It will take several months, if not a few years, to understand the effects Wells Fargo’s sale of Des Moines-area properties at discounted prices will have on the office market and property valuations, real estate experts say.

The two sales of office properties in the western suburbs could prompt other potential commercial office buyers to make offers that are below asking prices, prompting owners to reassess whether to sell properties, they said. It could also prompt property owners to request valuations be lowered, a move that would generate fewer property tax dollars for cities, counties, school districts and other entities.

“I don’t think it’s going to have some kind of catastrophic doom and gloom on the market,” said Alec Wilcox, a commercial real estate agent with Cushman & Wakefield Iowa Commercial Advisors. “There won’t be a monumental shift in the market.”

In December, Wells Fargo sold properties at 7001 Westown Parkway and 1725 68th St. in West Des Moines, and at 13733 University Ave. in Clive.

WB Realty Co., a Central Iowa commercial and residential brokerage firm, bought the West Des Moines properties for $16.5 million, or $57.3 million less than the properties’ combined assessed valuation of $73.8 million.

Heartland Co-op acquired the former Wells Fargo property in Clive, paying nearly $6.5 million for the property that is valued at $13.7 million.

The sale of the properties occurred less than a year after Wells Fargo announced that it was relocating many of its Des Moines-area employees to its Jordan Creek campus in West Des Moines. The financial institution’s home mortgage offices had been located on the Westown Parkway and University Avenue properties.

A spokesperson for Wells Fargo declined to comment about the properties’ sale prices.

Bryon Tack, chief deputy assessor in Polk County, said it’s too soon to know the impact the sales will have on valuations or other transactions involving office properties.

In the past year, four Des Moines-area office properties have been sold for between $70- and $160-per-square foot, Tack said. “That’s a tremendous range. … We are always trying to look for a pattern. We need to figure out which of those are outliers and whether there is something unique about the higher or lower sales.

“We just don’t have enough information right now to make a determination.”

Office properties in Polk County that have been sold in the past year include:

• The Wells Fargo property in Clive that was sold for nearly $70 a square foot.
• An office building at 1200 Locust St. in Des Moines that the city of Des Moines acquired for about $80 a square foot.
• An office building at 6200 Park Ave. in Des Moines that the state of Iowa bought for $130 a square foot.
• An office building at 1615 Locust St. in Des Moines that MidAmerican Energy Co. acquired for just over $160 a square foot.

In March 2023, Wells Fargo listed four office buildings and a parking garage for sale. A company spokesperson declined to comment on whether the properties are listed at below-market prices.

Wilcox speculated that Wells Fargo’s downtown properties could be sold for below their value if a buyer plans on using the buildings for uses other than offices.

“If a buyer plans on redevelopment, they are going to have to put money into retrofitting [a building],” Wilcox said. “They will want to buy the property for as little as possible. But, if an investor or a user buys the property, they might have the ability to pay a little more.”

Justin Lossner, a senior managing director in JLL’s Des Moines office, said it is unlikely that the property occupied by Wells Fargo in West Des Moines would have ever been sold for near its assessed value.

“It was a corporately occupied asset and had been for years,” said Lossner, who with others at JLL, listed the property. “Going forward, it’s not going to be a 425,000-square-foot, single-occupier building, which means the value of that is different. … Unless magically, an owner-user came along and wanted to purchase the whole thing – which is unlikely in the Des Moines market – then you’re looking at this as an investment/speculative purchase.”

The traditional costs of tenant improvement packages were taken into consideration when the JLL team determined the property’s value, Lossner said. Also considered were the amount of time it would take to lease the property and what a property owner’s expectations would be on their return on investment.

Steve Helm, Dallas County’s assessor, said it’s too soon to know how the sale will affect valuations of other office properties. However, he said he’s had a few inquiries from office property owners asking about lowering assessed valuations.

Ryan Wiederstein, owner of WB Realty Co., which bought the office building, has said the competitive lease rates being offered in the six-story building will attract interest from potential office users. Leasing options for potential tenants will range from 4,000 square feet up to the entire building for a single tenant.

“We bought [the property] at a price point that we think can be very competitive in the Class A office market in the western suburbs,” Wiederstein said.

Lossner said he is seeing an uptick in interest in Class A office space from potential lessees.
“If you’re sitting on high-quality Class A product, odds are that you’re looking at multiple deals right now,” Lossner said. “If you’re sitting on C-quality space, you’re probably still pretty cold.”

Helm said no decisions have been made on whether to change the valuation of the recently sold West Des Moines office property. If the building remains vacant for a long time, the property’s assessment could be lowered, he said. “If it is leased quickly, that’s another thing.”