$1,089 4Q 2023
$1,135 4Q 2024
4.2%
94.1% 4Q 2023
93.9% 4Q 2024
-20 points
390.8K 2023
392.5K 2024
2.8% 2023
3.2% 2024
* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.
** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.
FORECASTED ABSORPTION
FORECASTED NEW SUPPLY
Thanks to strong population growth, Des Moines’ multifamily market has experienced historical healthy demand, leading to quick lease-ups for new developments. Despite a dip in unit absorption in 2022, renter demand has consistently met or surpassed the number of units coming online annually since 2018, with a notable increase from 731 units absorbed in 2022 to 1,522 units in the past 12 months.
Looking to 2024, the Des Moines apartment market is expected to see a decrease in renter demand, with an anticipated absorption of around 700 units. This slowdown is largely attributed to a general softness in the financial services sector, a crucial part of the local economy. Both the financial services and professional and business services sectors are expected to experience a slight contraction in 2024. Despite this, the decrease in demand is likely to be offset by a corresponding reduction in new unit deliveries, thereby avoiding any significant impact on occupancy rates, which are expected to remain stable at around 94.0%.
In Des Moines, multifamily development has been notably restrained compared to national trends, with just over 2,000 units currently under construction or just 3.5% of existing inventory. This marks a departure from the period between 2014 and 2019, when the market averaged more than 2,100 units deliveries annually. Recent years have seen a decrease in this pace, with annual deliveries averaging around 1,400 units from 2021 to 2023. Looking ahead to 2024, this trend is expected to continue, with only 701 units forecasted for delivery this year, significantly lower than previous years.
2025 is projected to experience a brief increase in unit completions as the remaining under-construction units are finalized. However, due to rising interest rates, the number of new apartments starts has declined last year. Considering the typical development timeframe of 18-24 months for apartment projects, a decrease in deliveries is anticipated by 2026. In this scenario, demand is expected to surpass supply, altering market dynamics, and potentially creating more favorable conditions for operators in the Des Moines multifamily market.
Average Monthly Mortgage Payment
Average Monthly Rent
In 2023, Des Moines’ apartment market experienced a moderation in rent growth from its peak in 2022, but still achieved a positive annual increase, closing the year with a 1.2% rise and an average rent of $1,089. Looking forward, 2024 is set to see an upswing in rent growth, with forecasts indicating a 4.2% year-over-year increase by the final quarter. While the outer suburbs and rural areas, known for their spacious, garden-style apartment communities, have previously led in rent growth, all eight submarkets in Des Moines are expected to witness consistent and notable improvements in rent growth, surpassing 4.0% by the end of 2024. This broad-based improvement signals a promising near-term recovery across the market’s diverse localities.
| Submarket | Q4 2023 Stabilized Occupancy | Q4 2024 Stabilized Occupancy (f) | Annual Occupancy Change (2024/2023) | Q4 2023 Average Monthly Rent | Q4 2024 Average Monthly Rent (f) | Annual Rent Change (2024/2023) |
|---|---|---|---|---|---|---|
| Ankeny/Saylorville | 95.2% | 95.0% | -0.1% | $1,188 | $1,238 | 4.3% |
| Dallas County | 92.6% | 92.3% | -0.3% | $1,325 | $1,380 | 4.2% |
| Guthrie County | 94.0% | 93.8% | -0.2% | $691 | $720 | 4.2% |
| Madison County | 97.8% | 97.8% | -0.1% | $967 | $1,008 | 4.3% |
| Outlying Polk County | 97.8% | 97.8% | 0.0% | $1,078 | $1,124 | 4.3% |
| South/East Des Moines | 93.3% | 93.1% | -0.2% | $1,024 | $1,067 | 4.1% |
| Warren County | 95.2% | 95.0% | -0.2% | $905 | $945 | 4.3% |
| West Des Moines/Urbandale | 94.7% | 94.5% | -0.2% | $1,005 | $1,047 | 4.1% |
| Market | 94.1% | 93.9% | -0.2% | $1,089 | $1,135 | 4.2% |
