MARKETVIEW Des Moines Metro Retail, Q1 2018 Absorption slowed in 2017, but Des Moines shows continued strength as regional trade center Vacancy Rate (Neighborhood Center) 15.4% Vacancy Rates Vacancy Rate (Big Box) 1.9% Net Absorption (Neighborhood Center) 85,961 SF Net Absorption (Big Box) 293,075 SF New Inventory 193,177 SF 20.0% 15.0% 17.4% 15.7% 15.4% 10.0% 5.0% 0.0% 5.3% 4.0% 2.0% 4.6% 3.6% 1.4% 2016 2017 2018 Big Box Neighborhood & Community Center Regional Malls HIGHLIGHTS The corridor in and about Jordan Creek Town Center continues to be the #1 preferred destination for many retailers. Store openings in the big box or junior box categories have or soon will include The Container Store, Hobby Lobby, and Slumberland. The 300,000 square foot Outlets of Des Moines opened in 2017 in Prairie Crossing development in Altoona near the Bass Pro Shops. Almost 40 stores opened with others to come, including Lucky Brand Jeans in May 2018. Retail growth in Ankeny continues at rapid pace and is centered at Prairie Trail and the Delaware Avenue Corridor. Various national headlines in 2017 declared Retail is Dead. It certainly is not and we submit the Des Moines marketplace as the first piece of evidence. What is accurate is that markets are changing. E-commerce sales are growing but still represented only 9.1% of total retail sales in the 4th quarter 2017. Demands from customers continued to evolve and retailers are responding to those demands. Brick and mortar stores are getting smaller. Despite these changes, over 380,000 square feet of retail space was absorbed in the Des Moines market in 2017, including 293,075 square feet of big box space and 85,961 square feet in neighborhood and community centers. Another indication of strength in the market is that vacancy rates dropped across both categories. Vacancy slipped to just 1.9% for big box space and fell an additional 30 basis-points in neighborhood centers to 15.4%. Q1 2018 RETAIL 2018 CBRE Hubbell Commercial 1
MARKETVIEW GREATER RETAIL CHANGING RETAIL TRENDS IN THE MARKETPLACE There is a dichotomy in the retail market and it is becoming more and more apparent. It exists between Class A retail locations and many second generation centers. The Class A centers are often newer construction and characterized by high visibility, superior co-tenancy, limited supply, and higher rental rates. On the other hand, there is a supply of inferior retail space that is often unanchored, located in mature retail corridors with limited growth, flat rental rates, and excess supply. Many landlords of these inferior locations continue to make necessary adjustments which include re-tenanting vacant spaces to non-retail uses, often service or medical tenants, or doing significant renovations to re-brand a particular center. The contrasts in our market continue to get wider as construction costs rise. Rental rates in the Western Suburbs have risen to the mid $30 s per square foot or higher for Class A centers whereas retail space can be leased just a few miles away in the $10-$14 psf range at inferior centers. Growth continues in DRA s Prairie Trail development and two new buildings have been constructed in The District section of the development. The mixed-use District has quickly become a favorite for office tenants, restaurants, and retailers. The biggest news at Prairie Trail is that B&B Theatres began construction on a 12 screen movie theatre and 12 lane bowling alley. The theater and bowling center will serve as an anchor in the town square area of The District. Delaware Avenue continues to be a major player for traditional retailers and the strength of this market was witnessed when MC Sports shuttered their Delaware store and it was quickly backfilled with Planet Fitness. Prairie Trail New