Project 515: Office market returning to normal in 2024

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Look for several big development announcements downtown in the coming months, along with possible updates on redevelopment of Valley West Mall and Des Moines City Hall, experts said during the Business Record’s Project 515 event last week that focused on office space.

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That was one of the takeaways from the virtual hourlong event on Thursday, Aug. 15. Panelists for the conversation included Carrie Kruse, economic development administrator for the city of Des Moines; Justin Lossner, senior managing director for JLL; Adam Kaduce, president of R&R Real Estate Advisors; Alec Wilcox, senior associate with Cushman & Wakefield; and Mindy Aust, principal at MA Architecture.

They discussed a variety of topics, including key trends they are seeing in the office market, how lower inflation and interest rates may affect the market, key areas to watch for growth and how the decision by companies to bring workers back to the office is affecting occupancy rates.

Here are some other key takeaways from the event. Responses may have been lightly edited for clarity and brevity.

On the current state of the office market

Wilcox: It’s positive and it’s looking up. For the past two years, we’ve heard about all the things landlords are doing to incentivize folks to come back to the office, to upgrade their space, and those projects have been completed … and it’s worked. This past year is probably the first time we’ve seen multiple examples of results and leasing that’s happened because of this. What’s happened is the standard of office product is simply just elevated, and we’re seeing landlords get payoff for the work they’ve done.

Lossner: It’s active, but we have a lot of work to do. Downtown is active again, which is huge. From 2020 to 2022 and 2023 it was pretty slow downtown, and we had a lot of catching up to do with major givebacks in space. With Wells Fargo vacating space, there’s going to be some unique opportunities downtown. The good news is leasing velocity is up. We did see a record quarter two with a 15% increase year over year of leasing activity. We have traction, but we have a lot of work to do.

Kruse: We’re seeing a lot of renewed leasing downtown. Definitely seeing increases in inquiries for space both in-state and out-of-state. Overall a lot of positive momentum. We’re finally seeing costs of construction for improvement come down, and with those renewed leases we’re seeing a lot of investment in those spaces and that leveling up of space, we’re seeing that quite common with the lease renewals we’re following.

Aust: Trends we’re seeing are repurposing single-use buildings into multitenant or multiuse, both in the suburbs and in the metro. We’re also seeing a ton of adaptive reuse, and people are loving that because they aren’t wanting the typical office space. They are wanting something unique to them, and we’re seeing that across the state, not just Central Iowa.

Kaduce: There’s a lot of optimism out there, but we’re just at the front end of that. While we still have much higher vacancy than we want, we’re starting to see a number of items return to a more normal office environment. This is the first year that feels like an average deal-size normal year. This year we are seeing more medium-sized deals. We’re seeing larger deals out on the market. We’re also starting to see some expansions, which the market needs.

What areas are being closely watched for development?

Kaduce: I still remain very excited about the Valley West Mall corridor. I think it’s one of the most desirable development sites in town from an accessibility standpoint. I think that area has potential to be a really unique community amenity.

Lossner: The core of downtown will see several major, exciting announcements in the next six to nine months in the form of major office users, in the form of continued conversation of existing structures, and in the form of land that has sat idle for far too long, and we’re excited about all of it.

Wilcox: The Valley West Mall corridor is what you’re going to see opportunities come soon. With what West Bank did creates a ton of vibrancy in that area, and the Market District in downtown. There’s plenty of opportunities downtown that will be taken advantage of.

Kruse: I’m particularly excited about the opportunity for Des Moines City Hall. It’s a really cool, beautiful, historic building. I’m just hopeful we can get a use for something that’s vibrant and unique. I’ll also make a plug for Polk County. They have their surface parking lot just south of the courthouse. The RFP is on the street for that now, and I think it’s a great opportunity and location that’s walkable to all the best things downtown has to offer, so I’m hoping to see something exciting coming out on that here soon, too.

Look for more takeaways in the Aug. 30 Business Record.

To watch the conversation in its entirety, click here

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Michael Crumb

Michael Crumb is a senior staff writer at Business Record. He covers real estate and development and transportation.

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