2009 Commercial Real Estate Report
Cedar Rapids | Iowa City / Coralville | Cedar Falls / Waterloo
Tenth Annual Commercial
Real Estate Report
NAI Iowa Realty Commercial is excited to present our Unfortunately, as our office was flooded June 12, 2008, we
Tenth Annual Commercial Real Estate Report. This report is were unable to save our survey results and publish our trends
an in-depth analysis of commercial real estate in the Greater magazine for the year. The report this year is a great testimony
Cedar Rapids area. Surveys are distributed annually for office, to the strength and cooperation of our area landlords and
warehouse, retail and investment properties. We gathered facts commercial property owners that took time to help us rebuild
and figures on over 1,600 properties; our most comprehensive and update our data. This report is up to date through mid-year
survey to date. We then applied our own analysis to the data to of 2009 and reflects the market impacts of the floods and the
more accurately determine the area’s activity and better predict economy. Thank you for your review of this report and/or your
future trends. contribution. Should you have any questions or comments,
please contact me at 319-378-6781 or email@example.com
Data is an essential component of any facilities or investment
decision. At NAI Iowa Realty Commercial, we believe that a Thank you,
comprehensive analysis is an important aspect of advising our Kirk Hiland
clients so they are able to make wise, profitable choices. Managing Broker, NAI Iowa Realty Commercial
NAI Iowa Realty Commercial Agents
Kirk Hiland Scott Byers, CCIM, Bob Holland, CCIM,
Van Miller Dave Drown, CCIM,
Jim Lamb Adam Gibbs
Aaron Saylor Joanne Stevens, CCIM Josh Seamans Jeremy Tipton Todd Barker, MBA
Iowa City / Coralville Cedar Falls / Waterloo
Randy Miller Peggy Slaughter Rod Eiklenborg Fred Miehe, CCIM Tom Dalton Matt Miehe
The information contained in this report is believed to be reliable, but not guaranteed. Reproduction of this publication, in whole or in part, is prohibited without permission of NAI Iowa Realty Commercial.
NAI Iowa Realty Commercial commercial real estate, our branches are able to service Cedar
Our team features specialists in nearly every aspect of Rapids, Marion, Hiawatha, Waterloo/Cedar Falls, Iowa City/
commercial real estate, and we hold individual accreditations Coralville, North Liberty, Muscatine, Dubuque, the Quad Cities
with CCIM, SIOR, MCR, ALC and GRI. Our affiliation with NAI and all surrounding communities. In conjunction with a sister
gives us access to markets across the world. With over 3,700 office in West Des Moines, we also provide extensive coverage
brokers in 270 offices worldwide, we have vast resources at our in central Iowa.
fingertips; a global perspective combined with local expertise. Locally, our associates have over 350 combined years of
We are Iowa’s largest and most experienced commercial real experience in:
estate company. Recently, we were cited as the 46th highest • Site Selection
volume producing commercial real estate company in the
Midwest, and the only firm in the state that made the list. • Buyer, Seller, Landlord and Tenant Representation
From local investor to corporate America, we have the market • Land Development: Retail Centers, Industrial/Warehouse and
information, contacts, experience and insight to meet diverse Office Property
needs. • Project Management
NAI Iowa Realty Commercial has office locations throughout • Property and Lease Management
the state of Iowa (Cedar Rapids, Waterloo, Iowa City and • Mergers, Acquisitions and Divestitures
Des Moines). Widely acknowledged as the leader in Iowa
• Business Brokerage
Where We Are Where We’re Going
Despite an unprecedented national economic debacle and the The big plus to investment real estate these days is that interest
fourth largest natural disaster to ever hit the United States, rates are remaining in the same low range. With rates ranging
the Eastern Iowa investment market has remained strong and between 5½ and 6½ percent interest, real estate investment still
steady. Area real estate investments have never been looked on makes good sense for a long term hold.
as glamorous in comparison to the Sun Belt and coasts. But,
while the bubble blew apart in these areas, our properties have Underwriting has tightened in that:
not only maintained their values but shown their typical steady • Down payments have edged up to the 25-30 range
• Non-recourse loans have gone the way of the Carrier Pigeon
Eastern Iowa is fortunate to have strong locally owned and • Appraisals are receiving increased scrutiny and
controlled financial institutions which buttress the major lenders
that have a strong and increasing presence in our market. The • Capitalization rate expectancies have moved up
majority of our investment opportunities are in the Ten Million In today’s market, even national, Class A tenants are receiving
Dollar and under range and this niche fits well with local lenders scrutiny and an increase in capitalization basis points that were
with knowledge of the real property and in many cases the unheard of previously. The low cap sales dependent to a great
investors. extent on hopes of value increase are dying away.
