The vacancy rate for industrial space in the Greater Des Moines area was 5.2% in 2023’s third quarter, up from the same period a year ago when it was 2.9%, JLL’s industrial insight report shows.

However, the over 3.48 million square feet of industrial space that is currently vacant is not alarming, said Austin Hedstrom, a senior vice president at JLL’s Des Moines office.

“A lot of [the vacancy] is due to the fact that we had a number of net new deliveries over the past three quarters,” Hedstrom said.

The Des Moines area has over 67 million square feet of manufacturing and warehouse and distribution space, JLL’s report shows. Construction of over 520,000 square feet of new space was completed in the third quarter, the report shows.

“We are tracking good activity in those buildings, but it is taking little longer time to pull the trigger on signing leases,” Hedstrom said. High interest rates and an uncertain economic climate is creating some hesitancy in committing to long-term leases, he said.

“Anytime there’s uncertainty, it takes longer to close deals,” said Jason Lozano, a senior vice president at JLL’s Des Moines office.

Interest from out-of-state investors remains high, according to the market report. In August, Louisiana-based Sealy & Co. acquired a 265,726-square-foot Class A warehouse and distribution structure located in Altoona’s Altus Commerce Center. Also in August, a New York property investment and management firm bought a recently completed 200,220-square-foot warehouse at 5950 Delaware Ave. in Ankeny.

“These transactions highlight the interest of out-of-state investors in fully leased, high-quality warehouse properties,” the JLL report said.

Both JLL and CBRE Inc.’s third-quarter market reports predict industrial vacancy rates will begin to decline by mid- to late-2024. Currently just 820,000 square feet of industrial space is under construction, according to CBRE’s report. Two of the projects – Prairie Tower I and Urban Loop Commerce Center I – are in Urbandale. The other is in Altoona’s Gateway East Business Park.

“The amount of space that is under construction right now is down from previous years,” Lozano said. “If we reach normal absorption levels, I think we’ll see a supply-and-demand issue as we move into end of year 2024 and beginning of 2025.

“Groups that have available products on the market today are waiting to get leases signed before moving to the next project,” Lozano said.

According to Hedstrom, “We’re just a couple deals away from having a tight market again.”
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To read JLL’s third-quarter industrial report, click here.
To read CBRE’s report, click here.