construction has and will continue to occur but speculative retail construction will be limited. A major trend will be the placement of medical uses in retail settings. Medical tenants benefit from the easy access and visibility for patients. The proliferation of medical uses and other service providing tenants has been a positive factor for landlords in their efforts to re-tenant second generation neighborhood and community shopping centers. We expect vacancy rates for big box stores to increase in the next twelve months as Babies R Us and Kmart have announced store closings in the western suburbs. Market by Market Update ANKENY B & B Theatres plans a 12 screen theatre and 12 lane bowling alley. Above is a photo of the company s Wentzville, Missouri theatre. Mills Crossing The City of Ankeny has been consistently been named one of the fastest growing cities in the U.S. and that growth included $337 million of new construction in 2017. It is no surprise that this growth results in a dynamic retail market. New construction continued with five new buildings added to this year s survey, totaling over 68,000 square feet. Occupancy within the neighborhood and community center declined slightly (1.2%) but that decrease is a result of new product being in the initial stages of lease-up. Overall, absorption in this market was positive with over 50,000 sf absorbed. Occupancy within the big box category increased due to the backfilling of the former Dahl s on N Ankeny Boulevard. Container Store located in the Mills Crossing development in West Des Moines. Q1 2018 RETAIL 2018 CBRE Hubbell Commercial 2
MARKETVIEW GREATER RETAIL WESTERN SUBURBS When you think retail and Des Moines, you start in the Western Suburbs. The strength of this submarket is palatable as over 50% of the absorption in the neighborhood and community center and big box categories occurred in this market. New construction continues as four new buildings were added. Occupancy increased to 84% within the neighborhood and community center category and 97.5% in the big box market. Retail rental rates are highest in this submarket as rates for newly constructed small shop space range from the mid $20 s to mid $30 s per square foot. Several noticeable projects included Stuff, Etc. consignment store backfilling the former Dahl s at 86th Street & Hickman, Clive (45,245 sf), opening of Slumberland at Jordan Crossing (36,160 sf) and continued construction of the new Hobby Lobby (52,223 sf) at the Plaza at Jordan Creek. A major impact on this marketplace was Signature s redevelopment of Parkwood Plaza to the new Urban Town Center. The transformation from a tired, mostly vacant Class C center to a bustling, stabilized center has been transformative for the City of Urbandale. Additional retail projects are on the horizon as the Hickman Road corridor is gaining strength, especially near the Hy-Vee at Alice s Road where Panchero s, AutoZone, and Starbucks are in the process of opening new stores. Retail development will make a jump across Jordan Creek Parkway as Fareway will construct a new grocery store and development of The Parkways project adjacent to the new IMT headquarters will commence. on Fleur Drive and recent additions of retailers and restaurants on Fleur Drive, as well as increased occupancy at Stefon Plaza. Despite all of the momentum on Fleur Drive, absorption did decrease 10,942 sf in 2017 for neighborhood and community centers while big box occupancy remained almost unchanged. NORTHEAST/ALTOONA The October 2017 opening of the Outlets of Des Moines at Prairie Crossing was clearly the major event in this submarket. The 300,000 sf center is the first outlet style center to open in the immediate Des Moines area and solidifies Altoona as a major entertainment