Ankeny council approves office development incentive policy
Enactment of the new policy comes at a time when the Greater Des Moines market is about to be saturated with existing Class A office space.
Ankeny is known for its retail development along Delaware Avenue, its Prairie Trail commercial district and a manufacturing sector that occupies millions of square feet of industrial space.
Now Ankeny officials want the burgeoning city to also be known as a community that is friendly to developers of office space.
In July, the City Council unanimously approved an office development incentive policy that provides eligible projects with up to 10 years of tax increment finance rebates. While the incentives are similar to what other communities offer, Ankeny officials want developers and business leaders to know “that we support office development in Ankeny,” City Manager David Jones said.
Said Derek Lord, the city’s economic development director: “There’s a strong desire for more office development in the city and the high-quality jobs that come with it.”
Passage of the incentive policy comes as a glut of competitive Class A office space is about to saturate the Greater Des Moines market. Many large office space users either have vacated leased space in favor of owning their own office buildings or have moved into more modern leased space. Among them:
- Sammons Financial Group, which in June began construction of a new 215,000-square-foot headquarters at 81st Street and Mills Civic Parkway in West Des Moines. When construction is completed in late 2021, the company will vacate about 138,000 square feet that it is leasing at 4350 Westown Parkway in West Des Moines.
- Wells Fargo, which in February announced it will not renew its lease in the 25-story Financial Center at 666 Walnut St. in Des Moines. The company will vacate about 127,000 square feet at the center, moving many of its downtown workers to its building at 801 Walnut St.
- IMT Insurance, which in December moved to its new 88,000-square-foot headquarters at 7824 Mills Civic Parkway in West Des Moines. The firm had leased about 52,000 square feet at 4445 Corporate Drive.
- Holmes Murphy, which in 2018 moved to Waukee’s Kettlestone Development. The insurance brokerage firm is leasing space in a new, $15.6 million, 93,740-square-foot office building owned by Knapp Properties Inc. For about 17 years, Holmes Murphy had leased about 65,000 square feet at 3001 Westown Parkway in West Des Moines.
- Kum & Go, which moved into its new downtown headquarters in late 2018, leaving more than 80,000 square feet it had leased at 6400 Westown Parkway in West Des Moines.
In addition, nearly 130,000 square feet of new, speculative office space is under construction in the Des Moines area, according to a quarterly survey by CBRE|Hubbell Commercial.
“Large vacancies steal the headlines but it’s not actually reflective of the health of the market,” said Zach Scheckel, research analyst for CBRE|Hubbell Commercial. The firm’s second-quarter office market snapshot showed a competitive market office vacancy rate in the Des Moines metro area of 9.8%.
“Companies are focused on becoming more and more lean, and their real estate footprint is a part of that,” Scheckel said.
Still, said Mark Rupprecht, president of R&R Realty Group, the demand for office space still exists.
“Revenues are still growing and companies are still hiring people,” said Rupprecht, whose company recently opened two new spec office buildings: a 180,000-square-foot building in Westfield Campus in West Des Moines and a 45,000-square-foot building in Urbandale. A second, 45,000-square-foot spec office building is under construction in Urbandale.
Rupprecht said concern exists among employers about the ability to retain workers and find new ones, especially with Iowa’s low unemployment rate.
“That’s why companies want to upgrade their space or move into newer space,” he said. “They want to offer amenities to their workers.”
R&R’s new office buildings offer collaborative workspace, rooftop patios, underground parking, and places for food trucks. The new West Des Moines office also includes an outdoor amphitheater.
Scheckel, of CBRE|Hubbell Commercial, said the firm doesn’t “see a lot of new inventory coming online – we see existing inventory getting improved.”
Ankeny officials, though, are hopeful that businesses will continue to have an interest in building new space rather than upgrading existing Class A office space.
Ankeny, with more than 60,000 residents, sits between Des Moines and Ames. Much of the land Ankeny has available for office development is east of Interstate Highway 80, which bisects the community.
To qualify for incentives in the office development incentive policy, a building must be at least two stories with 40,000 square feet of Class A office space. At least five jobs must be created that pay a minimum of $75,700 annually. The policy will be in place for three years.
Ankeny has a lot of office space already, said Lord, the city’s economic development director. “It’s just not all in one shiny new building.”
In the past five years, about 166,000 square feet of speculative office space has been added in the community, he said. In addition, in the past two years about 208,000 square feet of owner-occupied office space has either been added or plans have been announced to add the space. The new space includes a 60,000-square-foot expansion of Casey’s General Store Inc.’s headquarters in Ankeny.
For years Ankeny was considered a bedroom community, but as it has grown in the past two decades, it’s become a city with numerous amenities, an abundance of retail and a quality school system, said Kevin Crowley, sales manager with NAI Iowa Realty Commercial.
“As executives move, they want to office near where they live – and they want to live in quality communities,” he said. “While Ankeny has been slow [in the office space market], they have an opportunity now to get into the office business as the metro area grows.”
Crowley said that “right now, you can ask for similar incentives in the suburbs and Des Moines, but it’s better to have the program and be public about it.”