Will the Des Moines Metro Be Hit Hard?

[hawk61401]

Businessweek.com says West Des Moines will be hit hardest.

Could Be Hit Hardest by the Financial Crisis
by Prashant Gopal
Saturday, September 27, 2008
provided by

The upheaval shaking Wall Street will hurt privileged enclaves as well as working-class neighborhoods from coast to coast. Find out which will fare the worst.

Flickr: floralgal
Darien, Conn.

How many former Lehman Brothers bankers or AIG executives are likely to be buying a Park Avenue apartment or a home in Darien, Conn., this year? Most likely answer: not many at all.

As anyone who works on Wall Street, invests in the stock market, or just reads the newspapers knows, the past few weeks for the financials sector have been as ugly as Frankenstein's sister. People have seen their net worth eviscerated, if not obliterated completely.

More from BusinessWeek.com:

• Towns That Will Be Hit Hardest by Financial Crisis

• The Next Up-and-Coming Neighborhoods

• The Most Expensive Real Estate Markets in the U.S.

But Wall Street's woes are going to have a direct impact on communities around the U.S.—and not just because the proposed $700 billion bailout will result in higher taxes for most Americans. The pain will spread beyond the banks themselves to their back-office and IT operations, accountants, lawyers, and other professional service employees who depend on work from finance companies. It will also reach regional banks across the country. Credit-card companies and firms that deal with auto loans are also vulnerable as the credit market tightens. Even insurance companies, which have remained relatively strong, could be hurt if the economy worsens and workers drop existing policies and decide not to take on new ones. From CEOs to security guards, the financial, insurance, and real estate sectors employ approximately 9.8 million people in the U.S. alone, nearly 7% of the entire American workforce, and their spending potential is even greater.

New York's Ripple Effect

Moreover, many of these jobs often tend to cluster around certain towns; bankers in one community and tech support in another. And while Manhattan is at the center of the turmoil, the fallout will be nationwide. Already the financial sector alone has lost 10,000 jobs through July, or about 2% of finance jobs. Moody's Economy.com projects that New York City and its suburbs will lose 65,000 finance jobs by the middle of 2010, or 11% of the total.

Economists are projecting that Manhattan real estate prices will finally sink under the pressure of financial-sector layoffs and shrinking Wall Street bonuses. Wall Street accounts for about 12% of jobs in the city of New York, and a quarter of salaries.

"New York is the stone in the puddle that ripples across the country," said Scott Simmons, vice-president and founding partner of Crist/Kolder Associates, an executive recruiting firm in Chicago.

Smaller Cities Could Feel It More


West Des Moines, Iowa

In other words, smaller financial centers and their suburbs could also see trouble ahead. BusinessWeek.com worked with PolicyMap.com, a Philadelphia-based online data and demographics site, to rank the communities with the largest percentage of residents working in finance, real estate, insurance, and leasing. Topping the list is Darien, Conn., an affluent New York suburb where the median salary is $168,000 and 27% of residents work in those industries. Bloomington, Ill., home of State Farm Insurance, came in second, followed by Hoboken, N.J., which is across the Hudson River from Wall Street.

But the impact of a downturn could be more serious in smaller cities that are less diversified. Wilmington, Del., where many of the nation's credit-card companies are headquartered; Charlotte, N.C., home of Bank of America and Wachovia; and Sioux Falls, S.D., where many back-office jobs are located, each have about 15% of residents working in finance, real estate, and insurance.

Jeremy Nowak, president of The Reinvestment Fund, a nonprofit group in Philadelphia that operates PolicyMap.com, and a board member of the Philadelphia Federal Reserve, said the towns on the list aren't necessarily in trouble yet. Much depends on the health of the local employers and the mix of businesses. Not all banks, for example, are doing badly, he said. And the insurance industry is, so far, relatively healthy, despite the troubles besieging industry giant American Insurance Group.

"These are places to watch," Nowak said. "This will be the starting point for investigation, and not the answer."

Hitting Connecticut Commuters

John Tirinzonie, Connecticut's state labor economist, wasn't surprised to see that Darien topped the list. The Wall Street crisis puts stress on commuters in affluent Fairfield County, which includes Darien, Westport, New Canaan, Stamford, and Greenwich (home of former Lehman CEO Dick Fuld), he said. It remains unclear how the merger of Bank of America and Merrill Lynch will impact the thousands of employees who work at both banks in Hartford.


Westport, Conn.

