Cedar Rapids Real Estate Market Stays Hot As Flood Recovery Efforts Wind Down
The historic flood of June 2008 is becoming a distant memory as the city of Cedar Rapids prepares for the dedication of the new Northwest Recreation Center, the last public facility to be completed as part of the flood recovery project. The dedication ceremony is slated for Thursday, Aug. 25.
The recovery has led to a revitalization of many flood-impacted areas in the city, ranging from residential neighborhoods to the downtown business district.
Now the momentum is turning toward several new projects:
• This month, tenants will begin moving into the 11-story CRST tower downtown, which features 300 feet of the new flood protection system.
• A 28-story, mixed-use tower is being proposed on city-owned property downtown. The development may contain retail, office, hotel and residential space led by Allen Development, an Iowa City developer.
• Over 10 downtown housing projects are under construction that will create almost 400 new condo and apartment units, which will bring our core closer to a live-work-play environment. These projects are also putting vacant retail and office buildings to new uses.
• The Czech Village-New Bohemia neighborhood continues to grow with historic buildings being renovated and repurposed while augmenting exciting new construction featuring retail, entertainment, office and housing options.
Everywhere you look in Cedar Rapids, or in the neighboring communities, there are new housing and commercial projects under construction, and the nation is taking notice. Livability.com, a leading online resource used for researching communities, ranks Cedar Rapids No. 8 on its 2016 list of the “Top 10 Affordable Places to Live.”
Livability.com also currently ranks the city No. 88 in the “Top 100 Best Places to Live” nationally. Cedar Rapids was also ranked No. 7 among mid-sized cities in the United States with the shortest commutes to work, according to Town & Country magazine.
On the economic front, the latest report from the Bureau of Labor Statistics shows the metro area’s unemployment rate in May stood at 3.9 percent compared with 4.7 percent nationally during the same period.
In recent months, the number of job opportunities on recruitment websites has exceeded all of the unemployed in the region. This has led to efforts by the city and other organizations to travel across the Midwest to encourage skilled workers and young professionals to move to the area.
SmartAsset recently ranked Cedar Rapids No. 6 among “The Top 10 Best American Cities to Work in Tech in 2016.” In November 2015, Money Under 30 ranked Cedar Rapids No. 5 for “The Best Cities in America for Young Adults to Get Rich.”
The city is also working hard to expand the quality of life by creating trails, bike lanes and a complete street policy. Earlier this year, Cedar Rapids was officially recognized as a certified Blue Zones Community. Blue Zones takes a systematic, environmental approach to a community’s well-being, with a focus on optimizing policy, building design, social networks and the built environment. Cedar Rapids is one of 15 communities in Iowa that have either received the certified designation or are working toward it.
Retail on the fast track
The Cedar Rapids area is being recognized as a place to consider for retail development. During this year’s visit to the ICSC retail convention in Las Vegas with City Manager Jeff Pomeranz, it was evident that many retailers and developers had Cedar Rapids on their radar.
This is clear as we see many retail projects under construction, ranging from Westdale Mall’s rebirth to additions at Lindale Mall and the new North Towne Market/Water Rock projects on Blair Ferry Road. There are also several smaller strip retail developments underway to house local and national tenants.
Despite all of the new construction, retail rental rates have remained steady as the market is still very competitive. Based on conversations with local and national retailers, our market could see 20 to 25 new and expanding retail options in 2016 and 2017 combined.
Besides improving our retail options, this type of development creates jobs and a new tax base. But just as important, the sales tax from retail sales increases the funding for Paving for Progress, a 10-year, $150 million revitalization plan for our city streets, and the $600 million flood prevention system along the Cedar River.
Office projects continue
The new 112,000-square-foot CRST tower is 98 percent leased. Tenants are moving into the tower beginning this month and will continue to do so through October. Besides the corporate headquarters of CRST occupying two floors, other tenants include Banker’s Trust, Holmes Murphy Insurance and RSM US LLP. Most of tenants will be relocating from older office spaces downtown.
Thus, we have seen little change in the current 1.1 million square feet of office space on the active market. The biggest reduction of space has come from the conversion of older office buildings to downtown housing.
Office rents are virtually unchanged at a metro-wide average of $10.19 per square foot on a triple-net basis.
