Experts forecast a holding pattern for commercial real estate in 2003, much the same as 2002, but are encouraged by subtle indicators of an improving market.

“We are predicting a pretty similar year to 2002 as far as the amount of activity,” said Kurt Mumm, senior vice president and sales manager of Grubb & Ellis/Mid-America Pacific. “People are a lot more conservative in real estate decision making, which is why we haven’t seen the huge swings other markets have seen.”

Kevin Crowley, chief operating officer of Iowa Realty Commercial, said he doesn’t expect 2003 to be a boom year for commercial real estate, but it should be busier than last year. He is encouraged by a surge of transactions at the end of 2002.

“Looking back at the last 60 days, we have seen a trend in the market where people who have been putting off decisions for months are finally making deals,” he said. “We’ve had substantial leasing in the last two months. We’re seeing vacancies tightening for the first time in three years and ‘shadow spaces’ shrinking, which is a positive trend.”

Among Iowa Realty Commercial’s latest signings is the leasing of an 80,000-square-foot distribution center on Des Moines’ northeast side to Georgia-based American Tire. The company will employ 40 workers at its Des Moines site, which begins operation this week.

“The industrial market probably has been the hardest hit in Des Moines, but now it is getting absorbed,” Crowley said. “There are a lot of decent properties out there, and I see a lot of opportunity for Des Moines.”

Feisal Sayeed, senior vice president and managing director of CB Richard Ellis/Hubbell Commercial, said activity for industrial properties has been flat. He attributes static sales to out-of-town ownership, but he is encouraged by a trend of local companies investing in Des Moines.

“A lot of companies in Des Moines are no longer headquartered here, so you don’t feel that activity for larger properties,” Sayeed said. “But we are seeing more activity on the local level as local owners are going back to the market. Office and retail has picked up in the 3,000- to- 5,000-square-foot spaces for businesses based in Des Moines and that’s exciting.

“Eight to ten months ago, we had little activity in the market; not many deals were being done. But the last couple of months, the activity level has picked up again as people are quietly acquiring pieces of ground, which is a positive sign.”

Mumm, however, said just the opposite is true for his company. He said sales of properties to small companies has slowed, though leasing and subleasing have started to improve.

“They’re taking a wait-and-see attitude,” he said. “For us, large office users continue to drive the market. They want large blocks of space.”

Still, Mumm said, large companies are buying properties that fit their current needs instead of buying additional space with the hopes of filling it in the future.

“They’re leasing exactly what they need and they’re not making allowances for growth,” Mumm said. “Companies that need more space are becoming more efficient.”

Sayeed, Crowley and Mumm each said their industry ebbs and flows with the economy.

“We follow the economy very closely,” Crowley said. “Nothing will happen fast, just like the rest of the economy. We’ll have measured growth as economic trends affect the industry.”

Mumm said the heavy presence of mortgage and insurance companies in Des Moines helps sustains the local economy, which in turn, supports the real estate market.

“Des Moines is pretty well isolated compared to the rest of the country because of their presence. Our market looks better than other ones because we don’t have the high highs and low lows,” Mumm said. “We’re pretty conservative and steady.”

If there was a boom in the commercial real estate industry in Central Iowa last year, experts agree it was in the field of investments. It’s a trend they expect to continue.

In November, CB Richard Ellis/Hubbell Commercial welcomed the return of Timothy Sharpe and Linda Gibbs to head up the company’s first private client sales team to capitalize on investors seeking to divert their capital away from the stock market. Sayeed said commercial real estate continues to be of interest to users and investors.

“Commercial real estate continues to be a favorable area of investment for people who are in stock markets,” Sayeed said. “Our sales team tells me this is going to be an exciting year.”

Mumm said investors are looking to diversify their portfolios and take advantage of favorable financial terms. The problem is, few property owners are willing to sell now.

“In investment properties, we’re having a difficult time finding good product, so we have to create deals,” Mumm said. “There is a lot more money chasing deals now.”

A wait-and-see attitude also characterizes plans for developing the area around the future site of the Jordan Creek Town Center in West Des Moines. Experts say it isn’t a matter of “if,” but “when.”

“There’s kind of a frenzy as to what will happen at the mall,” Mumm said. “Decisions are being made now whether retailers will move to the mall or around the mall. They’re waiting to see how Christmas sales went. They know they need to be out there, but they’re weighing their options.”

Mumm said a number of other retail developers are also looking toward pockets of development near Grimes and the Des Moines International Airport. “Those areas have opened up to traffic, and there is a lot of ground to be developed at those locations,” he said.

Crowley said Iowa needs to continue to recruit companies like ING and DuPont, international companies with a Des Moines presence, to help the state grow. He said Michael Blouin, the new director of the Iowa Department of Economic Development, who was successful at the helm of the Greater Des Moines Partnership in recruiting companies, should help facilitate corporate movement to Iowa.

“One of the biggest things Michael did at the Partnership was successfully market Des Moines to a general populace of users at economic development shows,” Crowley said. “Now he’ll be able to lure more businesses to Iowa, which will create jobs and help Iowa grow.

“I’m looking forward to 2003 and happy to have 2002 behind us.”