Turn on the lights: office leasing a bright spot in Greater Des Moines

Expect to see more vacant office space fill up this year, especially in second-generation buildings, Greater Des Moines brokers said.

That was the trend in 2011, and it is expected to be a bright spot in the commercial real estate market in 2012.

“We’ve seen an improvement in 2010 and 2011, and I think we’ll see that in 2012,” said Kevin Crowley of Iowa Commercial Realty. One big improvement for his company has been the gradual infill of the Hub Tower at 699 Walnut St.

The building, a signature property in the 1980s, was bought out of receivership by EMC Insurance Co., and Iowa Realty has continued to market office space that had been vacated.

Iowa Realty leased about 55,000 square feet in Hub Tower last year and hopes to fill two or three floors of the 23-story building this year, Crowley said.

Bill Wright, managing director at Terrus Real Estate Group, is optimistic about the commercial real estate market in 2012, with special attention directed to offices.

Terrus manages the Bank of America building at 317 Sixth Ave., with a first floor that has been conspicuously vacant. That will change when BNIM Architects takes over half of the first floor, Wright said.

“We’re starting to see some positive movement,” Wright said. “The technology companies and younger entrepreneurs are looking in the central business district.”

StartupCity Des Moines also is located in the Bank of America building, and Wright credits its presence with sparking interest in the downtown.

On the retail side, leasing remains a struggle, but Crowley and Wright see signs of improvement.

“We’re starting to see some retail activity, which is great,” Wright said. “Small shops are doing new leases.”

Crowley said neighborhood-oriented retail shows promise.

The brokers also expect to see the amount of vacant industrial space shrink.

“We’re expecting to sell a couple of warehouses that we have under contract,” Crowley said. “We’re pretty bullish about (industrial). We were never overbuilt, so the vacancy is pretty small.”

Waiting out a slow recovery and stormy political season

Whether it’s on the development or sales front, commercial real estate is hacking its way out of the recession.

“I wish I could say we were in the correction from the recession, but we’re not,” said Kyle Gamble, senior vice president and managing director of CBRE/Hubbell Commercial. “It’s going to be slow, steady, gradual improvement. …The smart transactions will continue.”

On the development side, multifamily housing is the “favored food group right now,” he said.

“The credit markets are looking in favor of apartments. People are deferring owning a home … they want the flexibility to follow the jobs, and it’s difficult to follow the jobs right now,” Gamble said.

Hubbell will complete three apartment renovations this year. The company also is making plans to expand in the senior housing market.

Gamble sees little push to develop retail or office spaces.

“There are ample office options available in the marketplace, both in the central business district and in the outlying areas,” he said. “The office market is like the economy in a box. As the economy grows and improves, the office market gets better.”

The economy is heading toward a growth cycle, Gamble said, but he doubts that it will pick up steam until 2013 – after the political dust has settled around the presidential election.

“Decision makers need to have a better idea of the direction of the politics and the business it affects,” he said. “If you’re in a position to defer a decision in 2012 and make that decision in 2013, odds are you’re going to defer it.”