This annual survey of apartments in the Des Moines Metropolitan Area includes both conventional apartments and tax credit projects. The survey has been completed to assist in the decision-making process of developers, property owners, brokers, investors, managers, assessors, and other market participants regarding multi-family properties.
This 46th Annual Apartment Survey includes 25,954 conventional apartment units located in 282 projects and 3,822 Section 42 Low Income Housing Tax Credit units in 53 projects. The survey covers both high-rise and garden-style apartments, and was conducted during January of 2016. Occupancy and rental data was furnished by owners and/or managers of each building project, and was obtained by a mailed survey questionnaire or phone interview.
The surveyed apartments span a wide range of amenities and units per complex, ranging from 6 to 450 units, generally built after 1950. The survey does not include senior housing, student housing, or projects with non-rental amenities such as meals. A separate study for tax credit projects is also included in this report.
The survey includes only the units available for rent as of January 2016. This survey does not include units under construction as of the survey date.
Although the method of survey and occupancy data reports are considered valid and reliable, they are not guaranteed of being free of error, statistically or otherwise. In our opinion, this survey is an objective picture of the occupancy and rental situation as of January 2016. Reproduction of this information is permitted with acknowledgement to Commercial Appraisers of Iowa, Inc. and CBRE Hubbell Commercial.
For purposes of this study, the Greater Des Moines Metropolitan Area is geographically divided into the following areas:
- East All east and north of the Des Moines River, except CBD
- South All south of the Raccoon and Des Moines Rivers including Norwalk
- CBD Central Business District south of I-235, east of Martin Luther King Parkway, north of Raccoon River including East Village to the State Capitol
- West All west of the Des Moines River, north of the Raccoon River, except CBD
- West Suburbs Clive, Urbandale, Windsor Heights, West Des Moines, Grimes, Waukee and Johnston
Rental Rate Comparison
Rents have increased for all unit types over the past year. The increase in average rents ranged from 5.2% for two-bedroom units to 10.3% for efficiency units. The rents included in our past five annual surveys have been adjusted for any rent concessions offered, such as a free garage or rent, to arrive at an effective rent. Prior to 2010, the rents included in the survey were not adjusted for concessions. Approximately 8% of the market rate projects offered some type of rental concessions to new tenants, which is an increase from approximately 7% in the prior year.
Tax Credit Development
Section 42 of the Internal Revenue Service Code provides for tax credits to developers of rental housing for low income tenants. The Iowa Housing Finance Authority administers a program involving low income tax credits under which many apartments have been built or rehabbed in recent years. Since these projects have rent restrictions, they are not included in the market rate survey previously described in this report.
We surveyed 53 tax credit projects containing a total of 3,822 units within the Des Moines Metropolitan Area. The average vacancy rate is 2.7%, which is an increase from 2.0% vacancy last year.
The survey indicates rental rate increases for all market rate unit types ranging from 5.2% to 10.3% during the past year. The largest increases in market rent were seen in efficiency and one-bedroom units in the East submarket and efficiency units in the South and Altoona submarkets. The 55.7% increase for efficiency units in the Altoona submarket can be attributed to several high end units entering the submarket. These high end units more than doubled the number of efficiency units previously in the Altoona submarket. Overall, most of the largest increases in market rent observed in our survey coincide with a decrease in market rent in our previous 2015 survey. This can primarily be attributed to different sets of apartment complexes responding to the survey between 2014 and 2016. This survey also indicates an overall vacancy rate of 3.9% for conventional apartments, which is a decrease from 4.1% in 2015. The highest vacancy rates by geographic area are 5.3% for the Ankeny submarket and 4.3% for the West Suburbs and Indianola submarkets. The East submarket showed the most improvement, with vacancy decreasing from 4.4% to 2.9%. The vacancy rate for the tax credit projects increased to 2.7% from 2.0% the prior year.
The West Suburbs, Ankeny, and the new units added to the Central Business District have the highest average rents. The lowest average monthly rental rates tend to be in the South, East, Altoona, and Indianola submarkets.
Approximately 1,117 new rental apartment units of a planned 3,048 apartment units (37%) were added to the rental market in 2015, versus 2,137 new units in 2014. Of these, 1,081 are market rent apartments and 36 are tax credit units.
The planned apartment projects for 2015 are summarized in the following tables:
The numbers in the above tables represent only the units that we anticipate will be added to the market in 2016. These units do not always represent the total project size.
The 4,425 total units of planned development in 2016 is a 45% increase over the 3,048 total units planned in 2015. It should be noted that typically not all planned units are actually delivered to the market. However, in this case, approximately 2,670, or 60% of the planned 4,425 units are under construction. Therefore, in 2016, over 3,000 units are expected to be delivered to the market. The 2016 planned development estimates are primarily based on discussions with city development officials. The low vacancy rates and increasing rents seen throughout Greater Des Moines over the past few years have led to this substantial amount of planned development.
Over the past year, the steady demand for apartments has continued. A mix of Gen X, Baby Boomer and Millennial tenants are driving the demand, all desiring flexibility, walkability, choice in floor plans, diverse property designs, and quality amenity packages. With the exception of some parts of the West Suburbs Submarket, vacancy levels remain low and rental rates are increasing. The steady demand is a result of many factors, including but not limited to a shift to renting by choice, lack of consistent job formation thus allowing renters the flexibility to follow jobs, increasing population, and household creation.
While demand is expected to remain healthy, it is likely that the market will experience some normalization resulting in a slight softening of occupancy levels and rent growth due to the large number of units that will likely be delivered to the market in 2016. Increased single-family housing rental options, lack of wage growth, and reduced affordability will also be dynamics affecting apartment absorption in 2016.
We wish to thank the property owners, developers and managers who made this survey possible by providing rental and vacancy data over the past 46 years.
Commercial Appraisers of Iowa, Inc.
Commercial Appraisers of Iowa, Inc. is a full service commercial real estate appraisal and consulting firm. Our professional staff is highly educated and experienced in all facets of appraising commercial real estate. Clients include lending institutions, assessors, law firms, state and local government agencies, engineering firms, accountants, insurance companies, and private property owners. Our appraisals utilize a unique combination of professionalism, firsthand experience, and advanced analytical techniques.
© 2016 - Hubbell Commercial Brokers, L.C., d/b/a CBRE|Hubbell Commercial and Commercial Appraisers of Iowa, Inc. 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. Reproductions of this information is permitted with acknowledgement to Commercial Appraisers of Iowa, Inc. and CBRE|Hubbell Commercial.