It’s no secret that real estate and development in Des Moines is once again humming along. A quick look through the comments and you’ll see that as the recovery matures, new players enter the market, and as money becomes available, a new set of questions, concerns and challenges is developing. Although the challenges perhaps aren’t as severe as they were during the recession, how players in this market adapt in and are impacted by this new environment will certainly play a role in the office, housing and commercial markets. We asked the panelists of our upcoming CRE Trends and Issues Forum on April 22 what the most important thing businesses should know as developers do business in that new environment. Their repsonses below are just a taste of the dicussion we’ll be having at the event, and I hope you can join us for what I’m sure will be a stimulating and thought-provoking event.

What is the most important thing businesses should know about the real estate and development market in 2015?

Mark Rupprecht
President, R&R Realty Group

Property fundamentals will strengthen from the demand generated by our improving economic conditions. The apartment and industrial markets will continue to lead the commercial real estate market this year. However, apartments are in a mature phase of the real estate cycle and could see a slowdown in the pace of growth. New development will occur in the industrial market as demand remains healthy. The office market will progress gradually as demand increases, but speculative development activity will likely remain low as tenants focus on the efficient use of existing space and some move to new owner-occupied buildings. We are fortunate to have great companies and a strong workforce here in our community. There will be more opportunities for real estate development as our local economy and population continues to grow. 

Rick Tollakson
President & CEO, Hubbell Realty Co.

Money is flowing back into the real estate industry. That means from an equity and lending perspective, there is money available. With that said, home sale demand is beginning to impact land prices, and construction costs are well outpacing normal inflation due to a tightening labor force. Meanwhile, Des Moines is capturing the attention of out-of-state developers, who are making substantial investments in the community. This is beginning to cause a ripple on supply, especially in the multifamily market. Central Iowa developers understand the market and take a fairly cautious approach. Although funding is available for “good” development projects, it is becoming more difficult to find them.

Justin Doyle
Principal, Modus Engineering Ltd.

Many real estate professionals carry the scars of several painful years, however, sound real estate investment fundamentals have not changed. Economic diversity, investing-within-your-means, actions based on research (not emotion), and creating a solid team continue to be the tools of the successful investor. What have changed are the needs and wants of the market – fresh amenities, creative projects, interesting buildings, and excellent design. The opportunities to capitalize on these themes are abundant in all segments of the industry. It is no coincidence that the healthy players in the market today thrive on this progressive approach.  Unless you can shed the mindset of the recession, you will surely miss out on the recovery.

Gerry Neugent
President & CEO, Knapp Properties Inc.

In 2015, we need to focus on three I’s: interest rates, infrastructure and incentives. It seems like a broken record discussing interest rates. This has been at the top of the list for a number of years now. The Federal Reserve has told us that rates will increase and that such increases will be gradual. With this advance warning and if in fact the increases are gradual, I believe the market should continue at its current pace. We have to watch the effect rising rates will have on single-family mortgages and changes in loan underwritings. Infrastructure is always an issue for development. Funding and timing of public improvement projects need some certainty for development to be successful. Big projects such as Grand Prairie Parkway and the interchange on Interstate 80 are funded, but a delay in completion could cause a year delay in a development dependent on the public project. There are many sewer, water and road projects that impact if and when we will start a project. Incentives can tip the scales of competitiveness. For example, will Des Moines extend its tax abatement ordinance, which expires at the end of this year? We are reluctant to spend time and money on a potential project if there is uncertainty as to a critical financial component of the development project. Knowledge of the three I’s is vital in 2015.