One new entry into the office segment downtown is the historic Smulekoff’s Furniture building being renovated by developer/architect Steve Emerson, who is converting 100,000 square feet of space into retail,
office and micro apartments. The office component is expected to span 42,000 square feet.
Just across from the Smulekoff’s Furniture building and the CRST tower is a city-owned parcel that was listed for development this spring. Three proposals were submitted and the selected project consists of a 28-story mixed-use concept that would become the city’s tallest building.
Allen Development plans a restaurant/grocery store on the first level, parking on levels 2-7, a hotel on levels 11-15, apartments on levels 16-21 and condos on levels 22-27. The 28th level will feature a rooftop restaurant.
Also on the horizon is a 10-story, glass tower addition to the historic American Building that will allow the United Fire Group to expand its corporate headquarters, which occupies the balance of a block in the downtown core.
Downtown housing boom
Besides the previously mentioned new units in the former Smulekoff’s Furniture building and proposed 28-story tower, eight other housing projects are under construction in our downtown core, ranging from existing building conversions to new construction.
Also, several additional projects are in the planning stages that will ultimately expand the apartment and condo options by 400 units. The good news is that as these units come on line, they are being substantially occupied or sold. The need for more downtown housing has ranked as the No. 1 priority in the effort to recruit new job seekers to our metro area.
As our Baby Boomer population continues to age, seven new seniors housing projects are either under construction or have been recently announced in the metro area. The facilities will consist of nursing homes, assisted living communities and memory care projects and will range from 18 to 177 units.
This new supply still doesn’t meet the market demand anticipated over the next five years in Linn County, but these developments will create hundreds of new job opportunities, plus strengthen the tax base.
Hip neighborhood emerges
One of the outcomes of the 2008 flood was the redevelopment of the New Bohemia-Czech Village neighborhood that features restored buildings and Iowa’s only indoor year-round market.
New retail, entertainment, office and housing projects are constantly popping up in this area, creating a level of excitement for residents young and old who want to live in this cultural and art-infused Main Street district. It has also become one of the state’s top tourist attractions. New projects include several mixed-use developments that were leased as soon as they were completed.
One of the these new developments is the three-story, 45,000-square-foot building constructed two years ago by Geonetric. The software company occupies the third floor. The Iowa Startup Accelerator and a shared co-worker space for start-up companies are on level two. The first floor houses a virtual reality lab, a meeting facility with café that hosts a K-12 summer challenge camp, a code school and many community events.
Located across the street from Geonetric, one of the newest housing projects being studied by Des Moines-based Hatch Development Group is designed to serve attendees of this innovation center during their intense 10-week sessions as well as the occupants of the co-working space.
Steady industrial sector
Industrial space on the active market has increased from 935,000 square feet to 1 million square feet since last December. Two new facilities, each between 25,000 and 30,000 square feet, are under construction. One is for a company expansion, the other is purely spec space that will provide options for tenants who need space quickly or are looking to expand.
One facility of 61,000 square feet will be built for a feed byproduct facility moving from a county site into southwest Cedar Rapids. Two larger projects, a 170,000-square-foot expansion and a new 210,000-square-foot refrigerated warehouse, are nearly complete. Each has 100,000 square feet for lease as spec space.
Commercial land sales remain slow with over 1,000 acres on the active market. New options will be entering the market as the first phase of the $100 million Highway 100 extension from the northeast to northwest quadrant is slated to open late this year.
The extension of the state-funded highway will provide an additional river crossing and spur several acres of development for housing and commercial development in northwest Cedar Rapids.
The investment market is still active despite a limited number of income-producing properties on the market. This demand will continue as long as interest rates remain low.
Cedar Rapids has taken the adversity of a historic flood and created a dynamic city that is changing on a daily basis. But we have not forgotten the past flood as the city aggressively begins the construction of the flood protection system that will be constructed over the next two decades.
In the interim, the city has enacted new storm water regulations and has expanded temporary flood protection options as needed until the permanent flood walls are completed.
All in all, Cedar Rapids is working hard to become a great Midwestern city in which to live, work, play and call home.
— By Scott E. Olson, AIA, CFM, SIOR, Broker Associate, Skogman Commercial Group at the Penthouse Member, Cedar Rapids City Council. This article originally appeared in the August 2016 issue of Heartland Real Estate Business.