2010 Commercial Real Estate Report
Cedar Rapids | Iowa City / Coralville | Cedar Falls / Waterloo
Eleventh Annual Commercial
Real Estate Report
NAI Iowa Realty Commercial is excited to present our the challenging economic environment. We’d like to thank the
Eleventh Annual Commercial Real Estate Report. This report is hundreds of Commercial Property Owners who took time to fill
an in-depth analysis of commercial real estate in the Greater out and return our surveys. This data enables us to draw the
Cedar Rapids area. Surveys are distributed annually for office, conclusions and projections throughout the report.
warehouse, retail and investment properties. We gathered facts
and figures on over 1,600 properties; our most comprehensive Thank you for your review of this report and/or your
survey to date. We then applied our own analysis to the data to contribution. Copies of this are available at our office or online
more accurately determine the area’s activity and better predict through our website www.iowacommercial.com. Should you
future trends. 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
clients so they are able to make wise, profitable choices.
This report reflects data gathered through the first quarter of NAI Iowa Realty Commercial
2010. It reflects the ongoing effects of the floods of 2008 and
Over $100 Million
Volume in 2009!
Kirk Hiland Scott Byers • CCIM, SIOR Bob Holland • CCIM, SIOR Joanne Stevens • CCIM
Van Miller Jeremy Tipton Aaron Saylor Todd Barker • MBA Fred Miehe • CCIM Matt Miehe
Iowa City Cedar Falls
& Coralville & Waterloo
Tom Dalton Rod Eiklenborg Adam Clark These Ofﬁces to Serve You 319.363.2337 319.233.9999
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 We are Iowa’s largest and most experienced commercial real
Our team features specialists in nearly every aspect of estate company. Recently, we were cited as the 46th highest
commercial real estate, and we hold individual accreditations volume producing commercial real estate company in the
with CCIM, SIOR, MCR, ALC and GRI. Our affiliation with NAI Midwest, and the only firm in the state that made the list.
gives us access to markets across the world. With over 3,700 From local investor to corporate America, we have the market
brokers in 350 offices worldwide, we have vast resources at our information, contacts, experience and insight to meet diverse
fingertips; a global perspective combined with local expertise. needs.
Locally, our associates have over 350 combined years of NAI Iowa Realty Commercial has office locations throughout
experience in: the state of Iowa (Cedar Rapids, Waterloo, Iowa City and
Des Moines). Widely acknowledged as the leader in Iowa
• Site Selection commercial real estate, our branches are able to service Cedar
• Buyer, Seller, Landlord and Tenant Representation Rapids, Marion, Hiawatha, Waterloo/Cedar Falls, Iowa City/
Coralville, North Liberty, Muscatine, Dubuque, the Quad Cities
• Land Development: Retail Centers, Industrial/Warehouse and and all surrounding communities. In conjunction with a sister
Office Property office in West Des Moines, we also provide extensive coverage
• Project Management in central Iowa.
• Property and Lease Management
• Mergers, Acquisitions and Divestitures
• Business Brokerage
While investment in Commercial Real Estate is gradually We are entering a time of the “new normal”.
picking up, it continues to be controlled by unprecedented
economic instability and the prior collapse of the commercial Lease prices are adjusting to new economies and carrying
mortgage market. along with them the ultimate value of the commercial real
estate. Locally vacancy rates while not anywhere near national
While local lenders have filled the void for smaller investments, levels, have remained high and in some cases increased. The
larger real estate investments, 10 million dollars plus, continue effects of unemployment and downsizing can be seen across
to hang fire. Collateralized Mortgage Backed Securities (CMBS) the market.
are just beginning to reappear and with the secondary market
in disarray will not be a factor for sometime to come. Likewise, That being said, our market has some excellent values for
Insurance Company money, while available is under severe both tenancy and ownership. These values are adjusting
scrutiny both for the asset and the borrower. Investors have to into the new economy which will feature new tax, health and
be willing to be very patient and live by new rules in this market. employment standards.
This applies to both Sellers and Buyers. Fortunately our market is sized to handle future demands in all
TIC (Tenants in Common) investors have dried up, but the sectors of Commercial Real Estate.
good news here is that some of their holdings are coming Owners and investors have to recognize that we are in a new
back on the market in this area. These properties are back not economy with different lending rules, different expectations
necessarily through a deficiency of the real estate, but rather of and from tenants, and unfortunately, ever-increasing
due to losses in other markets. government control of lending, ownership and use.
