Greater Des Moines commercial real estate professionals boldly stood before their peers Jan. 27 at Wakonda Club and made their predictions for 2015.

“Our expectation is that a lot of people in this room will have a strong 2015,” said Chris Curran, senior vice president with R&R Realty Group.

Here is a rundown of the 2015 outlook by property type.

Industrial Property

Marty Herrmann with CBRE|Hubbell Commercial pointed out national trends that will have an effect on local markets, including the fact that e-commerce has resulted in inventory being stored in large distribution and fulfillment centers rather than in retail stores.

The expansion of the Panama Canal will allow larger container ships to reach ports on the East and West coasts, resulting in increased demand for space.

The economic recovery is bolstering the food industry and resulting in increased demand for cold storage.

On the downside, a shortage of truck drivers could cause inventories to fluctuate.

In Greater Des Moines, the vacancy rate at industrial properties is slightly more than 3 percent, and several large centers have come online or are slated for construction next year. Among those are Hubbell’s Grimes Distribution Center No. 3, which has 90,000 square feet of space remaining. R&R Realty Group’s Prairie Business Park will have 260,000 square feet available on April 1. 

More warehouse space is in the offing, Herrmann said.

Opus Group is expected to start construction in the spring on an 182,000-square-foot facility in Grimes, Graham Construction Co. has a 90,000-square-foot site available for construction, and IRET Properties has property in Urbandale that could accommodate a 275,000-square-foot building.

The industrial vacancy rate is 3.1 percent, with 316,300 square feet of space coming off the market last year.

Rents for new buildings are running $4.45 to $5.25 per square feet on a triple-net lease, while second-generation buildings are renting at $3.25 to $4.25 on a triple-net lease.

Multifamily

The hot commodity in commercial real estate in recent years has been multifamily housing, with renovations eating up abandoned office and industrial spaces, especially in downtown Des Moines, and new apartment buildings adding units across Greater Des Moines.

Rising rents and falling vacancy rates have been the norm for the last several years in Greater Des Moines, but the market might reach some stability in light of trends that occurred in the last quarter of 2014, said Kris Saddoris, vice president of development for Hubbell Realty Co.

The last quarter of 2014 saw the completion of several large apartment projects in West Des Moines and Clive. As those units become available this year, there is an expectation that vacancy rates could experience a slight uptick, she said, but still remain below 5 percent.

Although a spate of multifamily projects have been announced in recent weeks, Saddoris pointed out that permits for new construction dropped 12 percent last year from 2013.

With rents rising, apartment owners also were holding on to their properties last year.

As a result, investment in apartment buildings was light in 2014, Saddoris said, with Polk County assessor records showing just 11 sales of properties with more than 24 units.

Sales of older properties showed cap rates of 8.5 percent to 9.5 percent, while newer units with corresponding amenities had cap rates of 7.5 percent to 8.5 percent.

Most sellers were local owners selling to high-net-worth individuals, Saddoris said. Wellington Apartments in West Des Moines was the exception that proved the rule. The 420-unit complex was purchased by an institutional buyer, the only such sale last year.

The Greater Des Moines market will draw investor interest this year because of its reputation for stability and higher yields than nearby larger markets, Saddoris said.

Office

To leave no doubt about their outlook for 2015, R&R Realty Group’s Kate Byus and Chris Curran concluded their slideshow presentation with a big “thumb’s up” illustration.

Greater Des Moines’ office occupancy rate experienced modest improvement in 2014, with a rate of 87.4 percent for the entire market. Class A offices in the western suburbs were 89 percent occupied, while 80 percent of the Class B space in downtown Des Moines was occupied.

There are signs of life with mixed residential and office renovations underway and Sherman Associates Inc.’s plan to build a 72,000-square-foot office building in the River Point West area. Top those with Principal Financial Group Inc.’s nearly $270 million upgrade of its downtown campus and Kum & Go LC’s planned construction of its headquarters along Grand Avenue in the Western Gateway.

Other new projects underway include Merchant Bonding Co.’s office in West Des Moines and Nelson Construction & Development’s Ashworth Place, also in West Des Moines. 

A splashy purchase and renovation was the Iowa Lottery’s $7 million move into the chalet-like former headquarters of Donald DeWaay’s financial services companies on University Avenue in Clive. 

Adding to their optimism for the office market were increased hiring, strong markets and corporate profits, low interest rates, political calm and a positive business climate.

Retail

Christopher Stafford of NAI Optimum pointed out that yogurt shops that were omnipresent in recent years appear to be on the wane, and also in jeopardy are sit-down restaurants.

In vogue are high-end retail stores and specialty grocery chains, with The Fresh Market Inc. and Fresh Thyme Farmers Market planning stores for West Des Moines.

Major retail developments are in the works for Altoona’s Prairie Crossing area and Waukee’s Kettlestone development area holds promise for the future.

Stafford also pointed out that a retail forecast based on current conditions could change on a moment’s notice.

“Next week, things could change,” he said.