Up until mid-2008, area real estate investment was Our area investment market today has strength, stability and
experiencing a strong influx of investors from the coasts, many growth. Inventories of properties for sale are limited because
of them Tenants in Common (TIC) purchasers and similar we have not experienced the national downturn in our area
syndications. These investors have now dried up with the loss real estate market and many of the investor/owners recognize
of their equity positions, properties and financing structures a good position when they see one. Owners and investors
(Collateralized Mortgage Backed Securities, Interest Only, etc.) have to recognize that we are in a new economy with different
and are probably out of our picture for the time being. However, lending rules, different expectations of and from tenants, and
the projects they invested in have maintained their values unfortunately, ever-increasing government control of lending,
and continue to be good, viable commercial investments. ownership and use.
We anticipate in the next few years that we will have some
of these properties available again, not through any fault of Reminders:
the properties themselves, but rather because of borrower’s Owner/investors, in order to maintain and grow their
deficiencies in other markets. commercial real estate position, must:
NAI Iowa Realty Commercial is uniquely positioned to handle • Be proactive on property taxes
these through our affiliation with NAI which is now on a national • Be prepared to refinance into longer term fixed money should
and international basis assisting several major lenders in they sense an upturn in inflation
disposition of REO properties and the fact that we handled
many of these major transactions initially. • Recognize the ramifications of changes in capital gains taxes
that may (probably will) take place
3 • Be available and responsive to tenants to maintain occupancy
Office Suburban Office
As CBD office tenants fled their flood ravaged buildings, the suburban market experienced a
vacancy rate next to nothing. To the credit of suburban Landlords, prices were fair and leases
Central Business District were Moines. Rental rates for various future. As offices return in the
Des designed to fit the tenant need and plans for theclasses as shown to the CBD and
things settle, our survey shows that the average vacancy rate across the board for all classes
The Flood. Those two words changed the complexion of the of space seems to have stabilized at stayed very steady for metropolitan areas
accompanying chart have 10%. Certainly better than major the last few
Central Business District forever. Complete destruction and years. the United States and much better than former Iowa hot spots such as West Des
Moines. Rental rates for various classes as shown in the accompanying chart have stayed
devastation of all first floor, basement and in some cases very steady for the last few years.
second floor areas. Both sides of the river, hundreds of
thousands of square feet to rebuild, replace and/or remove.
What stage is the Central Business District at and where is it
Our survey showed that well over 90 percent of the office $6 $7 $8 $9 $10 $11 $12 $13 $14 $15 $16
building owners either were or planned on returning their
buildings to their previous use. The majority of tenants Class A
previously officed in downtown have returned to the downtown
Class B $10.00—$12.00
especially those on the floors that weren’t flood impacted.
First floor office space has been slower to return as rebuild has
taken longer in these spaces. New tenants will most likely be Class C
the users of these first floor spaces, i.e. a Health and Fitness
Center will tenant much of the first floor of the Higley Building.
The question of heating has been a stumbling block as the
“City” steam system formerly provided by Alliant Utilities is
Indications from Landlords are that they are absorbing tax and maintenance increases in an
phased out. Building owners are looking to private gas or effort to maintain tenancy and keep their buildings they are absorbing tax and
Indications from Landlords are that attractive to Tenants.
electric boiler systems for their needs and with this will come maintenance increases in an effort to maintain tenancy and
an increase in expense to cover the increased cost of these keep their buildings attractive to Tenants.
systems. Landlords and tenants will have a major negotiation
point in leases as for the most part the former system was very Overall Class C and B– buildings are experiencing somewhat
inexpensive and usually billed out as part of the base rent. This more vacancy (15-18%), but this seems to be the norm with
will lead to rents effectively increasing and brings suburban many of the tenants shorter term.
rents into competition with the CBD whereas before they were
higher across the board for all classes of office space. Another
factor in play is the parking expense and tenants are looking
closely at that versus the free parking in the suburban market.
Government, long the major player in the downtown CBD is,
with one exception, taking an extensive look at rebuilding and
moving back to existing space.
The exception to this is the Federal Government with its new
Courthouse and Federal Office facility. Long in the planning,
the inundation of the existing antiquated facility along First St.
