Greater Des Moines will fare better than most U.S. markets, but industrial vacancy rates will increase this year, according to Grubb & Ellis Co.’s 2009 real estate forecast.

Early 2008 reports suggested that the supply of contiguous warehouse space would fall short of meeting demand in 2009 without more new construction. But with 450,000 square feet coming on line in 2008, and the anticipation that several large users of industrial space may move during the first quarter, the metro area could experience an increase in inventory in the range of 600,000 to 800,000 square feet.

“I don’t see a need for new product for 18 months,” said Morey Knutsen, a senior vice president with Grubb & Ellis/Mid-America Commercial.

Businesses’ expansion plans will continue to be conservative in 2009, Grubb & Ellis’ national overview suggests, and developers have slowed construction plans in reaction to the struggling economy, putting projects on hold until market conditions warrant new construction.

Hubbell Realty Co., for example, has delayed subsequent phases of its Grimes Business Park project until it is able to fully lease the first of four planned 110,000-square-foot high-cube warehouses on the site. Hubbell has leased one of the 15,000-square-foot bays to Ohio-based Cintas Corp., said company spokesman Jarad Bernstein, but how quickly it is able to lease the remainder will determine when it will break ground on the other buildings.

According to Knutsen’s sources, there may be as much as 700,000 square feet of existing space opening up in the coming months, including 352,000 square feet that Lennox Industries Inc., a subsidiary of Lennox International Inc., is expected to vacate at 4301 121st St. in Urbandale.

The company plans to sublease the property, spokesman Ozzie Buckler confirmed, but failure to do so could push the total amount of available space in Greater Des Moines to more than 1 million square feet by the end of the first quarter.

“These guys are going to have to sharpen their pencils,” Knutsen said, referring to steps owners and developers of industrial properties will need to take in order to quell the vacancies. “We are going to see concessions (from landlords) that we haven’t seen in years,” such as free rent, increased tenant improvements and “to a lesser extent” moving allowances, he said.

“By the end of this quarter a user is going to have some serous, serious options available,” Knutsen said.

Delinquencies and defaults on commercial real estate loans will also affect developers’ plans to build as the tightening of the credit markets continues.

“For buyers who are going to rely on leverage it’s going to be tough for a while,” Knutsen said, referring to more stringent guidelines and due diligence in lending practices, measures he referred to as “long, long overdue.”

“There is still bleeding that needs to occur,” he said, adding that “for anyone with a lot of cash, it’s going to be a great time to buy in 2009.”

“This is going to be a real game” starting in 60 to 90 days.