offered a lot of concessions upon lease-up and are coming to the end of those initial leases. How the residents respond at the end of the lease will give us insight into how the new supply in our market will be handled. 
 
Could you please explain the impact of that trend?
If the residents come to the end of these initial leases, they may tend to move into more affordable housing stock that is older, which could severely hurt the new housing being developed and brought to the market. Additionally, these residents may "jump ship" to the newest complex to be developed and make a habit of following the concessions provided by ownership in lease-up phases. The mindset behind this will give us a clue as to what the next generation will be looking for and if they will prefer location and urban environments, will they be price/budget sensitive, will they really move to the suburbs? Their actions now will determine what we can expect from them further in the future.

What’s one trend to watch in the next 10 years?
Technology has exploded onto the commercial real estate sector in the last 18 to 24 months in a way not seen before; for the first time the industry is joining the 21st century. The future of commercial real estate will focus less on relationships (although relationships will still be of vital importance) and more on the data, analytics and logical reasoning of why a certain deal makes sense; and technology is vastly improving our efficiency in these areas and answering those questions. 

Seeking a more stable market
Kris Saddoris 
Vice president OF development, Hubbell Realty Co. 

Please identify one trend in your area to watch in the upcoming year.

The trend for our market in multifamily housing for 2019 is stabilization. We are coming off of record unit delivery years in almost all markets nationally, and Des Moines is no exception. However, our market will see a continuation in 2019 of the reduction in construction starts we saw during 2018, while all indicators show that we will continue to lead the Midwest in population growth. In addition, we know that lifestyle changes, possible recessionary pressures and the financial barriers of homeownership all support growth in multifamily housing in all age groups during 2019. The convergence of all those influences will make for a very interesting year to watch in our industry.

Could you please explain the impact of that trend?
As record numbers of multifamily units have delivered both in the commercial business district (CBD) as well as the western suburbs during 2017 and into 2018, rent levels have been negatively impacted, as is expected when supply well exceeds demand. Almost every city across the nation is currently experiencing this imbalance as multifamily construction was ramped up post-recession to record levels. However, most national markets still have strong deliveries coming to market yet again in 2019. Although that will hold true in our western suburbs in 2019, the pipeline of deliveries in the CBD is sharply reduced for the coming year.  

Strong rental concessions that are a natural response to the imbalance in the market are also impacting owners of multifamily units across the Greater Des Moines market, negatively affecting cash flow positions, in a year when multifamily assessed values are projected to rise an average of 20 percent. As the housing market demand grows for multifamily housing, it is critical that the market move back to a better state of balance and stabilization during 2019. This balance allows for a reduction in the level of rental concessions and moves our market back to a state that a more typical annual rental increase level can be expected to help offset the expected cost increases. Without a movement toward stabilization, further reduction in multifamily starts in our market can be expected at a time when there is record growth in the number of renters in the market. As Des Moines is focused on continuing our leadership role in imperative population growth, a stabilized multifamily market is a critical piece of that success for our region.

What’s one trend to watch in the next 10 years?
Like many major metro areas across the nation, creative housing options are playing an increasingly critical role as Des Moines competes in the livability race toward population and corporate growth. As our community evolves into a “live and play” space and we strive to create a vibrant, connected environment to attract industry and the best and brightest, the role of a variety of housing opportunities has become more essential in that effort.

In 10 years, we will define “housing” very differently. The lines between workspace and living space are beginning to blur today, and advances in technology, coupled with the interests of a new working population that demands more flexibility, will change how living spaces are defined and designed.

Des Moines’ neighborhoods support needed workforce
Erin Olson-Douglas 
Director, Des Moines Economic Development Department 

Please identify one trend in your area to watch in the upcoming year.
Des Moines continues to enjoy low unemployment. The flip side of this heralded position is that attraction of quality workers along the entire spectrum of the workforce — from professionals to service providers — is increasingly challenging.

Could you please explain the impact of that trend?
Provision of quality, well-located housing at price points that foster Des Moines’ highly touted quality of life is key to continuing regional growth and vibrancy. Last year, the city of Des Moines completed an analysis of our Neighborhood Revitalization Program. The analysis concluded that we should coordinate and concentrate new resources in areas that need a nudge to encourage reinvestment by residents and prospective residents. The city is currently budgeting $4.5 million to focus in the first four pilot areas: Waveland Park, Oak Park, Columbus Park and Drake. By and large, these areas contain quality housing stock, but they are functionally obsolete and often passed over in the market. People do not live the same way that they did 50 or more years ago when many of these homes were built ­— kitchens are too cramped, there aren’t enough bathrooms, rooms are too small, there is not enough diversity in housing types. Funding is intended to address these issues and bring housing to today’s standards. Paired with reinvestment in already charming commercial areas, these walkable neighborhoods with libraries, parks, trails, schools and bus routes are ripe for new buyers. 

Meanwhile, Capital Crossroads is currently completing an analysis of our workforce housing market. It shows a future demand for nearly 60,000 housing units in the region over the next 20 years. Based on the job projections in this analysis, over 80 percent of this housing needs to be affordable to households making less than $75,000 per year. With a diversity of housing prices and an average assessed value around $150,000 in the pilot areas, Des Moines’ neighborhoods are well-positioned to provide housing that is affordable across the spectrum of our expected workforce. Reinvigoration of our urban neighborhoods will enhance our region’s competitiveness for the best and brightest workforce.