Principal Financial Group Inc. moved out of 160,000 square feet of office space at its 801 Grand tower and into renovated offices in other buildings at its downtown Des Moines campus, yet the overall office vacancy rate for Greater Des Moines dropped to 13 percent in the third quarter from 13.6 percent a year ago, according to commercial real estate firm JLL.

JLL issued reports today on the Greater Des Moines office and industrial markets. The conclusions: More users will be found for office space, with businesses debating whether to be located downtown or in the western suburbs, and demand for industrial space remains strong.

The retail market reported its 12th consecutive quarter of positive absorption in the third quarter, but at a slower pace than in 2016, with overall retail vacancies increasing to 5.5 percent from 5.1 percent a year ago, real estate analytics firm Xceligent Inc. said in a report on Greater Des Moines commercial real estate.

In the downtown office market, the Federal Home Loan Bank of Des Moines has leased 21,000 square feet at the Financial Center as it awaits a move in 2019 to new headquarters at 909 Locust St. According to the JLL report, the bank had to abandon offices at 801 Walnut St. because of sprinkler flooding.

Overall vacancies downtown stood at 17.7 percent.

In the western suburbs, there were 20 leases signed and 15 move-outs. “Tenants in the market still weigh options between this submarket and the (central business district). Typical location criteria compared beyond lease rates include parking, amenities, commute times, accessibility and signage options,” according to the report. 

The overall vacancy rate in the western suburbs was 11.2 percent at the end of the quarter.

Average asking rents in Greater Des Moines were $18.12 per square foot, led by $23.16 per square foot for Class A offices downtown and $19.57 per square foot for Class A offices in the western suburbs.

The hunt for industrial space continues, with a vacancy rate of 3.8 percent at the end of the quarter, down from 4 percent a year ago. Average asking rents were $4.90 per square foot.

“Industrial demand for space remains strong in the Des Moines market,” according to the report. “The low vacancy has caused industrial tenants to consider build-to-suits or wait for the construction of additional space. Tenants such as third-party logistics firms may not have the luxury of waiting for additional space to come online. … These firms may choose space options which may not have optimal clear heights or dock doors.”

The largest move-in for the quarter was Des Moines Cold Storage, which occupies a new 120,000-square-foot warehouse at Vandalia Road and 43rd Street in Des Moines. Graham Construction has nearly 1.3 million square feet of warehouse planned or under construction in northeast Des Moines.

Many of the tenants leasing larger spaces this quarter are involved in the construction industry. Products and industries represented included drywall, electric, cabinetry, heating, ventilation and air conditioning, lighting, and general contracting, according to the report.

JLL also took note of an area along 100th Street in Urbandale, where an interchange to Interstate 35/80 will be completed next year, that will open for a mix of office and industrial users. R&R Realty is developing Center Pointe Business Park along the west side of 100th and north of the interstate.

Though space is tight, JLL said the construction of speculative industrial properties will be limited. “Although the projects that have been built have leased up, most developers (and lenders) require some amount of pre-leasing,” the report said.

A report later in the day from Xceligent Inc. also took note of the big move by Principal and its impact on office performance in the third quarter, and noted that the overall market continues to improve.

Among the major movers cited by Xceligent in the third quarter were the Federal Home Loan Bank, ReMy Health, Huney Vaughn Court Reporters and Gravitate.

Xceligent placed the overall vacancy rate at 12.9 percent and weighted average asking rents at $19.27 per square foot, an 11 percent increase from a year ago. Class A rents increased 13.6 percent year over year to $21.52, while Class B rents increased 5.8 percent to $16.99, Xceligent said.

On the industrial side, Xceligent took note of this new construction: 300,000 square feet at 6812 S.E. Delaware Ave. in Ankeny, 245,000 square feet at 2300 S.E. Grimes Blvd. in Grimes that will be occupied by Daimler Trucks North America, and 200,700 square feet at Corporate Woods Industrial Center in Ankeny.

Restaurateurs and retailers specializing in soft goods were the active players in the retail market during the third quarter, Xceligent said, while activity in nonfood and unanchored space was slow.

Average rents for all retail spaces dropped 3.6 percent to $11.33 per square foot from a year ago. Rents at convenience and strip shopping centers increased slightly, while rents at community/neighborhood shopping centers dropped 6.1 percent from the third quarter of 2016 to $10.76 per square foot.