Jared Husmann / June 1, 2021
Factors Impacting the Des Moines Housing Market & Rental Environment
Des Moines housing and rental market trends have evolved over the years and there are many factors contributing to these changes. Along with lifestyle and generational shifts, our world is still facing a global pandemic. This life-changing event has impacted the economy, how we live our lives and various industries for better or worse. Over a year in, we can start to anticipate which changes are here to stay and track Des Moines rental market trends.
These trends can be hard to pinpoint. If you’re looking for residential or commercial property in Des Moines, you might be finding it rather difficult. Understanding the Des Moines rental market trends that are impacting your search can help you with the process, and our experts at The Katalyst Team are here to share our knowledge.
Learn about the 5 main factors we believe are impacting the housing and renting markets in Des Moines along with our predictions for the future.
Commercial Real Estate Trends in Des Moines Reveal Shifts From Urban to Suburban
Downtown Des Moines offers many multifamily opportunities. And yet, the suburbs have been seeing exponential growth. You might wonder why so many people are choosing to live in the suburbs as opposed to downtown when there’s housing available in addition to the endless fun opportunities for all ages.
Restaurants, music concerts and festivals, outdoor recreation, shopping and so much more can be found in Des Moines’ downtown area. Even so, people are realizing that they don’t need to live among the hustle and bustle to enjoy the perks of the city. Instead, they’re flocking to the outskirts to enjoy quiet living along the city limits.
We’re seeing many Iowans move from their small towns to these growing suburbs for the amenities and job opportunities their rural communities might not offer. As the number of individuals and families choosing to live in the suburbs increases, we may experience some growing pains in the Greater Des Moines area.
Suburbs to the west, like Waukee and Grimes, have experienced a lot of residential and commercial growth in recent years attracting more and more Iowans. In fact, Waukee is Iowa’s fastest-growing city and has grown by more than 74% since 2010, according to the Des Moines Register. Ankeny is another great example of a growing city just outside of Des Moines that offers close commutes, but has expanded to offer everything else you might need. The same article from above states that Ankeny has grown by nearly 50% since 2010, and it will soon be the metro’s largest suburb. In coming years, we expect even more exponential growth from the cities surrounding the Des Moines area, particularly those along I-35.
Demographics Have a Big Impact on Des Moines Rental Market Trends
Millennials & Baby Boomers are the two largest populations that make up the housing and rental markets in Des Moines, and trends are shifting for these groups. Though individuals in these two groups are in very different life stages, in some cases, they may end up competing with one another for Des Moines commercial property and residential housing.
Depending on where they fall on the spectrum, Millennials may either own a home but are looking to upgrade, or they’re just getting to the age where they have the buying power to consider homeownership. By contrast, there is still a sizable population of Millennials who prefer renting, which leads to high competition and high costs in the Des Moines rental market. There are a variety of reasons why Millennials choose to rent:
- Student loan debt makes it harder for Millennials to save money to buy a house.
- Many Millennials are choosing to postpone marriage and having children as they take more time to discover what they want in life.
- People are spending less time working for the same company nowadays. Renting gives them the possibility to pick up and go when their lease is up and accept a dream job across or even out of the state.
- Duties such as yardwork, maintenance and repairs are handled by the landlord. Passing this labor and the hidden expenses that homeowners face can save Millennials their free time and the money to enjoy it.
On the other hand, Baby Boomers are shifting their preferences too. Some of the top trends that are impacting real estate trends in Des Moines include:
- Baby boomers are living longer and therefore staying in the housing market longer. There is a high population of individuals over 60 years old who are choosing to “age in place.” By choosing to stay in their homes, they are limiting supplies and slowing down home sales.
- For some, it’s becoming more common to downsize to a condo or townhome as people live longer and come to realize their home is either too big for them or too difficult to care for.
- Some members of the older generation are choosing to live near their grandkids in retirement as more Millennials from small towns move to the suburbs.
- Renting can help them save money instead of spending it on home expenses. That money can then be invested into their retirement fund, travel, family activities and more.
These two large demographics are both need housing and rental options, which is leading to higher demand and less availability. In some cases, there are simply not enough options in the residential and commercial real estate markets in Des Moines. With these populations making up the majority of the rental and buying population, everything is very competitive and prices are skyrocketing for both single-family and multifamily properties.
Continual Growth Points to Rising Equities & Rents
We anticipate the costs of houses and rental properties to continue to rise in Des Moines. Demand is so high for new homes in the Des Moines area that people are feeling the need to pay above listing prices in bidding wars. In fact, home sales increased 1% from February of 2020 to February of 2021, with the median sales price increasing by $22,000 – $155,000 in 2020 compared to $177,000 in 2021, says the Iowa Association of Realtors. Some homeowners wanting to move feel stuck because even though they know they’d probably be able to sell above their listing price, they also face the pressure of needing to pay above the listing price on an upgraded home, which for some is not an option.