4Q 2023 Unit Inventory
Number of Units Under Construction
Number of Units UC Delivering
In the Next 4 Quarters
| Submarket | Unit Inventory: 4Q 2023 | Units Under Construction | % of Existing Inventory UC | % of Total UC | Units UC Delivering In the Next 4 Quarters |
|---|---|---|---|---|---|
| Ankeny/Saylorville | 7,502 | 0 | 0% | 0.0% | 0 |
| Dallas County | 8,836 | 1,518 | 17% | 74.3% | 352 |
| Guthrie County | 95 | 0 | 0% | 0.0% | 0 |
| Madison County | 98 | 0 | 0% | 0.0% | 0 |
| Outlying Polk County | 1,537 | 0 | 0% | 0.0% | 0 |
| South/East Des Moines | 16,792 | 284 | 2% | 13.9% | 170 |
| Warren County | 1,577 | 0 | 0% | 0.0% | 0 |
| West Des Moines/Urbandale | 21,199 | 242 | 1% | 11.8% | 179 |
| Market | 57,636 | 2,044 | 3.5% | 100.0% | 701 |
Preliminary data from MSCI reveals that Des Moines ended 2023 with a reasonably strong performance in conventional single asset multifamily trades. The final quarter saw a sales volume of $55.34 million, contributing to a total annual transaction activity of $163.16 million across 17 sales. Although there was a 20% year-over-year contraction in transaction volume in 2023, this decline was significantly smaller compared to the national trend, which experienced a reduction of about 65%. Notably, Des Moines’ deal activity in this past year exceeded annual figures in 8 out of the last 10 years, highlighting the metro’s increasing prominence among multifamily investors.
Heading into 2024, Des Moines’ balanced supply and demand fundamentals, coupled with its rapidly growing population—one of the highest in the Midwest—and robust economy, are expected to boost transaction activity. Investors are increasingly targeting secondary markets like Des Moines that offer strong growth potential and are less affected by supply side pressures.
*Most Active Buyers and Sellers are based on the sale volume of apartment units.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
P=Preliminary
| Sector | Employment Change 2023 to 2024 | Percent Change |
|---|---|---|
| Overall Employment | 2,400 | 0.6% |
| Manufacturing | 0 | 0.0% |
| Construction | (100) | -0.4% |
| Trade, Transport., & Utilities | 600 | 0.8% |
| Information | 100 | 1.6% |
| Financial Activities | (400) | -0.7% |
| Professional & Business Services | (200) | -0.4% |
| Education & Health Services | 1,600 | 2.8% |
| Government | 900 | 1.9% |
| Lesuire & Hospitality | (100) | -0.3% |
| Natural Resources & Mining | 0 | 0.0% |
| Other Services | 0 | 0.0% |
Des Moines’ economic outlook for 2024 is marked by stability and a slight slowing in hiring, with job growth expected to downshift to 0.6%, adding about 2,400 jobs across the metro. The city concluded 2023 with a low unemployment rate of 2.8%, notably below the national average. The Des Moines economy is underpinned by diverse sectors, with trade, transportation, and utilities, financial activities and education and health services accounting for 48% of total employment.
The education and health sector is poised for strong growth this year, with major institutions like UnityPoint Health Partners, Mercy One, Drake University, and Iowa State University expected to add 2,800 jobs, a 2.8% sector expansion. The government sector is also forecasted to grow, by 900 positions (1.9%). However, this positive trajectory might be tempered by softness in the financial services and professional and business services sectors, which have been impacted by the run up in interest rates.
Despite this short-term moderation, Des Moines is on the cusp of significant economic development. The $770 million expansion of the Des Moines International Airport is projected to create 8,500 jobs over the next decade. Additionally, major cultural projects like the $100 million Live Nation entertainment district and the $550 million stadium district with a new downtown soccer stadium are in progress. These developments not only bolster Des Moines’ cultural appeal but are also pivotal in driving demand and enhancing the city’s economic ecosystem in the long term, positioning it as a key destination in the Midwest.
