Financial Sector Encourages
Growth in Des Moines, Iowa

Beyond the pigs, butter sculptures and corndogs at the Iowa State Fair that opens next month in Des Moines is an expanding commercial real-estate market that doesn't play to type.

Much of the state capital's real-estate and job growth has been driven by the Des Moines region's insurance and financial-services sector. Banking and insurance jobs accounted for about 15% of the area's total non-farm jobs in May, a greater percentage -- though on a smaller scale -- than the 12% financial-sector component of the higher-profile insurance stronghold of Hartford, Conn., according to the Bureau of Labor Statistics.

Demand from the expanding financial sector and its rising number of workers has driven development of new offices and stores and pushed up rents for high-end space in the office and retail sectors, according to Kyle Gamble, senior vice president of CB Richard Ellis/Hubbell Commercial in Des Moines. Apartment-sector vacancies are stabilizing after losing some renters who took advantage of lower interest rates to become homeowners. The warehouse market also is improving, Mr. Gamble says.

Some of the most substantial office projects are being built for the area's largest employers. San Francisco financial-services giant Wells Fargo & Co. has expanded its work force in the Des Moines region to more than 11,000 from 5,100 in 2000. To accommodate the growth of Wells Fargo's residential real-estate lending businesses, a four-building 960,000-square-foot office campus in suburban West Des Moines will be completed by early next year, and a nine-story, 360,000-square-foot building is being added in downtown Des Moines.

Wells Fargo is developing about 1.3 million square feet of additional office space in Des Moines, Iowa, and West Des Moines for its residential real-estate lending businesses.

The area's lower costs, the trend toward people trying for a better balance of work and family, and an increasing number of amenities in the region has made it easier in recent years to attract executives from larger cities, says Mark Oman, senior executive vice president of Wells Fargo & Co. "As people focus on work-life balance, Des Moines shines," says Mr. Oman.

Short commutes, strong school systems and low housing costs are among the region's attractions. The first-quarter median home price in the region was $139,600, below the national median of $217,900, according to the National Association of Realtors.

In 2004, the region gained its fourth regional shopping mall when Chicago-based General Growth Properties Inc. opened the 1.1 million-square-foot Jordan Creek Town Center, which includes an outdoor component, in West Des Moines. In addition, downtown Des Moines last year saw the opening of an arena that is home to the Iowa Stars minor league hockey team.

The Des Moines region's economy is a bright spot in a state struggling with population and job declines in its rural areas because of more efficient agricultural production and a soft manufacturing sector, says David Swenson, an economist at Iowa State University. "When people talk about Iowa they feel almost duty-bound to talk about how important agriculture is," says Mr. Swenson. "The big story is the big gains in financial-service sectors in places like Des Moines."

Des Moines, home to about 194,000 people, anchors a five-county metropolitan region where the population increased about 6% to 511,878 in 2004 from 2000, outpacing the rate for the state of Iowa, according to the Census Bureau. Job growth in the Des Moines area also has been above average, at about 2.6% in May from the year-earlier month, compared with about 1.7% statewide growth over the same period, according to the Bureau of Labor Statistics.

For now, the Des Moines commercial market, with an office market about half the size of Hartford's, remains off the radar screen for most major institutional real estate players who typically seek larger inventories and metropolitan populations of at least 1 million to assure liquidity, according to Scott Harris, a director at New York-based ING Clarion Partners, which provides real-estate-investment services to pension funds and other investors. Des Moines "is attracting dollars from a corporate perspective but it's not a pure institutional play yet," says Mr. Harris, who is based in Des Moines.

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