M A R K E T O V E R V I E W

Des Moines, Iowa Fourth Quarter 2007

MARKET MAP MARKET FACTS



69
Market U.S.


35

Population 534,399 301,825,750

Avg. Annual Five-Year Chg.* 1.2% 0.9%



6
Total Households 217,355 113,136,906



235
Avg. Annual Five-Year HH Chg.* 1.6% 1.0%
Des
Des Moines
Moines
Median Household Income $56,819 $51,680

Median Age 36.5 36.7



65 Employment 341,755 140,176,643


69

Vacancy Rate (3Q 07) 8.3% 9.4%

Avg. Asking Rent (3Q 07) $12.66 $19.32



28 

5

65
* 2006-2011 Forecast

MARKET VACANCY RANKING MARKET HIGHLIGHTS

3Q 07 3Q 07 Early forecasts call for healthy retail sales and pop-
Market Vacancy Asking Rents ulation growth for the metro in 2008, providing a solid
foundation for the Des Moines retail property market.
Chicago 8.2% $19.45
Although retail property stock is still expanding at a
Des Moines 8.3% $12.66 somewhat high rate, demand growth will continue to
approximate supply growth. Despite the run-up in con-
Milwaukee 9.6% $15.16 struction, occupancy levels are projected to only slight-
ly increase over the next 12 months. During this time,
St. Louis 9.7% $14.99 rent growth is predicted to be modest, and owners are
expected to maintain concessions at their current levels.
Denver 10.4% $16.88 Going forward, the metro’s prospects for sustained
growth and competitive yields will maintain investor
Minneapolis 10.8% $17.66 interest. Transaction velocity over the last two years
has been relatively stable. As such, average cap rates
Indianapolis 11.5% $14.98 continue to trade above the national average, with rates
hovering in the mid- to high-7 percent range. With the
Cincinnati 11.8% $14.63 current level of building activity posing a threat to
near-term occupancy levels, cash buyers seeking top-
Columbus 11.9% $12.48 tier space will be well-positioned when making offers,
as stringent lending requirements will likely dampen
Cleveland 13.2% $15.45
competition from leveraged buyers.

Justin R. Davenport © Marcus & Millichap 2007

Research Analyst www.MarcusMillichap.com
Des Moines, Iowa Retail Market Overview ◆ Fourth Quarter 2007

Construction Trends CONSTRUCTION TRENDS

◆ The pace of new retail construction over the past three years has
Square Feet Completed (thsouands)

1,200
been relatively consistent, averaging 625,000 square feet per year.
900 After adding 680,000 square feet to the market last year, retail
developers are projected to bring another 600,000 square feet
600 online by year-end 2007, expanding inventory by 2.5 percent.

300 ◆ A majority of the new development is taking place in the western

portion of the market. The most recent project to come to fruition
0 is a Lowe’s Home Center at 450 South Jordan Creek Parkway in
03 04 05 06 07* West Des Moines. This 117,000-square foot property was com-
* Forecast
Sources: Marcus & Millichap Research Services, Reis, TWR pleted in the fourth quarter of this year.

◆ There are approximately 2.9 million square feet of retail space

planned throughout the metro. The largest property proposed is
the 700,000-square foot Waukee Marketplace at Hickman and
Alice’s roads. This project has no target start date at this time.

Asking Rent and Vacancy Trends RENT AND VACANCY TRENDS

Average Asking Rent per Square Foot

$14
Average Asking Rent 10% ◆ Slower absorption rates, coupled with elevated construction, have
Vacancy
pushed vacancy higher over the past 12 months. During this time,
$13 9% vacancy has climbed 20 basis points to 8.3 percent after rising 30
Vacancy Rate

basis points in the previous 12-month period.

$12 8%
◆ Owners are showing an increased willingness to offer concessions
$11 7% in order to fill new space and rent growth has been slowing dur-
ing the last three years. Over the past 12 months, asking rents
$10 6% have advanced 2.1 percent to $12.66 per square foot, while effec-
03 04 05 06 07* tive rents have increased 1.8 percent to $11.14 per square foot.
* 3Q 2007
Sources: Marcus & Millichap Research Services, PPR, Reis

◆ Looking forward, rent growth in the metro is forecast to stay in

the low-2 percent range. Occupancy levels are forecast to hold
steady in the mid-8 percent range, as demand and supply are
expected to remain in near equilibrium.

Sales Trends SALES TRENDS

$160 ◆ Limited for-sale inventory will continue to restrain sales activity;
Median Price per Square Foot

however, investors will still receive competitive bids for listed prop-
$140 erties. Deal flow over the past 12 months has remained healthy,
despite the economic slowdown and softer consumer spending.
$120

◆ In light of the onset of the recent credit crunch, values have edged
$100 lower in 2007, as sellers have adjusted their price expectations to
avoid extended marketing times. Currently, the median price is
$80 $143 per square foot, down 1 percent from year-end 2006.
03 04 05 06 07*
* Trailing 12 Months Ended September 30
Sources: Marcus & Millichap Research Services, CoStar Group, Inc. ◆ Although cap rates have compressed in recent years, they are still
high enough to attract out-of-state buyers. Cap rates are currently
in the mid- to high-7 percent range and are expected to push high-
er over the next year as price appreciation subsides.

Justin R. Davenport © Marcus & Millichap 2007

Research Analyst www.MarcusMillichap.com
Sources: Marcus & Millichap Research Services, BOC, CoStar Group Inc., RCA, Reis, SRC, TWR
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.