SE, advanced the funding process on the new $140 million plus
facility now under construction along Eighth Avenue SE.
City government is still in the planning process as to whether
they will relocate or return to the island. Likewise the planned
intermodal facility is looking for a site as well as the Library, the
Central Fire Station and several other City Departments. The
commitment to the downtown is strong and these facilities as
they develop will add a new look and resurgence to the Central Future Growth
Business District. The current economy has, for the most part, stymied office
projects that typically would be adding to available space. This
will have an effect on the “pipeline” for several years to come.
As CBD office tenants fled their flood ravaged buildings, the
However, as the first half of 2009 ended, several projects were
suburban market experienced a vacancy rate next to nothing.
in the serious planning stages including a 24,000 square foot
To the credit of suburban Landlords, prices were fair and leases
Class A building in the Prairie Park Office Addition at Wright
were designed to fit the tenant need and plans for the future. As
Brothers Blvd. and I-380 and a 10,000 square foot Class A
offices return to the CBD and things settle, our survey shows
building on the St Marten Land at Highway 965 and Wright
that the average vacancy rate across the board for all classes
Brothers Boulevard. The pace of new construction should
of space seems to have stabilized at 10%. Certainly better
continue to accelerate slowly as lenders return to the market
than major metropolitan areas throughout the United States
and users return to a growth mode.
and much better than former Iowa hot spots such as West 4
Retail Recap Nevertheless, the mall still anchored by Younkers and JC
As the National economy plunged, Retail in the corridor Penney remains available with no new prospects in site. One
remained strong and viable. Major news was the bankruptcy bright spot is the purchase of the former “Big Lots” building
of General Growth, long a player in the corridor area and the and adjoining land at the Northeast corner of the Mall property.
current owner of Coral Ridge Mall in Coralville. While this Developers are said to have several prospects for restaurants
shocked major players and markets around the country, it was and retail on the site after razing the existing buildings. This
business as usual at Coral Ridge with very high occupancy and might be the start of something good for the area.
Elsewhere in Coralville at Holiday Road and Highway 965,
Gordman’s; Michaels; Petco and Bed, Bath and Beyond anchor
a power strip that has but a few pad sites left.
In Iowa City, Sycamore Mall which sold to California investors in
late 2008 continues to experience high occupancy and shows a
good example of a successful turnaround situation.
Cedar Rapids has leaned down its retailing which has actually
helped occupancies and market areas.
Westdale Mall, in foreclosure prior to the Floods of 2008,
was given a short breath of life when County and City offices
moved to the property on an emergency basis. Apparently, as
time goes on these government offices will move out and the
mall will once again be an albatross waiting for an investor/
developer to take it from the lender and do a redevelopment.
Citizens will debate for years why the county and city did
not look seriously at purchasing and rebuilding this into a
Across town retail has remained strong with Lindale Mall being
the longtime anchor. Flanking Lindale, Market Place on First is
full and growing with the addition of Ginsberg Jewelers on an
outlying pad site. Lindale Crossings at First Ave. and Collins
Rd. has experienced some minor vacancy with a few small
spaces being vacated by local retailers. Collins Road Square
recently purchased by a group of Texas investors is filling space
with about 27,000 square feet left to go. Northland Square
is full, but will be looking to backfill the Barnes and Noble
Bookstore space as they transition to Lindale Mall. The former
K’s Merchandise, a 100,000+ square foot big box has now
undergone a change in use and is leased to Rockwell Collins.
The old standby of Cedar Rapids, Town and Country Shopping
Center, the first center of its’ kind built in the United States
currently has about a 96 % occupancy.
market after the former tenants vacated. These comprise the two largest boxes left on the Southwest
without current occupants. Additional space may become open as two buildings along Highway 30
ently housing Cooper Tire, may become available.
alville has 410,000 square feet of warehouse at I-80 and Commerce Drive that has been available as
tor and Gamble have transitioned into their own warehouse facilities.
pite a few large boxes, corridor warehousing has remained strong. Pro-active Landlords have been
to keep their buildings filled and demand continues for good grade warehousing. The economy and
umer demand for locally produced goods are the factors that will come into play this year for ouralong Highway 30 currently housing Cooper
Industrial & Warehouse as two buildings
er warehouse spaces. Flexibility to tenant need will be a major in the in filling space may become available.
