A test of the downtown Des Moines office market
KENT DARR Nov 11, 2016 | 9:27 pm
3 min read time
739 wordsAll Latest News, Business Record Insider, Real Estate and DevelopmentOffice users are doing a lot of poking around the downtown Des Moines market, real estate brokers say, but a true measure of where the city has come since the dark days of the Great Recession, when more than 1 million square feet of office space was empty could come from the marketing of Capital Square, the eight-story office building that was a signature urban renewal project in the early 1980s.
The site at Fourth and Locust streets has some history. In 1896, what was hailed as the tallest office building between Chicago and San Francisco at 13 stories, the Van Ginkel Building, later to be called the Observatory Building, was the state’s first skyscraper. It might have been the tallest office building in the city, but it wasn’t the tallest building. That distinction was held by the Iowa Capitol.
The Observatory Building boasted amenities including electricity and gas lighting and a rooftop garden with a 600-seat outdoor performance area on the ninth floor. The building’s name derived from a four-story observation tower.
The building was razed in 1937, and a Mobil fuel station and parking lot took its place.
Capital Square was one of the first projects Hubbell Realty Co. sought to develop downtown. The company with the noteworthy local history lost out to Draper and Kramer Inc. of Chicago, another family-oriented real estate firm. Capital Square is its lone property in Iowa. After 33 years of ownership, the company said earlier this week that Capital Square was for sale.
These are relatively good days for Capital Square, after years of high vacancies that were fed in part by the exodus of downtown office users to the suburbs. Many people can recall the echo of their footsteps in the cavernous building.
But those were echoes of the past. According to the marketing flier for the property, Capital Square is 73 percent occupied. That means a little more than 122,748 square feet is for rent. The problem is that much of that space is scattered among various floors. Though there is a clamor for office space, many of those users would like it in a tidy package.
If lease rates are good and tenants are solid — the building has many high-credit occupiers — why sell, and to whom?
The listing is being handled by CBRE Group Inc.’s capital markets group out of Minneapolis. Those folks bring in institutional investors such as insurance companies and pension funds.
Such investors are relatively rare in Greater Des Moines. If they bite, it could be a sign that more big money will follow, commercial real estate observers say.
The timing appears to be geared toward a time when there is a lot of capital looking for good deals. Interest rates and capitalization rates are relatively low. That means the time is right for Draper and Kramer to get a premium for the property.
“It’s almost now or never,” one broker said.
The property is being marketed without a stated asking price. That too is unusual for Greater Des Moines, though a Draper and Kramer vice president said in an email that in the company’s world — it is a really big real estate firm — it is common practice. Still, it is a test of what the market will bring. Some estimates are that Capital Square could be sold in the $30 million range.
For its part, Draper and Kramer doesn’t have much more to say about the decision to sell the building than what was included in a news release on Nov. 7.
Here is an email response to some questions from the Business Record:
“The timing of our decision to market Capital Square reflects the strong appeal of the property thanks to recent leasing successes we’ve enjoyed, as well as improvements we’ve made to the building’s common areas and atrium. Plus, the renovation of Cowles Commons adjacent to Capital Square has made this part of the business district more desirable than ever,” said Jim Elsman, vice president.
CBRE out of Minneapolis is being assisted locally by CBRE|Hubbell Commercial.
Meanwhile, Des Moines Assistant City Manager Matt Anderson said Thursday during a Downtown Chamber of Commerce event that prospects are taking a hard look at locating downtown.
He would not identify any companies, but others say several financial services firms are interested in leasing or building large chunks of space.
“There are some great options in both camps,” Anderson said.
Trending News
