Construction is underway on Hubbell Realty Co.'s Grimes Distribution Center No. 5 along Iowa Highway 141. The 110,000-square-foot facility is expected to be completed by year’s end.  Photo provided by Hubbell Realty Co.

The vacancy rate for industrial space in the Greater Des Moines Area is hovering around 3%, a sign that demand for the product continues to be strong, two recently released reports on the market show.

Reports by both Hubbell Realty Co. and JLL Inc. also show the year-to-date net absorption of industrial space in the metro area is about 1 million square feet.

XPO Logistics, among the world’s largest providers of transportation and logistics services, signed a lease for 600,000 square feet at a warehouse at 4950 N.E. 29th St. owned by Graham Group, the Hubbell and JLL reports said. The transaction helped tighten the availability of industrial space in the area, the reports said.

"We don’t have enough of the space," said Marcus Pitts, a commercial real estate broker and managing director of JLL, a real estate and investment management firm. "There isn’t enough supply to meet the demand."

In fact, Pitts said, firms recently looking for space in the Midwest opted to locate in Kansas City rather than the Des Moines area because the Missouri city had industrial and warehouse space readily available. The Des Moines area lost companies that would have leased nearly 1 million square feet of industrial space, he said.

Demand for the industrial space has been sparked by the growth of e-commerce, increasing the demand for warehouse space particularly in the Midwest, experts say.

"Businesses want to get their products to consumers faster," said Mark Rupprecht, president of R&R Realty Group. "So they are looking for space to store their products so they can be distributed more easily and quickly."

Zach Scheckel, research analyst for CBRE|Hubbell Commercial, said Des Moines’ location near two major interstate systems makes it an attractive area in which to locate. "Also, we’re right smack dab in the middle [of the country], which also gives us a competitive advantage.

According to the two reports, about 500,000 square feet of warehouse, distribution and manufacturing space is under construction. Among the projects are:

• Hubbell’s Grimes Distribution Center No. 5 along Iowa Highway 141. Construction of the 110,000-square-foot facility is expected to be completed by year’s end.

• Signature Commercial Real Estate’s Meredith Pointe at Northwest Urbandale and Meredith drives in Urbandale. An 80,000-square-foot build-to-suit warehouse is for Assembled Products, Inc. Two other buildings will provide flex space of more than 150,000 square feet. Tenants have not been announced for the two buildings.

The Des Moines area could use more speculative warehouse space, Pitts said.

"Iowa has been pretty conservative with the amount of spec space it builds," Pitts said. "As more national developers get involved in the market that might change."