Another strong year appears to lie ahead for area commercial real estate developers in 2008, with a flurry of activity on the horizon. With solid groundwork laid in 2007 for major development projects across Greater Des Moines, developers see an opportunity for more growth.

“Activity breeds activity,” said Rick Tollakson, president of Hubbell Realty Co. “You’ve got a lot of projects under construction, so that puts a lot of people to work building projects.”

Area developers eye the large investments made by Wellmark Blue Cross and Blue Shield, Aviva USA and the two new area hospitals as a sign for strong development growth in 2008.

“The Greater Des Moines area is kind of like an oasis because of the growth generated by Wellmark’s new building downtown, Aviva’s building in West Des Moines and the two new hospitals,” said Kevin Crowley, chief operating officer of Iowa Realty Commercial. “That represents just under a billion dollars in new construction. That type of activity creates other activity, so I consider that a real fortunate thing for this market.”

Although Aviva and Wellmark won’t move into their new quarters in 2008, developers still take note of the large amount of Class A office space that will be left vacant in the wake of those two projects. By 2010, there could be as much as 750,000 square feet of open office space in downtown Des Moines.

For some, the warning signs are already there.

“The big caution flags that are going up in my mind are over downtown Des Moines office space,” said Bill Knapp II, chairman and CEO of Knapp Properties Inc. “There is a lot of vacant space; you have probably the most significant amount of vacancy in downtown in any short amount of time in the modern history of downtown.”

Outside of the core of downtown Des Moines, developers will be keeping a close eye on two landmark development projects in progress. Ankeny’s Prairie Trail and the Village of Ponderosa in West Des Moines both offer a new style of development — a planned community where people will live, work and be entertained that is a new approach for Central Iowa.

Knapp said the idea of “new urbanism” projects in Ankeny and West Des Moines is “exciting,” and he is eager to see how it will develop in 2008.

“It’s going to be interesting to see how these projects go,” he said. “They are well on their way and in strong financial hands, so I’m just anxious to see how Iowans take to living, working and being entertained in the same area.”

Knapp Properties isn’t the only developer watching the new urbanism projects.

“[Dennis] Albaugh’s Prairie Trail is an unusual type of project,” Tollakson said. “We watch not only what we have, but what our competitors are doing. Variety adds intrigue to the marketplace,” he said.

Though the housing market slump and credit crunch loom over the nation’s residential sector, their effects on the commercial sector might be limited in 2008. Last year developers started to see tighter underwriting requirements and a need to have more capital on hand, a trend that is likely to continue.

“You’re going to see more developers putting real equity in their projects,” Knapp said. “[The housing slump] isn’t going to be a huge problem, but it will have some effect.”

What raises concern for commercial developers more than the housing slump is the upcoming election. By the beginning of 2008, the he-said, she-said game called politics will be full steam ahead and will rear its head in the economy.

“The one thing that will always bother you about going into ’08 is that it’s an election year, and we’re constantly going to be hearing about how bad things are and how this person is going to make our lives better,” Tollakson said. “It’s that negativism that makes people uneasy. There gets to be an anxious feeling with people, and so they tend to hold back a little bit.”

Crowley thinks the economy will stay strong for most of 2008; it’s after the election he’s worried about for commercial developers.

“After the election it will be a toss-up, and I am not even sure if it matters which team wins,” he said. “The economy usually takes a pause after the election.”

Others in the market feel the election impact might be small on the commercial sector and see taxes as the big issue.

“I think taxes are going to be raised after the election,” said Gerry Neugent, president of Knapp Properties Inc. “It doesn’t matter whether it’s a Republican or a Democrat, we can’t sustain the deficit we’re having while at war without raising taxes, and that does concern people like us who are in the investment and capital assets business.”

Looking past the upcoming election and housing slump hurdles shouldn’t be a problem for most of the area commercial developers who have an optimistic outlook for 2008.

For Hubbell, 2008 may be another big year. On schedule to be completed in 2008 are its Drake University student housing project and its Court Avenue apartments and condominiums.

“2008 on the commercial side is going to be very strong,” Tollakson said. “We feel pretty bullish for next year. Everyone is predicting a much better year in 2008 than this year in 2007, and 2007 was a pretty good year for us.”

Iowa Realty Commercial has the same zeal for 2008.

“Overall we continue to have growth in our sales numbers,” Crowley said. “I believe 2008 is going to be great.”