Construction of new apartment units in Greater Des Moines slowed in 2020 as developers paused to assess the pandemic’s effect on material costs and whether there was demand for new multifamily housing.


Just 1,084 new units were added to the market in 2020, 53% below the five-year average of new unit additions, a recent market survey from CBRE|Hubbell Commercial shows. In 2019, 2,317 new units were added in the Greater Des Moines area, according to a past survey.


The COVID-19-related closure or curtailment of production at lumber mills across the country has caused spikes in the price of wood used to frame buildings. The cost of windows and doors has also increased, as have appliance prices. The unanticipated increases have made it difficult to deliver apartment units at prices consumers are willing to pay, people in the industry say.


In addition, interest rates for 30-year home mortgages have been at historic lows, making it more economically feasible for traditional apartment tenants to buy houses. And many did. Quarterly homeownership rates in the United States in 2020 ranged between 65.3% and 67.9%, the highest since mid-2013, U.S. Census Bureau data released this month shows. 

“I think you’re going to see a little bit of a lull this year” in multifamily construction, said Kris Saddoris, vice president of Hubbell’s multifamily development division. “I wouldn’t say we’re on hold, but we’re going to have a bigger hill to climb this year than we have in prior years.”


The jump in lumber prices caused managers at Haverkamp Properties Inc. to recently reassess whether to move forward with the third and fourth buildings planned at the Emory, a new apartment development at 1490 34th Ave. S.W. in Altoona.


The project’s first phase includes the clubhouse and four apartment buildings with a total of 168 units.


“We got to a point where lumber prices were so expensive that we did a cost analysis – do we keep moving forward with the next two buildings of phase one or do we need to put a hold on things,” said Todd Wuestenberg, chief operations officer for Haverkamp Properties, the Ames company developing the Emory. 


“We think there’s enough demand in the Altoona area that we will still be able to lease our units, so we’ve moved forward,” he said of the nearly $40 million development.


Construction of the clubhouse is complete; tenants will begin moving into the first building in April. Construction of the first phase is expected to be completed by late 2021, Wuestenberg said. A second phase is expected to be built in 2022.


More projects in pipeline


While multifamily construction slowed in the Greater Des Moines area in 2020, it didn’t come to a halt.

More than 1,300 units are under construction in the Des Moines area and expected to be completed this year, according to the CBRE|Hubbell market survey. 


Among the projects are:

  • A $20.6 million mixed-use project by Nelson Construction & Development at 26th Street and University in Des Moines. The four-story building with 135 apartment units and street-level retail is expected to be completed in July.
  • The second and third phases of Linc at Gray’s Station, Hubbell’s 75-acre planned neighborhood development south of downtown Des Moines. The first phase of Linc, a $48 million development, included the construction of a four-story building with 85 units and 14,000 square feet of commercial space. The second and third phases, which are expected to be completed in the spring, include 142 units and 45 rental townhomes.
  • A four-story, 57-unit structure at 401 S.E. Sixth St. in Des Moines valued at about $11 million. Construction of the Connolly Lofts is expected to be completed by mid-2021.
  • The second phase of Larson Development’s Parkside Apartments at 2415 Paine St. in Bondurant. A building permit issued in September was valued at $3.4 million. 
  • Construction of two 70-unit apartment buildings at 720 and 770 N.E. 70th St. in Pleasant Hill. Building permits valued at $7 million each were issued in December to All Points Development.
  • A $10 million project in the 6300 block of Douglas Avenue in Urbandale that will include 43 two- and three-bedroom apartments, 10% of which will be leased at market rates and the remainder priced at rates based on a renter’s income. 

 

 

Other projects are underway in West Des Moines, Waukee, Grimes, Ankeny and Johnston.

How many new projects are started in 2021 is yet to be seen, said David Gaines, senior director of capital markets for Jones Lange LaSalle Americas Inc. JLL, with offices in Des Moines, issues quarterly multifamily market snapshots.


“You’ve got a lot of projects under construction now that will be delivered either later this year or in 2022,” Gaines said. “I think the Des Moines area will be delivering between 1,200 and 1,300 units a year for the next couple years, which is a very healthy amount.”


The average occupancy rate in the fourth quarter of 2020 was 92% for the Greater Des Moines area, about the same as it was a year ago, he said. The average monthly rental rate was $954, slightly higher than a year ago.


“You’ve got some situations where landlords were able to raise rents, which is an indication of a growing population and low unemployment,” Gaines said. 

He said the shortage of single-family houses for sale in the Des Moines area is also creating a demand for what’s called “luxury rental housing.”


“A lot of people moving to the area can’t find houses to buy or are planning on building a house, but can’t do it for a year or so,” he said. “They rent for a year or two but they want that unit to be similar to what they might build. They want those luxury items in their unit.”