center in Iowa. Within the neighborhood and community center category, occupancy dipped slightly to 86.9% and there was a minimal positive absorption (1,985 sf). Alternatively, there was a major shift in the big box market as the former Dahl s store at Eastwood Village was backfilled with Affordable Family Storage (47,019 sf), as was the former Homemaker s East outlet store on Hubbell Avenue. New construction of neighborhood and community centers was limited. An exciting entry to this submarket is the opening of the Des Moines area s first Pet Supplies Plus store (8,998 sf) in Altoona. A new retail center is getting set to open at the corner of 8th Street SE & Prairie Meadows Drive that will include Dunkin Donuts, Radiant Complexions, and Supercuts (11,900 sf). Also, development at Prairie Crossing will continue to gain momentum as Hyatt Place, Burger Shed, and Hy- Vee Fast and Fresh are all expected to develop in the next 24 months. Outlets of Des Moines SOUTH Changes are occurring in this submarket as well. NDC completed construction of a new retail center at 2619 SW 9th Street (5,734 sf) but the major event to occur is the redevelopment of the Wakonda on Fleur Shopping Center. Approximately 35,000 sf of Class C retail space was razed and replaced with a new 30,282 sf Fareway grocery store. The center is being re-branded Fareway on Fleur and also includes a remodeled McDonald s, re-build of Financial Plus Credit Union, and addition of Pet Supplies Plus, Cheng s Garden, Dollar Tree, and a fitness center to the tenant roster. Occupancy within this submarket increased nicely three full percentage points to 86.7%. This positive development is a reflection of the growth of retail The 300,000 SF outlet center opened in Altoona in October 2017. Q1 2018 RETAIL 2018 CBRE Hubbell Commercial 3
MARKETVIEW GREATER RETAIL Big Box Retail VACANCY RATES INVENTORY Overall market occupancy was 98.1% at year end 2017. Occupancy has risen 2.7% in the past 24 months. South Des Moines has the lowest occupancy rate at 96.6% and primarily results from Best Buy s 2016 departure from Southdale Shopping Center. Big Box occupancy is 100% in both the Northeast and Northwest submarkets. Submarket Market Rentable Area (SF) Vacant (SF) Our survey included 148 properties, representing over 10.56 million square feet of retail space and an addition of 4 new properties over last year. Two of those new properties were in the western suburbs while one was in South Des Moines. Hy-Vee opened their new downtown grocery store in 2017, which is located at 4th Street and Court Avenue. The store is part of a 4-story mixed use project, with 81 upper floor apartments. An adjacent parking deck structure is included for additional parking. The addition is the first big box store added in the CBD. The grocery store contains 37,204 square feet. Vacancy Rate Net Absorption Western Suburbs 5,472,030 136,801 2.5% 150,777 CBD 37,204-0.0% 37,204 Northwest Des Moines 390,246-0.0% - Northeast Des Moines 1,576,772-0.0% 85,146 South Des Moines 1,332,093 45,291 3.4% 30,282 Ankeny 1,791,343 21,496 1.2% 26,870 Greater Des Moines Total 10,562,484 203,588 1.9% 293,075 Neighborhood and Community Centers VACANCY RATES INVENTORY Overall market occupancy was 85.6% at year end 2017. Occupancy has risen 2.0% percent since year end 2015. Excluding the central business district, all submarkets have occupancy rates between 84% and 90%. The strongest submarket in terms of occupancy is Ankeny where 90.3% of all neighborhood and community center space is occupied. This year s survey included 383 properties, representing over 6.92 million square feet of retail space in strip retail centers. Eleven new properties were included in this year s survey, including five in Ankeny, four in the Western Suburbs, and one each in Northeast and South Des Moines. Submarket Market Rentable Area (SF) Vacant (SF) Vacancy Rate Net Absorption Western Suburbs 3,784,558 605,529 16.0% 43,611 CBD 138,432 62,294 45.0% (3,461) Northwest Des Moines 780,238 138,102 17.7% 2,341 Northeast Des Moines 823,723 107,908 13.1% 1,985 South Des Moines 549,445 73,076 13.3% (10,942) Ankeny 845,860 82,048 9.7% 52,427 Greater Des Moines Total 6,922,256 1,068,957 15.4% 85,961 Q1 2018 RETAIL 2018 CBRE Hubbell Commercial 4