Money as it is available is at very favorable rates between 5½ Reminders:
to 6½ percent. This is definitely a bright side to the investment
market. Lenders are flush and see very attractive margin Owner/investors, in order to maintain and grow their
spreads in their loans. The caveat here though is that these commercial real estate position, must:
loans are now being subjected to unprecedented scrutiny by • Be proactive on property taxes
not only the lenders themselves, but also by their regulators.
Down payments have moved into the 20 to 30 percent range. • Be prepared to refinance into longer term fixed money should
Debt coverage ratios have escalated and of course the day of they sense an upturn in inflation
the non-recourse loan has gone away. • Recognize the ramifications of changes in capital gains taxes
that may (probably will) take place
• Be available and responsive to tenants to maintain occupancy
Central Business District Suburban Office
The evolution of the Central Business District continues after Suburban Office Space is a mix of good and bad. Class A
the Flood of 2008. Several key elements to rebuilding and space has maintained a high occupancy of 94+%. This has
or re-tenanting have now been decided on, advanced to the remained steady since the Flood when a number of offices
blueprint stage and/or started. relocated and took up some vacant Class A buildings. A
Municipal government has now committed to return to softening of this market may occur as Municipal offices move
downtown, mixing the former City offices on Mays Island back downtown, however, there has been very little new
with some use of the former Federal Building on First Street. construction of Class A speculative space (basically none)
In addition, the new Events Center is moving ahead on First in the past year so this should steady the market as offices
Avenue and Third Street with property buyouts in progress and transition.
ground breaking in 2011. The Cedar Rapids Library has chosen
the “True North” site along Fourth Avenue and True North
Companies will be moving to the former Library site which
was flooded out in 2008. The Central Fire Station is poised to
relocate to First Avenue and Sixth Street. The County offices
will return to their pre-flood home on Second Street SW. The
new Federal Building is moving along rapidly and giving the
downtown the first look of Sky Cranes in years.
A major factor for CBD Landlords and tenants a year ago was
the availability or lack thereof of steam for heating. This issue
has been resolved for the most part with a reconfiguration of
buildings from the Central System to private on-site systems.
This is a definite factor in gross rent expense. It has been
estimated that this has raised costs by as much as $.50 per
square foot with sure numbers not available at this time.
Occupancy is a mixed bag in the CBD with upper floors Class B and C space continues to be troublesome with
(basically undamaged by the flood) being occupied, but much vacancy rates now exceeding 18-20% and very minimal
main level still vacant. Overall our survey showed at this time an demand. This has moved up from last year’s 15 to 18% rate.
85% occupancy with an average rent (spread over Class A, B, It appears that economic factors have closed some offices
and C space) of $10.38 per square foot on a net leased basis. and caused others to consolidate. Recently NAI Iowa Realty
Commercial was involved in a lease transaction where more
As the Federal Building comes online there will be an increase than a third of the employees would be working from their
in Class A-B vacancy as government offices transition to the homes. This trend has been growing over the last few years. It
new building. The new United Way Building will also draw some has an obvious impact on tenancy and also more subtle things
non-profit tenants out of their current space increasing vacancy. such as parking requirements (ramps), food/service needs,
Overall, the Central Business District has had minimal change
in the last year, but 2011 and forward with the new projects
underway will have significant positive impact, not only on
tenancy but the overall vibrancy and excitement of the area.
$6 $7 $8 $9 $10 $11 $12 $13 $14 $15 $16
Class A $13.00—–—$15.90
Class B $10.00-$11.00
Class C $6.50—–-$8.50
As of this writing, the major office growth contemplated is in
Medical Services with the possibility of a new Medical Mall
and a new Cancer Treatment Center. These plans are still in
progress and while they will have tremendous community
impact, the influence on traditional office space should be
No major speculative office spaces are on the horizon at
this time, tightened lending restrictions and tough economic
conditions are limiting these opportunities.
Retail Recap of Crossroads Mall. Several other as yet unannounced tenants
Retail in the Corridor area is stable with rents remaining at will be filling out the balance of the 84,000 square foot space.
previous year’s levels and occupancy rates that have changed Theisen’s is refilling a 100,000+ square foot space on 51st
very little. National economic conditions aside, Corridor retailers Street in Northeast Cedar Rapids (also a former Econo-Foods).
have experienced steady sales. Landlords have benefited from The property which they purchased in the Spring of 2010
the lack of new construction which has allowed some moderate should be open by this fall. This is a major step forward in
backfilling of space as new tenants come to market. Regional using up second and third generation space in Cedar Rapids.
malls in Cedar Rapids (Lindale), Coralville (Coral Ridge), Iowa Theisen’s is also expanding into the Coralville/Iowa City market
City (Sycamore) and Waterloo (Cross Roads) have maintained with a new store between Coralville and Tiffin which will also be
high occupancy both in the Mall and outlying pads and shadow opening this fall.
spaces. Unfortunately, Westdale Mall continues to wallow in foreclosure
A new Dick’s Sporting Goods is the anchor tenant backfilling with no bright prospects for a necessary rehab effort at the
a former Econo-Foods grocery store at the northwest corner present time. No announcements of major Retail Projects are in
the offing at the present time.