What seems clear is that the financial turmoil is already hurting the local economy. Connecticut's unemployment rate jumped from 5.8% in July to 6.5% in August, he said.

"The problem is when you start to have people making good money who are commuting to New York and lose their job, they're going to be in a very competitive market now with people in the same position. If they're able to get a job … it may not be the same level and income they're used to. And that affects the state in terms of tax revenue."

New Jersey: Benefit Through Relocations?

In New Jersey, home prices in the wealthy towns of Madison, Summit, Chatham, and Millburn, which have direct train service to midtown Manhattan, had been holding up better than much of the state, said Rutgers University economist James Hughes. But that could now start to change.


One possible benefit for New Jersey: Manhattan companies that are coming to the end of their leases might consider moving to New Jersey where office rents are much lower, he said.

"You're going to see a smaller Wall Street," Hughes said. "Salaries will be less generous, bonus payments will be less. It's going to ripple through the residential market."

Manhattan Real Estate: Some Trouble Spots

The New York suburbs in Westchester, New Jersey, Long Island, and Connecticut could get hit harder than Manhattan itself, which has a relatively tight supply of housing. Jonathan Miller, chief executive of real estate appraisal firm Miller Samuel Inc. said the market for Manhattan units selling for more than $8 million is less vulnerable because many of the buyers come from overseas and are wealthy enough to survive an economic downturn, he said. Miller said the market for homes of $3 million to $8 million could get hurt more because many of the buyers work on Wall Street.

"The abruptness of all that has happened has caused many people to step back and wait and see whatever bad news will come along next," Miller said.


Summit, N.J.

Steve Spinola, president of the Real Estate Board of New York, said he expects prices to remain flat. He also said that many Wall Street employees who were laid off will be hired by new boutique investment banks that might be formed by executives from the former investment houses, and plenty of talent will be needed to implement the $700 billion bailout plan.

The Manhattan co-op market is tight. Spinola said the condo market might have more supply problems because builders, rushing to meet a June 30 tax abatement deadline, filed for about 17,000 new construction permits, he said.

"In two and a half years when these projects are done and open, will the market be back to buy them?," Spinola said. "I think the answer is 'yes.'"

10 Towns That Will Be Hit Hardest

1. Darien, Conn.
Share population in finance and real estate: 27.23%
Nearest large city: New York
Population: 20,666
Median salary: $168,687

2. Bloomington, Ill.
Share population in finance and real estate: 26.31%
Nearest large city: Chicago
Population: 70,395
Median salary: $54,971

3. Hoboken, N.J.
Share population in finance and real estate: 23.33%
Nearest large city: New York
Population: 40,002
Median salary: $81,356

4. West Des Moines, Iowa
Share population in finance and real estate: 22.15%
Nearest large city: Des Moines
Population: 54,627
Median salary: $61,303

5. Garden City, N.Y.
Share population in finance and real estate: 20.22%
Nearest large city: New York
Population: 21,671
Median salary: $121,831

6. Summit, N.J.
Share population in finance and real estate: 19.74%
Nearest large city: New York
Population: 20,618
Median salary: $111,497

7. Westport, Conn.
Share population in finance and real estate: 19.39%
Nearest large city: New York
Population: 26,822
Median salary: $137,133

8. University Park, Tex.
Share population in finance and real estate: 18.83%
Nearest large city: Dallas
Population: 24,582
Median salary: $110,976

9. Wethersfield, Conn.
Share population in finance and real estate: 18.73%
Nearest large city: Hartford
Population: 26,146
Median salary: $63,359

10. Mountain Brook, Ala.
Share population in finance and real estate: 18.66%
Nearest large city: Birmingham
Population: 20,654
Median salary: $115,148

Click here to see the full list.

Gopal writes about real estate for BusinessWeek.com in New York.

Editor's Note: The cities are ranked by percent of people employed in finance, insurance, real estate, and leasing in 2007 as estimated by Claritas. All cities have a population of at least 20,000 people.

Source: Reinvestment Fund of Philadelphia's PolicyMap (policymap.com)

Copyrighted, Business Week. All rights reserved.

[DMRyan]

I could see it happening. The major financial centers in DSM (Citi Group not included) are very good about laying off silently, where it doesn't really make it to the media. There are layoffs going on here, Principal, Wells Fargo, etc. They're also pretty good about using the laid off positions to fill in gaps elsewhere, but I've known several people recently (some long-time employees) that have gotten the axe.

