Overall, office continues to trend in the right direction in Des Moines, Iowa. The strong demand led to 45,014 square feet of product being positively absorbed in the first quarter, according to a market report from Colliers.
While that's down more than double from the 109,654 square feet recorded last quarter and considerably from the over 260,000 square feet year-over-year, the category remains positive.
"The bulk of this absorption was in Class B and C product. Tenants vacated a net negative 9,100 sq. ft. in Class A properties," Colliers explained.
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"Suburban submarkets, particularly Ankeny and West Des Moines, showed stronger absorption than the CBD, indicating tenant preferences shifting toward the suburbs. CBD vacancy grew 40 basis points in Q1 2025 to 12.7%."
The trend, according to Colliers, is continuing to send vacancy down, as the rate averaged 11.5 percent in the first quarter. From 12 months prior, vacant space plunged by 8.5 percent to 4.4 million square feet, although that figure is still up twofold from the pre-pandemic average.
Additionally, asking rates surged to nearly $22 per square foot compared to over $16 per square foot in the previous three months.
Meanwhile, only one office sale was recorded in the first quarter in Des Moines, involving the 23,750-square-foot Union 315 building, which traded hands for $7.2 million. It came after a strong fourth quarter, where just under $40 million of sales were recorded.
"Financing is still the major struggle for buyers as the cost of debt remains high," Colliers revealed.
"Interest rate volatility in the first quarter slowed first quarter transactions. Investment buyers in the market are typically local groups or individual buyers looking out for opportunistic deals."
That said, there is a potential for a turnaround in 2025 after the hiccup. The first quarter ended with more than 40 property listings, leaving an opportunity for buyers and even transactional growth this year, according to Colliers.
Also, the CRE firm predicts that vacant space will continue its steady decline, as net absorption remains positive. But tenants will still have leverage in lease negotiations, it further noted.
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