Q3 Des Moines Multifamily Pulse

While many markets across the country experienced a decline in demand in the third quarter, Des Moines bucked the trend with a rather robust leasing period. With absorption outpacing new supply, Des Moines’ vacancy rate dropped 30 bps quarter-over-quarter to 5.4%, the lowest rate since 2014. In turn, owners and operators have been able to push rents to new heights. As of the third quarter, asking rent grew 4.8% to $1,046 annually, just shy of the all-time high growth rate of 5.5% achieved the prior quarter. 

Senior Director BJ Connolly gave us his take on why Des Moines is outperforming the broader market and why investors should take notice if they haven’t already. “Des Moines doesn’t always pop to top of mind when you think of high-growth markets, but the fundamentals here don’t lie,” he states. “Population growth, median household income, and educational attainment are all higher than the national average.”

Population growth has been particularly robust in Des Moines in recent years. According to U.S. Census data released earlier this year, Des Moines was named the fastest growing metropolitan area in the Midwest percentage-wise as it grew at twice the rate of the second-fastest growing metro, Indianapolis. “That’s something I think a lot of major investors aren’t aware of,” Connolly states. The metro has seen an influx of corporate investment over the past decade, driving high-wage job growth and, in turn, population growth.

Somewhat under the radar, Des Moines has become a major force in the data center operations space. Microsoft and Meta have built massive data center operations in the Des Moines area over the past decade. These projects represent billions of dollars of capital investment. Furthermore, growth within this sector shows no signs of abating. Apple is currently building a brand new $1.2 billion data center in Waukee, while Meta is adding two new facilities to their existing $2.5 billion Altoona Campus. 

While the capital outlays of these data centers draw a lot of attention for the eyepopping dollar figures, organic job growth has also been broad-based in Des Moines. Employers added 5,500 jobs year-over-year in August, with gains in the professional and business services, education, and healthcare sectors leading the way. 

Overall investment activity has surged in recent quarters, with total sales volume surpassing $238 million, year-to-date. A healthy portion of these transactions involved national buyers new to the Des Moines market. “This is still a market dominated by local and regional investors,” Connolly states. “However, we are seeing more and more interest from institutions and buyers from the major gateway markets that are taking notice of Des Moines’ strong fundamentals and higher yields. It won’t be long before the secret is out on Des Moines.”