Silly to list West Des Moines seperately from the Des Moines area in general, especially when most of the larger corporations here have some presence in both the suburbs and DSM proper. Still, it's getting scary not knowing what to expect next. We're just one or two major announcements away (as are most places) from a major economic blow.

[Better Life dude]

I'll jump in here (hello everybody!) to say this article is full of generalizations and just a bunch of demographic points. The financial sector of the economy is not homogeneous. And not all financial companies are run like crap like the ones currently being bailed out by us the US taxpayers. Finally, the Des Moines metro is not a one company town. We don't rely on the ups and downs of one major employer or one type of industry.

Credit might be hard to get right now - and the bailout is supposed to be a remedy for this - but all the money in the world hasn't magically disappeared in the last two weeks. The stock market hasn't gone down to $0 and the whole country hasn't canceled their life insurance policies and annuities. Some of the best run financial companies in the world are found right here in Des Moines: The Principal, Wells Fargo, Nationwide (Allied), Aviva. Another thing to think about: unlike manufacturing jobs, most financial sector jobs will remain in the US. They won't be shipped off to China.

I'd take a chill pill on all of this for now - until proven otherwise. There will be layoffs (always inevitable in 21st century America). The worst thing about this from my point of view is that the $700 billion or so we are using won't be given back to the US overnight (from the sale of financial assets the federal government is taking over). Eventually, the US government might even make a profit once it sells the assets (assuming it's buying them at a reduced -albeit fair - price). The worst part is the drag the bailout will have on the federal budget the next few years.

Sorry to get all macro economic on you. As far as what happens to West Des Moines, I think Ryan is right: it's a Des Moines metro thing - not a West Des Moines only thing.

[Cmuse]

Well, yes, DMRyan, BLD, and Hawk, it was silly to separate WDM from DSM in terms of jobs in the mortgage and finance sector. I was greatly amused to see WDM misidentified as DSM in the Yahoo! version of the story (Yahoo! had a shot of the downtown skyline standing in for the suburban office parks of WDM).

A few months ago at the beginning of the subprime credit meltdown, I listened to an NPR interview with Wells Fargo's CEO in San Francisco, where he talked about that bank's reluctance to become overexposed in the subprime sector, which I suppose is good for DSM because of Wells Fargo's large-scale operations there. Still, I would be concerned if I were a DSM resident. If one includes insurance companies, the percentage of DSM-area residents who potentially could be affected is much higher than 20-odd percent. Insurance companies routinely invest in securities and the stock market; with the financial turmoil of the past year, it's hard to say just how bad it could get, both locally and nationally, even with the bailout.

One thing that is troubling, bailout or no bailout, is that the real estate and consumer-credit collapse appears to be getting worse in some parts of the country that were ground zero for the "creative lending" policies of a few years back. At this point, it is affecting many living in those areas who have very good credit (if credit suddenly dries up, unemployment begins to hover near 10% (7.7% statewide in California, and easily over 10% in some areas), and property values fall by 30% or much much more, it hurts far more people than just a few who took out iffy home loans in the '90s or early 2000s. We are already seeing just how far the global reach can be of the crash in U.S. real estate market in some of the worst-affected areas.

[Mulder.DSM]

What about Wachovia being bought out? Does anyone know how that will affect this area? I know Wachovia Securities is the top floor of the Liberty Building?

[wmjindsm]

In the article Urbandale was listed at #13.

http://images.businessweek.com/ss/08/09 ... wns/13.htm

[DMRyan]

Welcome back BLD, it's good to see your comments again.

Below is an article from one of Iowa's leading economists stating the generality of this recent article. So far, Iowa's FIRE industries have remained largely unscathed compared to some of thier coastal counterparts. He also alludes to the fact that while there is a concentration of FIRE industries here, that they are diverse. From banking to insurance to investments and finance and mortgage companies. I'm very concerned that I'll open my morning newspaper to huge local layoffs or corporate troubles with all the scary news, but the fact is that with the exception of Citi Group, Des Moines hasn't fared horribly...yet.

From the Register:

Is magazine right about WDM's risk in crisis?
By JEFF ECKHOFF • September 29, 2008

A magazine survey ranking West Des Moines and Urbandale among the nation’s top 20 communities likely to face trouble ahead from the still-brewing Wall Street financial crises really “doesn’t mean much,” an Iowa State University economist said Monday.

ISU lecturer David Swenson described the list compiled by BusinessWeek magazine as a first-step analysis that provides nothing but a raw snapshot of where people work in particular communities.

