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Most retail brokers in Des Moines are cautiously optimistic in their expectations for 2013. For the first time in years, I’m seeing a lot of site plans for new retail developments come across my desk. Several projects that had been on the back burner for the last few years have finally begun to take shape.
Des Moines, like most markets, got hurt when the Great Recession hit. However, with its major industry based in insurance, it weathered the storm better than many other markets. At its high point, the unemployment rate was 6.8 percent, and the rate as of May was 4.3 percent. The Des Moines retail market didn’t get nearly as overbuilt as many of the other nearby larger markets.
There wasn’t a ton of first-generation space that sat vacant on the retail market in Des Moines once the recession hit. Most of the retail developers here are conservative. Much of the first-generation space that sat vacant was the result of lenders taking back the properties and not wanting to invest any money in those assets.
Lessons Learned
The developers in today’s market have a more disciplined approach than many of their predecessors. There was a time when real estate fundamentals simply went out the window. A lot of people who got into the business had little retail real estate experience.
While some developers fell on hard times because of the lack of tenant expansion, we also saw some developers get careless with their projects by not giving proper consideration to signage, access and parking ratios. There was a time it seemed when as long as you had four walls and a roof, the space would lease up.
Much of the space available in the Des Moines metro area today is located within neighborhood retail centers that don’t have a specific draw. This year we will see much more retail development within retail corridors, or within the shadows of big-box retailers and grocers. I strongly believe that as a result of this trend, we’ll see several new retailers come into the market.
There is a lot of pent-up demand in the Des Moines market. I’ve toured the market with several retailers who have come here with plans of identifying four or five locations to pursue, and only walk away with one or two good options.
It is not uncommon for clients to come into the market with expectations of lower lease rates and more space readily available, but because the market never got overbuilt they find that their options are relatively limited. Restaurants have had an especially difficult time identifying suitable locations during the last few years.
This year, construction is beginning on retail developments that were planned before the recession. These new developments along with more residential rooftops going up will help the restaurant out significantly.
Construction Comeback
The good news is that both urban and suburban development is picking up. The suburbs have more anchor and retail strip centers planned, while Des Moines proper is spearheading downtown retail growth. Hy-Vee has two grocery stores under construction in Ankeny and Waukee that are set to open late this year. Each store will be approximately 90,000 square feet.
Under construction near both grocery stores are retail strip centers. Notable projects include the 32,000-square-foot CampusTown retail development In Ankeny and the 30,000-square-foot Williams Point Retail in Waukee. Dick’s Sporting Goods has signed a deal to lease 55,000 square feet near Jordan Creek Mall in West Des Moines. Dick’s Sporting Goods plans to open in time for the holiday shopping season.
Along with the construction of Dick’s Sporting Goods, an additional 70,000 square feet of junior-anchor retail will begin construction this summer. This is just a small snapshot of several suburban projects planned this year.
The two malls located in Des Moines proper have invested a significant amount of money to improve their retailing experiences. Recently, Macerich’s Southridge Mall created more of an open-air feel with exterior storefronts, a pedestrian plaza and outdoor seating, resulting in an additional 100,000 square feet. A portion of the existing mall was demolished in order to make way for the update.
Merle Hay Mall has a new 24,000-square-foot MC Sports prototype now open, and a multi-screen cinema-eatery recently signed on as a tenant, the first of its kind in the state.
The MC Sports and cinema project are kicking off a significant renovation for Merle Hay Mall, which will include interior mall upgrades, and the creation of exterior streetscape shops and restaurants facing Douglas Avenue.
There is no doubt in my mind that the market is picking up. I’ve seen the dirt moving and cranes in the air to prove it.
— Aaron Hyde, sales associate, Ferguson Commercial Real Estate Services