Des Moines Industrial Rents Up 13%, Vacancy Record Low

Rent Growth Accelerates Across Des Moines Industrial Market

Several key indicators signal a dramatic shift in Des Moines' industrial rental terrain. Asking rents are climbing to $7.00 per square foot annually by the first quarter of 2025.

The acceleration represents a stark reversal from previous modest growth rates. Projections indicate rent increases will surge to approximately 2.8% by year-end 2025.

Market dynamics show significant variation across property segments. R&D/Flex facilities command premium rates of $9.62 per square foot annually.

Office services buildings reach $9.40 PSF. Manufacturing properties average $6.40 PSF.

Distribution and logistics assets reflect tenant preferences for cost-effective warehouse space. Asking rates are maintained around $6.32 per square foot annually at the start of 2025.

The rent acceleration stems from fundamental supply-demand imbalances. These have emerged across Des Moines' industrial corridors. Market vacancy rates have compressed to just 6.3% in the first quarter.

Positive net absorption has persisted every quarter since the pandemic. Q1 2025 recorded approximately 56,000 square feet of occupied space.

Demand forecasts indicate tenant requirements will exceed new supply deliveries by more than 50% throughout 2025. This underscores the sustained pressure on rental rates.

Vacancy Rates Hit Multi-Year Lows in Key Submarkets

Vacancy rates in Des Moines have reached a significant point in Q1 2025, with overall levels at 6.1%.

However, critical submarkets are experiencing serious shortages, hitting multi-year lows.

The Downtown Des Moines CBD submarket is the tightest, exhibiting just a 2.2% vacancy.

This creates a highly competitive environment for tenants eager to secure prime industrial space.

Following closely is Ankeny, with a 2.3% vacancy rate, highlighting another area of pressure in the metro's supply chain.

The Northeast submarket showcases exceptional performance by leading in positive net absorption.

Significant lease activity here includes a major 175,000-square-foot sublease transaction contributing to tightened vacancy rates.

In contrast, peripheral areas witness higher vacancy levels with newer speculative developments.

Construction activity has dramatically declined with only 54,900 square feet delivered in the first quarter.

R&D/Flex spaces add to the shortage with premium rates of $9.62 per square foot and very tight occupancy.

This highlights a growing trend as tenants shift towards established industrial corridors, moving away from the outskirts.

Strong Absorption Drives Market Tightening

As Des Moines industrial markets grapple with unprecedented supply constraints, the surge in positive net absorption stands out as the main driver behind market tightening.

In Q1 2025, net absorption reached 56,137 square feet, with the Northeast submarket contributing a significant 103,462 square feet of positive absorption.

This spike in tenant engagement directly reduces available inventory. Consequently, there's a cascading pressure across the city's prime industrial corridors.

Market indicators reveal strong absorption momentum in strategic locations. The CBD and Ankeny submarkets show strikingly low vacancy rates of only 2.2% and 2.3%, respectively.

These figures highlight the severe space constraints facing expanding businesses. The absorption spike occurs despite zero new construction deliveries in Q1 2025.

This shortage amplifies tenant demand impact on the limited available inventory. Current challenges in the supply pipeline, including labor shortages and zoning restrictions, could further hinder the capacity for new developments.

Approximately 397,000 square feet remain under construction but have not yet been delivered.

Consequently, the gap between supply and demand continues to widen. Strong absorption across multiple submarkets distributes tightening pressure region-wide.

This diffusion prevents extreme vacancy concentration while maintaining downward pressure on available industrial space.

Construction Pipeline Slows as Demand Outpaces Supply

Development paralysis grips Des Moines' industrial sector. Construction activity plummets to critically low levels.

Only 54,900 square feet were delivered in Q1 2025. This marks a dramatic contraction from previous years' efforts, effectively emptying the competitive pipeline.

Construction financing pressures and rising development costs force developers to halt new projects. The market has witnessed zero speculative projects since Q2 2024.

This has created unprecedented supply constraints across the metro area. Rising construction and financing costs discourage speculative building.

Despite robust tenant demand, higher upfront expenses and increased risks push developers toward existing property redevelopments. New builds are effectively on hold.

The supply shortage hits submarkets unevenly. Ankeny and Northwest Des Moines face acute shortages with vacancy rates below 3%.

Meanwhile, the South submarket maintains higher availability at 9%. Small industrial blocks become increasingly scarce, limiting options for smaller tenants.

This slowdown creates a feedback loop of limited supply and strong demand. As a result, rental rates are driven upward.

Market Outlook Points to Continued Strength Through 2025

Momentum is building across Des Moines' industrial landscape as market fundamentals strengthen heading into the remainder of 2025.

Analysts project vacancy rates will dip further below the current 6.3% baseline, with tenant competition intensifying for increasingly scarce industrial space.

The combination of data center expansion and traditional warehouse demand is creating a perfect storm for accelerated rent appreciation.

Supply chain disruptions continue to constrain new construction.

Developers are exercising heightened caution following previous speculative project struggles.

Forecasters anticipate double-digit rent growth will persist as the supply-demand imbalance reaches critical levels.

Data center developments by major operators, including Cielo Digital's 500-megawatt facility, will consume substantial industrial acreage.

This further restricts warehouse availability, pushing up competition among tenants.

Rising construction costs, coupled with tariff uncertainty on imported materials, threaten to extend the supply shortage well beyond 2025.

Market observers warn that competition for prime industrial locations will reach fever pitch.

Vacancy rates are approaching historic lows in Des Moines' most coveted submarkets, making it even more challenging for tenants to secure space.

Assessment

Des Moines industrial real estate fundamentals are indicating a market nearing critical tipping points. Vacancy rates have fallen to unprecedented lows.

The 13% increase in rents highlights severe supply shortages. There seems to be no immediate relief as construction pipelines shrink while demand surges.

Property owners hold significant leverage. Meanwhile, tenants face shrinking options and rising costs through 2025.

Market conditions suggest continued pressure on industrial occupiers. The rate of absorption is outpacing new deliveries across the metro area.

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