Luxury apartments in Des Moines area


Haverkamp Properties, which was founded in 1994, entered the Des Moines-area market about 18 years ago with the construction of Riverwood Apartments in Pleasant Hill in 2003. Since then, the company has completed apartment communities in Ankeny, Johnston, Waukee and Grimes. The Emory is Haverkamp’s second multifamily development in Altoona. Its first was Ironwood at 2570 First Ave. S. 


The company has built more than 2,000 apartment units since its inception, including student housing, market-rate apartments and 55-plus housing, Wuestenberg said.


“Our experiences in Pleasant Hill and Altoona have been very positive so when the opportunity presented itself to acquire more land in Altoona, Brent [Haverkamp, the company’s owner] did,” Wuestenberg said. “It just makes sense. Amazon coming into the area is going to create more demand for housing. And on the east side [of Polk County] there hasn’t been a lot of new developments and there’s demand for it, which is what a developer looks for.”


The Emory, when completed, will include one- to three-bedroom apartment units with monthly rentals ranging from $980 to $1,390. Units include ceiling fans, granite countertops and wood flooring. Elevators are included in each building, and garages can be rented with some units. 


“Our customers really want a very high-quality product with amenities that’s delivered at a competitive price,” Wuestenberg said.


SB Communities LLC, an Omaha-based company, is developing a similar product in Ankeny at its Sterling at Prairie Trail multifamily project. The development company recently completed the second phase of the project, located at 2333 S.W. Plaza Parkway.


The development’s second phase includes 67 elevator-accessible apartments and 32 townhomes. SB Communities completed 213 apartment units in the development in 2017.

Nearly all of the new townhome units are leased, as are many of the luxury apartments, said Jerry Slusky of SB Communities. Rents for the apartments range from $795 for a one-bedroom unit to $1,425 for a two-bedroom, two-bathroom unit, according to the company’s website.


Like the Emory, SB Communities’ apartments are described as “luxury” units.


“When we started researching apartments, we found most were designed by men who just wanted the four walls,” said Bob Batt of SB Communities. “They didn’t have a lot of creative vision.”


Batt said the apartments at the Sterling are designed to “feel like a home, not like a box.”


SB Communities plans to begin work on a similar development this spring on about 20 acres near Southwest 11th Street and Southwest Westview Drive in Ankeny, company officials said. 


The new development, called the Sterling North at Prairie Trail, will include about 400 apartment units built in two phases, Jerry Slusky of SB Communities said.  


“We will be closing on the land and starting to grade when the thaw comes in the spring,” he said.  


Wide range of amenities offered to apartment tenants


Walk into the clubhouse of the Emory, an apartment complex under construction in Altoona, and one of the first things you’ll see is a fully stocked coffee bar where residents can grab a fresh brew before heading out in the morning.


Also included in the clubhouse is a lounge with a bar area, a big-screen television and a range of seating options. There’s also a dog-washing station, a tanning bed and a workout room with state-of-the art equipment including a virtual trainer. 


Increasingly consumers are looking for more than apartments with outdoor swimming pools and workout areas, said Todd Wuestenberg, chief operations officer for Haverkamp Properties Inc., an Ames company developing the Emory. “We know that the [multifamily] consumer today is different from those of 10 years ago. They want a very high-quality product with a variety of amenities that complement their lifestyles.”


The pandemic accelerated the growth of e-commerce as an increasing number of consumers turned to online shopping for nearly everything, including everyday necessities like food and medicines. 


The increase in package deliveries prompted Haverkamp Properties to install a delivery system that includes a locker area where Emory residents can pick up packages, Wuesternberg said. An electronic notification delivered to a resident’s smartphone or computer will alert them that a package has been delivered.


“Package deliveries have increased this past year, and we know our residents want to make sure that their packages are secure and not just being left in hallways or entrances,” he said.

New multifamily developments are also offering high-speed and secure internet with bandwidth that allows for gaming, streaming and video calls. 


“Connectivity is important, and it’s become even more important this past year,” said Bob Batt, of SB Communities LLC, an Omaha-based company developing multifamily complexes in Ankeny’s Prairie Trail planned community. “That’s the No. 1 thing [potential tenants] ask about.”


The Emory is providing tenants with one gigabyte of service, Wuestenberg said. “It’s built into the rent just like garbage and water service. It’s another utility.”


Other new amenities offered in apartment buildings and complexes include rooftop patios, small workspaces to accommodate people working from home, bicycle storage areas, indoor swimming pools, and “maker” spaces including those for woodworking and artistic painting. 

   

“If you don’t offer the amenities that appeal to today’s [consumers], you’re going to lose out,” Batt said.