MARKETVIEW GREATER RETAIL Regional Shopping Center Overall 93.0% of the four major regional shopping centers are occupied. The lowest is approximately 75% at the Outlets of Des Moines due to its initial leaseup, and the strongest is Jordan Creek Town Center at 98%. A major event in this category is that Von Maur announced plans to build a new 140,000 sf store at Jordan Creek Town Center for a 2022 store opening. Rentable Area (SF) Total Stores Occupancy Merle Hay Mall 941,866 77 95.90% Valley West Mall 910,000 118 91.00% Outlets of Des Moines 300,000 40 75.00% Jordan Creek Town Center 979,000 134 98.00% Greater Des Moines Total 3,132,884 369 93.00% Jordan Creek Town Center Plaza at Jordan Creek Von Maur announced plans to open a new store in 2022 in West Des Moines. Hobby Lobby plans to open a new store near Jordan Creek Town Center in March 2018. Q1 2018 RETAIL 2018 CBRE Hubbell Commercial 5
MARKETVIEW GREATER RETAIL GREATER ECONOMIC DATA Population 635,000 (2017 MSA) Unemployment Rate 2.6% LARGEST EMPLOYERS EMPLOYEES Wells Fargo & Company 14,500 UnityPoint Health - Des Moines 7,797 Mercy Medical Center 7,055 Hy-Vee, Inc. 6,400 Principal 6,182 Nationwide 4,442 John Deere 3,089 Vermeer Corporation 2,500 DuPont Pioneer 2,495 JBS USA 2,300 Pella Corporation 2,224 Kum & Go 2,043 Wellmark Blue Cross Blue Shield of Iowa 1,800 UPS 1,600 Firestone Agricultural Tire Co. 1,600 YMCA of Greater Des Moines 1,480 Athene 1,320 EMC Insurance Companies 1,300 Casey's General Stores 1,200 Tyson Fresh Meats, Inc. 1,200 Annual Retail Sales 12 Month Change in employment 2.6% YEAR MSA PERCENTAGE CHANGE 2012 $8,270,064,777 5.07% 2013 $8,411,526,797 1.71% 2014 $8,787,0,388 4.47% 2015 $9,346,317,273 6.36% 2016 $9,769,581,274 4.53% 2017 $10,071,879,055 3.09% Source: Iowa Retail and Use Tax Report, Iowa Department of Revenue and Finance Other Services, 4% Government, 12% Construction, 6% Manufacturing, 5% Leisure and Hosp Services, 10% Trade Transportation/Utilities, 18% Information, 2% Education and Health Services, 14% Professional and Business Services, 14% Financial Activities, 15% Sources: Greater Des Moines Partnership Bureau of Economic Analysis US Bureau of Labor Statistics - December 2017 Q1 2018 RETAIL 2018 CBRE Hubbell Commercial 6
SCHOOL ST WOODLAND AVE HIGH ST INGERSOLL AVE SCHOOL ST 15TH ST LINDEN ST 16TH ST 15TH ST 15TH ST CENTER ST CROCKER ST TUTTLE ST SCHOOL ST PLEASANT ST TUTTLE ST 7TH ST 7TH ST CENTER ST WATSON POWELL JR WAY ELM ST 5TH AVE PARK ST MURPHY ST 3RD ST E 4TH ST W MARTIN LUTHER KING JR PKWY LYON ST SE 7TH ST E 9TH ST LYON ST 44 R22 MILLS CIVIC PKWY NW 142ND ST JORDAN CREEK PKWY HICKMAN RD Racoon River NW 128TH ST 141 UNIVERSITY AVE NW 100TH ST 100TH ST GRAND AVE NW 70TH AVE EP TRUE PKWY 86TH ST NW 86TH ST 235 RAILROAD AVE DOUGLAS AVE. 63RD ST SW 63RD ST MERLE HAY RD Saylorville Lake 28 28 INGERSOLL AVE GRAND AVE 28 INTERNATIONAL AIRPORT FLEUR DR Des Moines River Grays Lake SW 9TH ST 2ND AVE STATE ST 415 ARMY POST RD ANKENY BLVD 69 BROADWAY AVE E EUCLID AVE SE 14TH ST 69 DELAWARE AVE DELAWARE AVE 235 ANKENY REGIONAL AIRPORT E UNIVERSITY AVE NE 78TH AVE SW 8TH ST N 1ST ST 163 MARKETVIEW GREATER RETAIL METHODOLOGY While there are a variety of retail uses, this survey focuses on regional shopping malls, neighborhood and community