The list ranked West Des Moines fourth and Urbandale 12th in terms of towns larger than 20,000 people that have the largest percentage of their residents working in finance, real estate, insurance and leasing.

“You have to temper that conclusion with an evaluation of the kind of financial and insurance industry that exists here,” Swenson said. Central Iowa businesses are “only tangentially linked to some of the stress that is happening on Wall Street.”

Iowa has seen an uptick in the number of mortgage foreclosures, but less than the national average, Swenson said — implying that there’s a below-average number of risky loans originating here, since fewer are going bad. Local insurance companies for the most part also have chosen to stay out of credit swaps that threatened other firms, the economist said.

“I’m pretty doubtful that that’s a really relevant indicator,” Swenson said of the list. “The culture of risky loan making probably didn’t take as strongly in Iowa as it did in some other markets.”

West Des Moines mayor Steve Gaer said he feels the study is “overgeneralized” and that West Des Moines and other cities in the Midwest have proven that they have the ability to avoid the ripple-down effect from Wall Street.

“When you look at the major employers in Des Moines and West Des Moines they haven’t seen nearly the number of layoffs that cities on the coasts have,” he said.

BusinessWeek.com, which compiled the list with help from Philadelphia-based PolicyMap.com, also acknowledges limitations to the statistics. A story describing the list quotes Jeremy Novak, president of the nonprofit group that runs PolicyMap.com, as noting that towns on the list aren’t necessarily in trouble yet.

“These are places to watch,” Novak said. “This will be the starting point for investigation, not the answer.”

[Mastermind]

Wells Fargo is in good shape...

Wells Fargo acquiring Wachovia for $15.1 billion
ASSOCIATED PRESS • October 3, 2008


In an abrupt change of course, Wachovia Corp. said today it agreed to be acquired by Wells Fargo & Co. in a $15.1 billion all-stock deal, wiping out Wachovia's previous plan to sell its banking operations to rival suitor Citigroup Inc.

The Wells Fargo-Wachovia deal will be done without government assistance, while the Citigroup deal would have been done with the help of the Federal Deposit Insurance Corp.

It was not immediately clear what implications the purchase has for Wells Fargo’s Iowa operations. The company employs about 12,900 people statewide. Wells Fargo Home Mortgage, Wells Fargo Financial and the company’s card services and consumer lending divisions are all headquartered in the Des Moines area.

"It provides superior value compared to the previous offer to acquire only the banking operations of the company and because Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world's great financial services companies," said Wells Fargo Chairman Dick Kovacevich.

San Francisco-based Wells Fargo will record merger and integration charges of about $10 billion, but says it expects earnings to be boosted within the first year after the acquisition closes. No government assistance is part of the deal terms.

Additionally, Wells Fargo plans to issue up to $20 billion of stock, primarily common stock, to maintain a strong capital position.

Charlotte will be the headquarters for the combined company's East Coast retail and commercial and corporate banking business. St. Louis will remain the headquarters of Wachovia Securities.


The Wachovia-Wells deal comes in a turbulent time for banks and financial firms as they grapple with the ongoing credit crisis, which led to the recent bankruptcy of Lehman Brothers Holdings Inc. and the failure of Washington Mutual Inc.

"This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," Robert Steel, Wachovia's president and chief executive, said in a statement.

Wachovia shareholders will receive 0.1991 shares of Wells Fargo for every share of Charlotte, N.C.-based Wachovia stock they own, valuing Wachovia at about $7 per share. This is a nearly 80 percent premium over the stock's Thursday closing price of $3.91. Shares closed at $10 last Friday, the last trading session before the deal with Citigroup was announced.

The board approved Wells Fargo's offer late Thursday. The deal is still subject to Wachovia shareholder and other regulatory approvals. Wells Fargo said it expects the deal to close by year-end.

Additionally, three members of the Wachovia board will join the Wells Fargo board when the transaction is completed.

The combined company will have total deposits of $787 billion and assets of $1.42 trillion, more than doubling Wells Fargo's totals on both counts. The bank will operate more than 10,000 locations. The two banks currently employ a combined 280,000 people.

On Monday, Citigroup agreed to buy Wachovia's banking operations for $2.16 billion in a deal orchestrated by the federal government. That deal, which had been approved by the boards of both companies, was still subject to approval by Wachovia's shareholders and regulators. It is not clear whether Citigroup will have to pay a break-up fee.

