Commercial real estate rebounds
6/3/2026As of early 2026, commercial real estate in Des Moines is experiencing a rebound after recent drops in the market. While there are certainly ups and downs, CBRE Broker Ben Probst said the overall market is relatively strong with interest rates beginning to decline after rising in recent years.
Demand fluctuates depending on the asset class, as properties with similar characteristics, investment risks and market behaviors influence different sectors of commercial real estate.
Buyers are again looking to make deals in the investment market by buying, selling and leasing properties and in the development market by improving commercial space for higher-value assets. Overall, people are looking to reinvest in Des Moines.
“Des Moines itself seems to be outside of the big exit flows of what other markets see,” Probst said, referring to how investors plan to end their investments through sales, renovations or refinancing. “But, overall, Des Moines has been pretty steady.”
The industrial market experienced a hot-streak with significant development and interest from developers looking to grow the market and still remains the strongest sector of commercial real estate in Des Moines. The industrial market “remains concentrated in small-to-mid-sized requirements, with tenants favoring second-generation space that allows for quicker occupancy and lower upfront costs,” according to Colliers’ first-quarter 2026 report.
The industrial vacancy rate fell to 8.5% in the first quarter of 2026. That is down 10 basis points (the measure used to calculate interest rates, capitalization rates, loan fees and investment yields) from the previous quarter but 430 basis points higher than 2023, according to CBRE’s first-quarter 2026 industrial market report.
Net absorption was positive during the quarter. Construction deliveries, properties under construction and direct lease rates all increased from the previous quarter. More space was leased in Des Moines than vacated, creating positive net absorption of 188,788 square feet.
According to CBRE’s first-quarter 2026 industrial report, “The amount of industrial space under construction in the Des Moines market is now over 1.3 million sq. ft., which is the highest level since Q4 2022.” Sixteen projects contributed to the total.
“With the current state of the Des Moines industrial market, the minimal amount of new construction is a strong indicator of the oversupply of industrial product delivered to the market through 2021-2024,” CBRE broker Francesca Smith said. “With minimal supply being delivered to the market, existing vacant industrial inventory can be absorbed. When the supply of industrial products is outpacing demand, our vacancy rate goes up and buildings sit with no income for extended periods of time.”
Smith said Des Moines is currently a tenant-favored market because higher vacancy rates are pushing landlords to lower lease rates.
According to CBRE’s first-quarter 2026 industrial report, the average asking rent was $6.73 per square foot, with the highest asking rent by submarket coming from the Northwest at $7.11 per square foot and the lowest at $4.30 per square foot in the South. Properties measuring 100,000 square feet or smaller average $8.56 per square foot, while properties 300,000 – 499,999 square feet average $4.50 per square foot.
Des Moines is also seeing a lot of value-add opportunities in the office space market, allowing people to buy office space at a lower basis than they would have in the past, Probst said. Buyers are investing in high vacancy, outdated units and renovating the spaces to increase value.
Lease rates are steady, with downtown office spaces generally less expensive than properties in the western suburbs, which remains consistent with trends in the past. Though the office vacancy rate fell to 13.9% in the first quarter of 2026 — down 170 basis points from the fourth quarter of 2025 — vacancy rates remain elevated, rising 330 basis points over the past three years. Average rent reached $20.52 per square foot, a 0.6% increase from the previous quarter.
Office properties had a positive net absorption for Q1 2026 of 346,892 square feet. The Central Business District and Western suburbs “experienced the greatest amount of absorption with 189,000 sq. ft. and 161,000 sq. ft., respectively,” according to CBRE’s first-quarter 2026 office report,
Construction on office space is at an all-time low, with only one property under construction.
Buyers are targeting higher-quality buildings as companies continue to send their employees back into the office, post COVID.
The pandemic affected office demand as companies reconsidered how much space they needed.
“But that shift has mostly played out at this point,” Kurt Mumm, president and CEO of Cushman & Wakefield, said. “Now it’s less about reducing space and more about getting into better-quality buildings that help bring people back.”
The retail market is seeing high asking prices with rent ranging from the mid-$30s to $40 per square foot, which is high for the Des Moines market, Probst said. Still, Mumm said the retail market is doing better than expected.
“It’s been more local and regional growth versus big national rollouts, but it’s been pretty steady,” he said.
Commercial space in western Des Moines suburbs such as West Des Moines and Waukee is generally more expensive than acquiring space downtown. The main drivers are the housing market, along with the West’s entertainment industry, including Waukee’s Live Nation and West Des Moines Grand Experience.
“Out West is having a ton of growth, housing, a lot of entertainment and retail out there, so there has been a natural push out in the western suburbs,” Probst said.
But Probst highlights how downtown is being revitalized with the redevelopment of office buildings and the construction of the new $95 million Pro Iowa Stadium and Global Plaza project, which is set to break ground in late 2026 or early 2027.
“There is certainly going to be a lot more coming back to Des Moines as well,” he said.
As the digital economy evolves, so does its infrastructure needs. Many commercial office spaces are being converted to data centers. Probst said Des Moines is seeing increased interest in converting office and retail properties into data centers, including a recent office-to-data-center remodel in the city’s financial district.
“It’s the first one I’ve seen where an existing office building has been converted to a data center in the actual building rather than out in county grounds or out in rural parts of Des Moines,” he said.
The conversion and construction of new data centers will not affect the housing market as it continues to grow. New and out-of-market home builders continue to come to Des Moines to create opportunity, but, “data centers are going to have their place, and we’re probably going to see a little bit less homes around it, but there will be other things that fill in next to them,” Probst said.
Beyond the rise of data centers, new development overall has slowed down compared to previous years.
“Higher construction costs and interest rates have made developers more cautious,” Mumm said. “But, that’s actually helping the market absorb some of the existing vacancy.”
Overall, market opportunities in Des Moines remain steady, Probst said, pointing to WB Realty Co. President Ryan Wiederstein’s recent purchase of the Wells Fargo Mortgage Center in West Des Moines as an example.
“[He] bought it at a very good price per square foot, has been able to re-tenant it and stabilize it and invest in the project. It’s getting top-of-market office rent,” Probst said. “It’s been really fun to see that one come to fruition.”
Probst believes there are always pockets of opportunity in the market, especially when it comes to value-add deals.
“At some point, I think retail buildings will have opportunities where you can buy them at a lower price per square foot, retrofit and stabilize them,” he said.
As the first quarter closes and the second quarter begins, the Des Moines commercial real estate market remains relatively stable.
“It’s not booming, but it’s not struggling either. It just keeps moving forward at a healthy pace,” Mumm said. n
