What is a Vacancy Rate?
A vacancy rate is the percentage of unoccupied rental units in a given property or market. It’s a simple but powerful indicator of supply and demand in commercial real estate. The formula is:
Vacancy Rate = (Number of vacant units / Total number of units) x 100
Example:
If a flex building has 50 units and 3 are vacant, the vacancy rate is (3 / 50) x 100 = 6.0%.
Why Do Vacancy Rates Matter?
Vacancy rates are a key performance metric for investors, landlords, and anyone involved in commercial real estate. Here’s why they’re so important:
- Profitability: Low vacancy rates mean more units are generating income, boosting profitability and property value. High vacancy rates can signal lost income and potential challenges for owners.
- Market Analysis: Investors use vacancy rates to assess the strength of a market. A low rate suggests high demand and stability, while a high rate may indicate oversupply or weak demand.
- Strategic Planning: Landlords and property managers rely on vacancy data to set rental rates, plan marketing strategies, and make investment decisions.
- Negotiating Power: Tenants gain leverage in markets with high vacancy rates, often securing better terms or lower rents. In tight markets, landlords have the upper hand.
What Do Vacancy Rates Indicate?
- Low Vacancy Rate (under 5-6%):
Indicates a strong market with high demand. Landlords can expect stable cash flow and may have the ability to raise rents. Tenants face more competition for available space. - High Vacancy Rate (over 10%):
Suggests a weaker market with more available options for tenants. This can lead to lower rental prices and more negotiating power for tenants. - Market Barometer:
Vacancy rates act as a barometer for the balance between supply and demand in the market.
Des Moines Market Snapshot (2022–2025)
Des Moines’ industrial real estate market has seen notable shifts in vacancy rates over the past few years:
| Period | Vacancy Rate (%) | Market Context |
| Q3 2022 | 3.3% | Historic low, very strong demand |
| Q4 2023 | 6.2% | New construction increased supply |
| Q2 2024 | 9.4% | Peak vacancy due to speculative deliveries |
| Q3 2025 | 5.7% | Market stabilizing, demand catching up |
| 3-Year Average | 5.1% | Balanced, healthy market |
- Current (Q3 2025): Industrial vacancy rate is 5.7%, down from a peak of 9.4% in 2024, but up slightly from 6.2% a year ago. This reflects a market that has softened but remains fundamentally strong , , .
- Historical Low: The lowest rate in recent years was 3.3% in Q3 2022, during a period of exceptionally high demand , .
How Does Des Moines Compare to Other Midwest Markets?
| Market | Industrial Vacancy Rate (Q3/Q4 2025) | Trend/Context |
| Des Moines | 5.7% | Stabilizing after new construction |
| Kansas City | 4.3% | Tightest major Midwest market |
| Omaha | ~5.3% | Similar to Des Moines, stable |
| Minneapolis | ~5.4% | Low, driven by logistics demand |
Des Moines’ industrial vacancy rate is slightly above the Midwest average but remains within a healthy range, indicating a competitive and resilient market , .
What Drives Vacancy Rates in Des Moines?
Several factors influence vacancy rates in the local market:
- Population Growth: Steady growth fuels demand for commercial space .
- Business Relocations & Expansions: New and expanding companies increase absorption, especially in industrial and office sectors .
- New Construction: Surges in new development can temporarily raise vacancy rates until the market absorbs the new supply , .
- Economic Incentives: Tax abatements and job creation credits attract investment and support occupancy , .
- Major Employers: The presence of large companies in insurance, finance, logistics, and biosciences creates stable demand , .
- Industry Trends: E-commerce growth boosts industrial demand, while remote work impacts office vacancies , .
Who Cares About Vacancy Rates—and Why?
Investors:
Use vacancy rates to assess risk, forecast returns, and time acquisitions or sales. Low rates mean stable income and higher property values; high rates can signal risk and lower returns , .
Landlords:
Adjust rents and incentives based on vacancy trends. Low vacancy means more pricing power; high vacancy may require concessions to attract tenants , .
Tenants:
Leverage high vacancy rates to negotiate better terms or upgrade space. In tight markets, they face more competition and less negotiating power , .
Developers:
Monitor vacancy rates to decide when to build. Low rates encourage new projects; high rates may prompt caution or adaptive reuse , .
How to Calculate Vacancy Rate
- Formula:
Vacancy Rate = (Number of vacant units / Total number of units) x 100 - Example:
A flex building with 50 units and 3 vacant units:
(3 / 50) x 100 = 6.0%
Conclusion
Vacancy rates are a vital sign of the health and direction of the Des Moines commercial real estate market. They help investors, landlords, tenants, and developers make informed decisions about pricing, investment, and strategy. As of Q3 2025, Des Moines’ industrial market is stabilizing, with vacancy rates returning to healthy levels after a period of new construction and market adjustment. Keeping an eye on vacancy trends is essential for anyone involved in commercial real estate in Des Moines.