centers, and big box retail. The neighborhood and community centers analysis focuses on multi-tenant with small to medium size occupiers. Big box includes grocery stores, home improvement stores, and larger retail and discount stores containing approximately 20,000 SF. Regional shopping centers are considered separately. The 2018 Marketview contains information collected during the first quarter of 2018. SUBMARKET BOUNDARIES Central Business District (CBD) - Includes the Western CBD and the East Village, extending west to Martin Luther King Jr. Parkway and east to East 14th Street. Western Suburbs - Encompasses West Des Moines, Clive, Urbandale, Windsor Heights, Johnston, Grimes, Waukee, and some unincorporated areas of Polk, Dallas, and Warren Counties. Northeast - Consists of Northeast Des Moines (extended south to the Des Moines River), Pleasant Hill, Altoona, Eastern Saylor Township, and Delaware Township. South - Comprises Southwest Des Moines, Southeast Des Moines (south of Des Moines River), and some unincorporated areas of Polk and Warren Counties. Ankeny - Evaluated separately. Northwest - Includes Northwest Des Moines and Western Saylor Township. E GROVE AVE MARTIN LUTHER JR PKWY MARTIN LUTHER KING JR PKWY FLEUR DRIVE 20TH ST CROCKER ST 19TH ST 19TH ST 18TH ST 18TH ST 17TH ST 17TH ST 17TH ST 16 TH ST 15TH ST W MARTIN LUTHER KING JR PKWY OAKRIDGE DR SW 16TH ST OAKRIDGE AVE HIGH ST 9 TH ST 6TH AVE 6TH AVE 6TH AVE GRAND AVE GRAND AVE GRAND AVE GRAND AVE E GRAND AVE 13TH AVE 12TH ST Western Gateway Park KEOSAUQUA WAY 8TH ST 7TH ST SW 7TH ST WALNUT ST WALNUT ST W MARTIN LUTHER KING JR PKWY 8TH ST 3RD ST 3RD ST 2ND AVE 2ND AVE 2ND AVE SW 3RD ST SW 2ND ST LOCUST ST LOCUST ST LOCUST ST LOCUST ST SE 14TH ST 12TH ST 12TH ST CENTER ST 11TH ST 10TH ST 9TH ST 8TH ST 801 Grand CHERRY ST 235 5TH AVE MULBERRY ST SCHOOL ST Iowa Events Center 4TH ST 5TH AVE SW 5TH AVE COURT AVE COURT AVE E COURT AVE 4TH ST W RIVER DR Civic Center Court Avenue District VINE ST Des Moines River MARKET ST SW WATER ST ROBERT D RAY DR MAPLE ST SW WATER ST E 1ST ST Principal Park E 5TH ST LYON ST ST ST E 2ND ST Racoon River E 3RD ST Des Moines River Botanical Center East Village E 4TH ST E 4TH ST E VINE ST WALNUT ST E WALNUT ST E 5TH ST E MARKET ST E ELM ST State Historical Museum E 9TH ST RACCOON ST SE 8TH ST E 12TH ST E 12TH ST State Capitol SCOTT AVE SCOTT AVE SE 6TH ST E 6TH ST PENNSYLVANIA AVE SE 9TH ST SE 10TH ST E 1 3TH E 13TH E 14 TH ST SE 14TH ST E 14TH ST CENTRAL BUSINESS DISTRICT (CBD) NW BEAVER DR ANKENY DALLAS COUNTY GRIMES JOHNSTON 80 POLK COUNTY 35 35 80 6 ALTOONA BONDURANT 80 METROPOLITAN AREA 6 WAUKEE 80 CLIVE URBANDALE WINDSOR HEIGHTS WEST SUBURBS WEST 6 NW ML KING JR PKWY CBD HUBBELL AVE NE PLEASANT HILL 35 RACCOON RIVER DR 5 SOUTH CARLISLE 5 5 MADISON COUNTY CUMMING 35 NORWALK 28 WARREN COUNTY 69 5 2018 - Hubbell Commercial Brokers, L.C., d/b/a CBRE Hubbell Commercial and Frandson & Associates. The information contained herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we make no guarantee, warranty or representation, either expressed or implied, as to its accuracy or completeness.
Commercial Real Estate Advisory and Transaction Services 6900 Westown Parkway West Des Moines, Iowa 50266 +1 515 224 4900 Fax +1 515 221 62 www.cbre.com/desmoines Licensed in the state of Iowa. FRANDSON & ASSOCIATES, L.C Frandson & Associates, L.C. is a full service commercial real estate appraisal and consulting firm based in Des Moines, Iowa. The principals and associates of Frandson & Associates, L.C. have extensive experience in evaluating complex commercial, industrial, multi-family, development and special use properties. Financial Center, Suite 1801 6th & Walnut Des Moines, Iowa 50309 515.247.0040 Fax 515.247.0044 www.frandsonandassociates.com