The Wall Street Journal
07-26-06
Financial Sector Spurs Development
By MAURA WEBBER SADOVI
Beyond the pigs, butter sculptures and corndogs at the Iowa State Fair that
opens next month in Des Moines is an expanding commercial real-estate market
that doesn't play to type.
Much of the state capital's real-estate and job growth has been driven by the Des
Moines region's insurance and financial-services sector. Banking and insurance
jobs accounted for about 15% of the area's total non-farm jobs in May, a greater
percentage -- though on a smaller scale -- than the 12% financial-sector
component of the higher-profile insurance stronghold of Hartford, Conn.,
according to the Bureau of Labor Statistics.
Demand from the expanding financial sector and its rising number of workers has
driven development of new offices and stores and pushed up rents for high-end
space in the office and retail sectors, according to Kyle Gamble, senior vice
president of CB Richard Ellis/Hubbell Commercial in Des Moines. Apartmentsector vacancies are stabilizing after losing some renters who took advantage of
lower interest rates to become homeowners. The warehouse market also is
improving, Mr. Gamble says.
Some of the most substantial office projects are being built for the area's largest
employers. San Francisco financial-services giant Wells Fargo & Co. has
expanded its work force in the Des Moines region to more than 11,000 from
5,100 in 2000. To accommodate the growth of Wells Fargo's residential realestate lending businesses, a four-building 960,000-square-foot office campus in
suburban West Des Moines will be completed by early next year, and a ninestory, 360,000-square-foot building is being added in downtown Des Moines.
The area's lower costs, the trend toward people trying for a better balance of
work and family, and an increasing number of amenities in the region has made it
easier in recent years to attract executives from larger cities, says Mark Oman,
senior executive vice president of Wells Fargo & Co. "As people focus on worklife balance, Des Moines shines," says Mr. Oman.
[By the Numbers]
Short commutes, strong school systems and low housing costs are among the
region's attractions. The first-quarter median home price in the region was
$139,600, below the national median of $217,900, according to the National
Association of Realtors.
In 2004, the region gained its fourth regional shopping mall when Chicago-based
General Growth Properties Inc. opened the 1.1 million-square-foot Jordan Creek
Town Center, which includes an outdoor component, in West Des Moines. In
addition, downtown Des Moines last year saw the opening of an arena that is
home to the Iowa Stars minor league hockey team.
The Des Moines region's economy is a bright spot in a state struggling with
population and job declines in its rural areas because of more efficient
agricultural production and a soft manufacturing sector, says David Swenson,
an economist at Iowa State University. "When people talk about Iowa they feel
almost duty-bound to talk about how important agriculture is," says Mr. Swenson.
"The big story is the big gains in financial-service sectors in places like Des
Moines."
Des Moines, home to about 194,000 people, anchors a five-county metropolitan
region where the population increased about 6% to 511,878 in 2004 from 2000,
outpacing the rate for the state of Iowa, according to the Census Bureau. Job
growth in the Des Moines area also has been above average, at about 2.6% in
May from the year-earlier month, compared with about 1.7% statewide growth
over the same period, according to the Bureau of Labor Statistics.
For now, the Des Moines commercial market, with an office market about half the
size of Hartford's, remains off the radar screen for most major institutional real
estate players who typically seek larger inventories and metropolitan populations
of at least 1 million to assure liquidity, according to Scott Harris, a director at New
York-based ING Clarion Partners, which provides real-estate-investment services
to pension funds and other investors. Des Moines "is attracting dollars from a
corporate perspective but it's not a pure institutional play yet," says Mr. Harris,
who is based in Des Moines.