The demand for warehousing increased considerably factor
period after the floods of 2008. A combination of business and Coralville has 410,000 square feet of warehouse at I-80 and
market has backfilled most of the dry space loss of Midland Forge, Terex and Cryovac. has been available as Proctor and
industrialGovernmenttaken some major blows with the that was either for Commerce Drive that
lease need a major re-work and rehab to attract new industry. Most likely major redevel-
se facilities willor for sale. Gamble have transitioned into their own warehouse facilities.
ent with a new use will be the end game for these properties.
Despite a few large boxes, corridor warehousing
has remained strong. Pro-active Landlords
have been able to keep their buildings filled and
demand continues for good grade warehousing.
13.60% The economy and consumer demand for locally
12.00% produced goods are the factors that will come
10.00% into play this year for our larger warehouse
NE spaces. Flexibility to tenant need will be a major
7.80% factor in filling space.
5.20% NW/SW Our industrial market has taken some major
MAR/HIA blows with the loss of Midland Forge, Terex and
2.00% Cryovac. These facilities will need a major re-work
0.00% and rehab to attract new industry. Most likely
NE SE NW/SW MAR/HIA OVERALL major redevelopment with a new use will be the
end game for these properties.
Warehouse rates have remained relatively stagnant for the
past several years as new demand was met by build-to-suit
developers and many landlords have held the
line on rents as property taxes have driven
up the triple net costs for tenants. The major
warehousing for the Cedar Rapids Metro area
resides on the southwest side of Cedar Rapids (Average Rent/Square Foot)
(see chart) and these warehouses have held rents
fairly steady in a range from $4.00 to $4.65 per
square foot for several years. Vacancy in this area $7.00 $6.50
runs about 5.30 %, the lowest in Cedar Rapids $6.04 $6.00
and second only to Marion, which has a very tight $6.00
market at about 2.3% vacancy (see chart). $5.00 $4.65
Metro area warehousing has had little new $4.00 SE
construction and the only major building currently
under construction is 110,000 square feet on
Mann Road SW. 248,000 square feet on 20th $2.00 MAR/HIA
Ave. SW remains on the market after the former
tenants vacated. These comprise the two largest $1.00 AVERAGE
boxes left on the Southwest side, without current $0.00
occupants. Additional space may become open NE SE NW/SW MAR/HIA AVERAGE
Cedar Valley At A Glance
Cedar Falls 38,059
Unemployment Rate (June 2009)
Waterloo / Cedar Falls 4.7%
Commercial Property Rates*
Rent/SF Year Vacancy
Property Low High Rate
The Cedar Valley market continues to grow with strong, Downtown Office (Prime) $6.25 $11.00 9.0%
steady, sustained growth. The market is absorbing office Suburban Office (Prime) $8.00 $13.25 5.0%
and industrial vacancies.
Industrial Bulk Warehouse $3.00 $5.25 2.0%
• Fortune 500 company Grainger Inc., has moved into its new Retail $7.00 $20.00 12.5%
41,000 sq. ft. call center at Country Club Business Center in
Rental rates include estimated taxes, insurance and maintenances.
Waterloo. The new site allows for expansion in the future. The
construction project has a valuation of $5.2 million.
• VGM spinoff plans to utilize a historic downtown Waterloo
building that once housed one of the city’s oldest businesses.
About NAI Global
Healthcare Quality Association of Accreditation, or HQAA is a
spin-off of the VGM Group, specializing in accreditation in the
home medical equipment industry. NAI Global is one of the world’s leading providers of
• Target Distribution completed a 400,000 sq. ft. refrigeration commercial real estate services. We bring together people
distribution facility expanding on its 1.4 million sq. ft. facility and resources wherever needed to deliver outstanding
in the Cedar Falls Industrial Park. It is a $35 million project results for our clients.
totaling $80-$90 million including equipment with at least 100 NAI At A Glance
• Isle of Capri completed a $175 million casino in Waterloo for a
June 1, 2008 opening. At ground breaking it was a $70 million
project. Isle of Capri has significantly improved the amenities
$40 Billion Annual Transaction Volume
and design making it a $175 million project.
• New construction in the commercial/office/industrial section
continues. Waterloo and Cedar Falls have seen numerous
new and expanded professional office buildings and industrial
• The Cedar Valley’s medical community is worth noting with
Allen Memorial Hospital’s planned expansion, its most
expensive in history. They will invest $47M in a Cardiac Care
and Emergency Room.
116 Third Street SE
Cedar Rapids, Iowa 52401
220 Ridgeway Ave., Suite 100
Waterloo, Iowa 50701
327 Second Street, Suite 201
Coralville, Iowa 52241