Industrial & Warehouse versus 13.6% a year ago. The Southeast side has tightened to
Warehousing demand has shown a slight increase in the a 5% vacancy (some of this attributable to the Farmstead plant
past year. Immediately after the flood there was a spike as no longer being in use or reported). The major warehousing
tenants had to move and Landlords had to rehab buildings. areas on the Northwest and Southwest have increased vacancy
Transitioning back to buildings and economic conditions have to about 9.9%, a 4.5% increase. Marion and Hiawatha remain
changed the occupancy rates in quadrants somewhat. The very tight at 2.75% vacancy. The overall today is in the
Northeast side has tightened up with a current rate of 8.5% neighborhood of 5.25%.
Two major big boxes still sit vacant with one in excess of Average rents per square foot have remained very constant
100,000 square feet and another in excess of 200,000 square for the past few years, with any changes attributable to pass
feet. Further south in the corridor, Coralville has a 410,000 through costs to tenants.
square foot facility available.
Cedar Valley At A Glance
Cedar Falls 38,059
Unemployment Rate (July 2010)
Waterloo / Cedar Falls 6.3%
(Down from 7.0% Feb 2010)
Commercial Property Rates*
Rent/SF Year Vacancy
Property Low High Rate
The Cedar Valley market continues to grow with strong,
steady, sustained growth. The market is absorbing office Downtown Office (Prime) $6.25 $9.50 10.0%
and industrial vacancies. Suburban Office (Prime) $8.00 $12.00 7.0%
• CBE Group purchased a two story 55,000 sq. ft. office Industrial Bulk Warehouse $2.00 $3.25 4.0%
building in the Cedar Falls Technology Park in late June for Retail $7.00 $19.00 11.0%
Rental rates include estimated taxes, insurance and maintenances.
• Dick’s Sporting Goods has leased 45,000 sq. ft. of retail space
in the former EconoFoods building near Crossroads Shopping
Center in Waterloo. Approximately 20,000 sq. ft. of space
remaining for lease; all under contract. About NAI Global
• Hy-Vee Grocery store has purchased a 12,000 sq. ft.
grocery store to relocate an existing store along Ansborough
Avenue in Waterloo. Their plans for the building are yet to be NAI Global is one of the world’s leading providers of
determined, but will probably entail redeveloping the site. commercial real estate services. We bring together people
and resources wherever needed to deliver outstanding
• Quik Star Convenience Store has acquired a site in Cedar results for our clients.
Falls for a new LEED convenience store on the corner of Hwy
58 & Ridgeway for a 5-6 million dollar project. NAI At A Glance
• The City of Waterloo has acquired 20 acres of undeveloped 350 Offices
ground across US Hwy 20 from Ansborough Avenue for 45 Countries
anticipated future industrial and technology development. The 5,000 Professionals
site is adjacent and south of the Tower Park Complex. $40 Billion Annual Transaction Volume
• Two hotels are being built in South Cedar Falls near the new
Target retail store. Motel 8 and Suburban Hotel Groups are
building three-story hotels.
• Sakura Restaurant has acquired and built a new Japanese
Steakhouse and Sushi restaurant that opened the Spring of
2010 in Cedar Falls near College Square Mall. It is a 6,000 sq.
• Darden Restaurant Group has acquired a former Ground
ft. restaurant that built an additional 5,000 sq. ft. for additional
Round restaurant with plans to redevelop the site for a Long
Horn Steakhouse in Waterloo near the Crossroads Shopping
• Buffalo Wild Wings is breaking ground in the spring as they Center.
plan to build a 5,000 sq. ft. restaurant across from College
Square Mall in Cedar Falls with additional space for lease.
116 Third Street SE
Cedar Rapids, Iowa 52401
220 Ridgeway Ave., Suite 100
Waterloo, Iowa 50701
327 Second Street, Suite 201
Coralville, Iowa 52241