MARKET SNAPSHOT
$1,140 3Q 2024
94.0% 3Q 2024
569 [YTD: 809]
1.9% 3Q 2024
-20 BASIS POINTS
757 [YTD: 1,475]
Following relatively subdued net absorption in the first half of the year, the Des Moines multifamily market rebounded to its historical average in the third quarter, with approximately 570 units absorbed on a net basis
After reaching a peak of over 3,700 units under construction in Q1 2023, activity has dropped to under 1,000 units as of the fourth quarter of 2024.
At the submarket level, occupancy rates have remained healthy across Des Moines, with more than half of these areas maintaining rates above average occupancy levels led by Outlying Polk County’s 96.9%.
Following relatively subdued net absorption in the first half of the year, the Des Moines multifamily market rebounded to its historical average in the third quarter, with approximately 570 units absorbed on a net basis. The Dallas County submarket remains a key driver, contributing around 373 units to this third-quarter absorption alone. Looking ahead, the base case scenario anticipates a continued balance between supply and demand, likely supporting occupancy rates and rent growth into late 2024 and early 2025.
Following a decade-high construction boom, multifamily development activity in Des Moines is now slowing as developers navigate rising financing and construction costs. After reaching a peak of over 3,700 units under construction in Q1 2023, activity has dropped to under 1,000 units in the fourth quarter of 2024, a figure notably below the historical average of 2,600 units per quarter over the past decade. The South/East Des Moines submarket, encompassing sought after areas like downtown Des Moines and Altoona, has welcomed most of the recent higher-end inventory. This area has attracted over 40% of the market’s premium unit deliveries in the past five years.
As rental demand in Des Moines stabilizes, occupancy rates are leveling off. While the average occupancy rate declined by 20 basis points year-over-year due to a slight imbalance between delivered and absorbed units, quarter-over-quarter figures indicate that occupancy has steadied around 94.0%. This rate is expected to hold as the gap between supply and demand narrows, with a gradual increase in average occupancy projected for 2025.
At the submarket level, occupancy rates remain healthy across Des Moines, with more than half of the areas maintaining levels above the market average, led by Outlying Polk County at 96.9%. Dallas County, however, recorded a 120-basis-point decline to 91.5% as of the third quarter of 2024, largely due to an influx of approximately 1,655 new units over the past year. Looking ahead, the outlook for Dallas County is more optimistic, with only 125 units currently under construction, suggesting potential stabilization and recovery in its occupancy rate over the next four quarters.
In the third quarter of 2024, Des Moines saw a 1.9% year-over-year increase in average effective rents for new leases, reaching $1,140 per month—surpassing the national average rental increase of 1.0%. Moving into 2025, Des Moines is poised for even stronger rental growth, with forecasts predicting a 4-5% annual increase as demand stabilizes and the pipeline of new units shrinks.
Submarket analysis reveals diverse performance across the region. The high-demand Ankeny area posted a robust 4.9% annual rent increase, second only to Warren County, which led with 8.3% growth. In contrast, Dallas County, the most expensive submarket, saw average rents dip by 160 basis points to $1,339, driven by an influx of new units over the past year. Overall, six of Des Moines’ eight submarkets recorded positive rent growth in the third quarter.
In August 2024, the Des Moines, IA region experienced a notable increase in employment, adding 800 jobs and marking a 1.7% year-over-year growth rate. This expansion was primarily driven by robust growth in the Education and Health Services sector, which led the way with 4,400 new positions—a notable 8.1% increase compared to the previous year. The Government sector also saw significant gains, contributing an additional 2,100 jobs, equating to a 4.6% expansion from last August. The unemployment rate remained steady at a low 3.4%, comfortably outperforming the national average of 4.2%. This relatively low unemployment rate underscores Des Moines’ strong labor market fundamentals, providing a solid foundation for further growth as the year progresses.
August 2024 ANNUAL JOBS CREATED
AUGUST 2024 EMPLOYMENT GROWTH
AUGUST 2024 Unemployment rate
4.2% us August rate
Nominal Change
from August 2023
to August 2024: 4,400
Percent Change: 8.1%
Nominal Change
from August 2023
to August 2024: 2,100
Percent Change: 4.6%
Nominal Change
from August 2023
to August 2024: 1,100
Percent Change: 4.3%
Nominal Change
from August 2023
to August 2024: 100
Percent Change: 0.1%
Nominal Change
from August 2023
to August 2024: 0
Percent Change: 0.0%
| Sector | Nominal Change from August 2023 to August 2024 | Percent Change |
|---|---|---|
| Education and Health Services | 4,400 | 8.1% |
| Government | 2,100 | 4.6% |
| Mining, Logging, and Construction | 1,100 | 4.3% |
| Trade, Transportation, and Utilities | 100 | 0.1% |
| Information | 0 | 0.0% |
| Other Services | -200 | -1.5% |
| Professional and Business Services | -1,100 | -2.0% |
| Manufacturing | -1,700 | -7.2% |
| Leisure and Hospitality | -1,900 | -4.9% |
| Financial Activities | -2,100 | -3.7% |
The Grand Experience, a $600 million, 226-acre entertainment district, will be developed in West Des Moines, featuring a 220,000-square-foot facility with a 100,000-square-foot indoor waterpark, a family entertainment center, a 400-room hotel, and a business conference center.
The Des Moines International Airport is undergoing a $570 million expansion to replace its aging 12-gate terminal. The project will add up to 22 gates by 2030 to meet future capacity demands, with Phase I set to begin in September 2024.
Microsoft is set to invest an additional $210 million in a new data center in West Des Moines, increasing its local economic impact to over $2 billion and adding nearly 400 jobs.
Des Moines, IA, has established itself as a dynamic multifamily market, with annual rent growth consistently outpacing the national average since 2022. As of Q3 2024, the metro’s rent growth reached 1.9%, driven by significant population gains and steady demand for new developments. Although a surge in supply briefly softened occupancy rates, robust renter demand has since stabilized the market. With a limited pipeline of new multifamily projects, Des Moines is well-positioned for ongoing improvements in both occupancy and rent growth, setting the stage for outperformance relative to national trends through 2025.
Des Moines’ appeal is fueled by a highly educated workforce and a business-friendly environment, which have attracted major corporations like Microsoft, Meta, and Apple. As the fastest-growing metro in the Midwest, Des Moines continues to benefit from large-scale investments that promise to further invigorate the local economy. Notable projects include a 6,300-seat soccer stadium underway in Downtown Des Moines, a $570 million expansion of Des Moines International Airport, and the $600 million Grand Experience entertainment district. These developments are expected to drive economic growth and enhance the city’s attractiveness, supporting sustained demand for multifamily housing well into the future.
Sources: Costar; ESRI; U.S. Census Bureau; Yardi Matrix; U.S. Bureau of Labor Statistics
