QC audience hears status report on commercial real estate market

The commercial real estate market in the Quad Cities offers great opportunities with much of it headed in a positive direction. But it is also facing challenges, such as rising interest rates and inflation. Those were some of the main messages delivered Wednesday morning, May 15, during the ninth annual Market Report Event, presented by […]

The commercial real estate market in the Quad Cities offers great opportunities with much of it headed in a positive direction. But it is also facing challenges, such as rising interest rates and inflation. Those were some of the main messages delivered Wednesday morning, May 15, during the ninth annual Market Report Event, presented by the NAI Ruhl Commercial Company. The event, held at Rhythm City Casino Resort in Davenport, also was supported by platinum sponsor Olde Town Roofing.

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More than 300 people from the region’s business community attended the breakfast meeting to hear trends and predictions on various commercial real estate sectors, including office space, retail, industrial, property management and farm. “The team at NAI Ruhl Commercial hopes the commercial real estate information we gather and track offers insight into what we are seeing in our industry to help companies and clients make the best commercial real estate decisions for the years to come,” according to John G. Ruhl, managing director of NAI Ruhl Commercial Company and the market report’s host, in information presented before the meeting. Data and facts on the local commercial real estate market were presented in a series of videos and from a four-man guest panel including: Chris Beason, president of NAI Ruhl Commercial Co.; Dan Huber, CEO of Frontier Hospitality Group (FHG);  Ken Chester Jr., a syndicated automotive journalist and host of “TechMobility” programs; and Bob Larson, chief financial officer of Von Maur. During his portion of the meeting, Mr. Larson said Von Maur continues to thrive and grow. The company’s Dry Goods brand currently has 80 stores and plans to add five new stores this year. It will expand in Delaware, New Jersey and Virginia. “We continue to grow our business. … We are trying to make things more exciting,” said Mr. Larson, adding that great customer service remains one of the company’s keys to getting and keeping customers. But Von Maur also faces challenges. During the presentation, Mr. Larson said those challenges include customers shopping online, property taxes for its stores and inflation. Even though the country has low unemployment, 52% of consumers are finding it tough to make ends meet. During the meeting, Mr. Larson was asked by an audience member if Von Maur is looking to expand and open a store in The Plex business area in northern Bettendorf. Mr. Larson did not give a direct answer to the question, only adding: “We continue to look for places to grow.” That growing business area in northern Bettendorf also was addressed by Mr. Huber. He pointed out that FHG has begun work on its latest hotel project in The Plex. A ground-breaking ceremony was held Tuesday, May 14, for the new SpringHill Suites by Marriott hotel. The $18 million, 86-room hotel will be a key component in the expansion of The Plex business area and should be complete in about a year. Mr. Huber also pointed out the strengths and challenges of building hotels in the Quad Cities region. For example, he said 2022 and 2023 were “healthy, strong years” for FHG as hotel occupancy rates rebounded from tough times during the pandemic year of 2020. Much of that was spurred by people going on “revenge travel” trips after the pandemic. That is, many people were getting out of the house, taking a trip and staying in hotels across the country after many vacations were canceled during the pandemic. But the era of revenge traveling seems to be leveling off. That, plus higher interest rates and a 30% hike in construction costs have combined to create some challenges in the hotel business world, Mr. Huber added. Even with those challenges, he predicts big, positive news coming from the two hotels in The Plex  –  Cambria Hotel Quad Cities  and the future SpringHill Suites – will help attract more tourists, sports teams and sports fans drawn to the area around the TBK Bank Sports Complex. During his presentation, Mr. Beason also was optimistic about the future as he pointed out that the post-pandemic era is bringing a return to the office – and office space occupancy – in the region. He said the TBK Bank Sports Complex area is also playing a role in that return as new buildings are going up in that business neighborhood and have space for more offices. For some companies, though, that return will be to places that offer a “smaller footprint” as they look for smaller office spaces. “As office occupiers are slowly becoming active again locally, spaces leased are still often smaller in size (10,000 square feet or less) and a shorter lease term. Before the pandemic, five-year lease terms were common. Today, occupiers seek three-year lease terms with options to extend at the tenant’s sole discretion,” according to information on office space trends from NAI Ruhl Commercial. That information also pointed out three notable recent office developments in the QC:

• Bettendorf Family Dental  at 6786 Friendship Path, Bettendorf, recently opened and the building currently has two vacant suites for other businesses.
• The NelsonCorp Wealth Management building at 5465 Utica Ridge Road, Davenport.
• The Creekside Veterinary Hospital & Referral Center at 1301 E. 53rd St., Davenport. That vet hospital building is expected to be open for business next month.

Mr. Chester told the crowd about trends in warehousing and transportation. He said one of the newest and growing trends will be automated warehouses that use cutting-edge technology that tackle the jobs of inventory, packaging and delivery for consumers who increasingly demand goods they ordered to be delivered almost immediately. The spaces outside many warehouses are also in transition, he added. That’s because delivery vehicles are in a transition era with many companies starting to make the change to autonomous driving trucks, electric vehicles and hydrogen cell technology trucks. Several attendees in the crowd said they liked the new market report’s new format of presenting information by the four-person panel and through videos. One guest, Allison Miller of Rally Appraisal of Bettendorf, said the format gave people a lot of information and a chance to submit questions. “It was really good to hear about office spaces. All you hear is (occupancy) is down, down, down. … In the Quad Cities, it’s not that dire,” she added. Some of the other subjects addressed at the meeting included:

• Land and farm: Activity in the region remains strong. Interest rates are taking some buyers out of the market. The recent Iowa Realtors Land Institute Land Survey showed the Iowa QC region with a value of $15,791 per acre for high quality farmland. There will be continued interest in vacant or transitional land in this region. Farmland listings will be difficult to find due to “farmers sitting tight,” according to the 2024 Commercial Real Estate Market Report presented at the meeting.
• Industrial: “Locally, we have seen more new industrial development in the past two years than we have seen in the past two decades. Much of this new development was speculative and was quickly occupied to meet the wave of new demand,” according to the report. The report adds the market is still too active to be called a “slowdown” but the rise in interest rates, lead time to build, and the high cost of construction has slowed the hot industrial real estate market.
• Retail: The retail market in the area remains robust with a variety of properties available. Some of the active retail areas in the bistate region include: The Plex area in Bettendorf, and Birchwood Fields South, east of Utica Ridge Road on 53rd Street in Davenport. Also, restaurants and coffee shops continue to be active. 

“Another segment that has seen a great amount of activity is the construction of tunnel car washes with funding from private equity investors. The car washes offer memberships, like a gym, which lead to more consistent income streams and fewer employees needed on site…” according to the report. Another area of growth in the retail market is “Big Box” stores going into smaller footprints.