This extremely high demand in the housing market has some homeowners choosing to build. But, materials are in low supply due to the global pandemic, so high construction costs are driving up prices for new houses while impacting those trying to sell existing homes.
Additionally, higher prices of homes is forcing some Millenials to rent longer, but they may begin seeking out luxury apartments and townhomes. Most renters want to upgrade and will begin to look for more luxurious options, especially since working from home may be the new norm, and doing so in a large apartment is more ideal. Many Baby Boomers looking to rent will also seek out the luxury, Class A apartment and townhome options. These new and luxurious builds are popping up all over downtown Des Moines and in many suburbs.
With all the growth happening in the suburbs and so many new and luxury homes, townhomes and apartments, prices have been influenced across the board. The equity of homes and rental properties are rising, and Level A, Level B and Level C units have no choice but to increase their rent prices to account for the expected improvements and higher expectations of those in the market for something new.
Our Central Location Makes Des Moines Commercial Properties Desirable
As overcrowding in major cities and hubs continues, opportunities for surrounding metros are popping up. Des Moines has the potential to bring in an influx of renters and buyers from Minneapolis, Chicago, Kansas City and Omaha as people seek a close or similar alternative that is still in the Midwest. As these larger metros become more congested, we’ll see a rise in out-of-state families and individuals looking to live here. This could be why we’re already seeing a crowded housing and rental market as the DSM metro rapidly expands.
But, what’s making so many want to live in the Greater Des Moines area? We have a lot to offer newcomers and returning or current residents alike – these are just a few of the major benefits:
- More bang for your buck: Des Moines is recognized as the #1 best city for high salaries and low cost of living in the Midwest, and people are taking notice! With a variety of job opportunities and experiences, residents can make a great living and enjoy lower expenses compared to other parts of the country.
- More space: City life can be loud, and many grow tired of the noise and crowdedness out on the coasts. Midwest living is much more spacious, quiet, and laid back, and we still have a large social scene. This is great for growing families with young children running around.
- Highly rated school options: Iowa’s education systems are impressive, and our schooling options for K-12 and beyond are top rated across the nation. Des Moines schools typically have less crowded classrooms and more teachers, and provide more opportunities for kids to befriend neighboring children and develop socially.
- Convenience: Des Moines offers easy access to the things you need, an impressive variety of fun things to do for single adults and families with children, and you don’t need to deal with dense crowds or stressful traffic. Additionally, professionals can expect a short commute from most suburbs, unlike larger cities.
- Central location: Part of the draw to Des Moines is its central location and abundance of business opportunities. Buffered by I-35/I-80, Des Moines is a perfect hub for transportation with access to nearly every other area of the country. We predict growth along I-35 and other surrounding cities that show potential.
Des Moines is a place where you can build the life you want. With endless career opportunities, a heavy focus on quality of life, cultural experiences and beautiful spaces, Des Moines is a great fit for an array of lifestyles. We expect more people to take notice of the perks of Des Moines, helping us continue to grow compared to other Midwest metros.
Changes in the Industry Impact Commercial Real Estate Trends in Des Moines
Out-of-state commercial real estate investors are noticing the expanding opportunities here as well. Des Moines’ promising growth and rental opportunities has drawn in many large investors, making bids on new and existing rental properties increasingly competitive. As the coasts and other metros experience growing pains, the small, growing city of Des Moines is attractive to those looking to build new rental properties.
Because larger investors are taking charge of the market, getting started in the multifamily industry in Des Moines is becoming more and more difficult. Gone are the days of Mom & Pop apartment complex rentals. Instead, small and large multifamily opportunities are being snatched up by companies built to run fleets of commercial rental buildings.
This makes the commercial real estate market more competitive for our local multifamily investors. Those who once owned a few properties as a side income are being forced out by huge corporations that own commercial properties across the country.
DSM was ranked in the top 10 places to live after the pandemic, and our multifamily experts expect Des Moines’ growth and rental opportunities to continue to rise, meaning these larger investors aren’t going away anytime soon. Many areas in the metro are extremely desirable for people of all ages and will continue to expand to meet their rising populations with apartment complexes and townhomes popping up rapidly. Our quick growth, vacant land to develop and raising demand for new rental properties provide the perfect opportunity for large investors to come in from out of state.
Keeping Up With Commercial Real Estate Trends in Des Moines
If you currently own Des Moines commercial property or are looking to enter into the multifamily industry, we can help you keep up with the commercial real estate trends in 2021 and beyond. The Katalyst Team is diligent about staying up-to-date, and we have years of industry experience to help you make wise investment decisions. Reach out to our team if you have any questions about the current market or future outlook.