Des Moines office rental prices see dramatic drop

Office rental asking prices in downtown Des Moines this year fell by more than 35% from pre-pandemic levels, according to the most recent data from CBRE.

• It was $13.99 per square foot in the first quarter of this year, down from $21.62 in 2019, per the commercial real estate firm's data.

Why it matters: The lower prices could help position DSM as an attractive place for business growth, said Greg Edwards, CEO of the Greater Des Moines Convention and Visitors Bureau.

• Yes, but: It could also dent the tax base and make local governments struggle.

For example, the assessed value of one of Nationwide's properties in Des Moines, which is being converted to office rentals, dropped by nearly $19 million recently.

• That cut its annual tax payments by an estimated $818,000.

State of play: Downtown office vacancy rates increased from 12.5% at the end of 2019 to almost 17.5% in the first quarter of this year, according to CBRE data provided by the Greater Des Moines Partnership this week.

• Many employers who have retained office space have not yet fully returned to them.

The big picture: The pandemic has changed our work habits and office space isn’t as hot of a commodity as it was several years ago.

• About 65% of companies want to have a hybrid office after the pandemic, according to a survey CBRE provided to Axios.

• Plus, the U.S. is on track to see a record number of apartment conversions this year, according to a recent study by RentCafé.

Zoom in: Several Des Moines-area businesses, like Nationwide, have already adopted policies allowing some of their employees to work from home.

• EMC Insurance in July announced that it's putting its $24 million headquarters expansion on an indefinite hold, partly due to work-from-home flexibilities following the pandemic.

What they're saying: The latest office data is a snapshot in time prior to when many vaccines were widely available, said Tiffany Tauscheck, the partnership's COO.

• The market will rebound as more DSM employers fully reopen offices, Tauscheck and Edwards told Axios.