In addition to assuming $53 billion worth of debt, Citigroup had agreed to absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio. The FDIC agreed to cover any remaining losses in exchange for $12 billion in Citigroup preferred stock and warrants.

But the failure of the government's proposed $700 billion bailout for financial institutions Monday afternoon cast doubt on whether Citigroup would be able to rid itself of some of Wachovia's bad debt.

While the proposal would have prevented most banks from profiting on the sale of troubled assets to the government, an exception would have been made for assets acquired in a merger or buyout.

That would have allowed Citigroup to sell Wachovia's distressed mortgage-related assets to the government for a profit.

A revised version of the bailout plan was passed on Wednesday by the Senate and goes up for a House vote on Friday. The plan still centers on enabling the government to spend billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions.

Citigroup has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.

While Wells Fargo has logged three straight quarters of profit declines, the bank has been weathering one of the nation's worst credit crises much better than most of its competitors, in part because it had less exposure to the subprime mortgages whose failure undermined the financial sector.

That means it hasn't been forced to take the huge number of write-downs that other banks have needed. Under Stumpf the bank also has continued raising its dividend at a time when many other financial institutions are slashing theirs to preserve capital.

John G. Stumpf, Wells Fargo president and CEO, took over in June 2007 — near the start of the credit crisis — from Kovacevich, who remains chairman. Both men worked since the 1980s at Norwest Corp., Wells Fargo's predecessor.

Wachovia shares were up $2.25, or 53 percent, at $6.50 in premarket trading, while Wells Fargo fell $1.40, or 3.8 percent, to $35.31. Citigroup shares were down $3.10, or 13.2 percent, to $20.35.

[doubleWindsor]

What about Wachovia being bought out? Does anyone know how that will affect this area? I know Wachovia Securities is the top floor of the Liberty Building?

If Citi prevails the best Wachovia brokers will probablly be folded into existing Smith Barney locations. If Wells Fargo wins out I think they would be likely to stay put.

[Ingersoll1978]

So what does this mean for Iowa? Anyone have any idea? I would assume it's possibly positive?

[MR. Ruan]

From the ariticle it looks as if they are keeping the companies seprate since they are keeping their corporate headquarters. That would leave me to beleive at least initially this will have no impact on Des Moines.

[spacebetween]

I think WF in DSM will be a good marriage for a long time as there are 4 WF business units that call DSM home. I could see one of the business units pulling up shop at some point and relocating, maybe. But, as Microsoft and Google have indicated, labor and property are so cheap here it would be hard for WF to leave anytime in the near future.

Here is an article in the DSM Register to support my opinion above:

http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20081003/NEWS/81003014

[DMRyan]

This is one situation where I don't even think there could be educated speculation. There's no word that this purchase could be final with the latest judge-ordered ruling to pause the purchase by Wells Fargo. In as topsy turvy as the economy is these days, this could easily go the other way and mean bad news to Des Moines. The only track record we have is that Wells Fargo has been more than gracious in establishing a presence here and why would they want to jeopardize that with all of their investment made?

[Des Moineser]

It's only been slowed down. The judge ordered the slowdown because some of Citicorp's exec went to this judge's house and sat in his dining room and explained that they wanted a second chance to make a better deal for Wachovia.

[econboy]

As of this morning, word is that a higher court judge has overturned the lower court ruling and it appears things are looking in Wells Fargo's favor.

[Mastermind]

Wells Fargo-Wachovia plans succeed; Citi ends talks
ASSOCIATED PRESS • October 10, 2008

NEW YORK (AP) - Wells Fargo emerged as the apparent victor in the battle for control of Wachovia bank Thursday night, after rival suitor Citigroup broke off talks with Wells Fargo and federal regulators but vowed to have its day in court.

While Citigroup said it plans to seek $60 billion in damages for breach of contract, it has decided not to challenge the Wells Fargo-Wachovia deal in court.


Wells Fargo said late Thursday it had ended talks with Citigroup and was moving ahead to acquire all of Wachovia's banking and other operations. It said the deal would not require aid from the Federal Deposit Insurance Corp. or any other government agency.

"We're pleased Citigroup has abandoned its efforts to interfere with Wachovia's planned merger with Wells Fargo," said Wachovia spokeswoman Christy Phillips-Brown in an e-mail to The Associated Press. "We look forward to completing our merger with Wells Fargo, which we have always believed is in the best interest of shareholders, employees, creditors and retirees as well as the American taxpayers, and it imposes no risk to the FDIC fund."

Wells Fargo said it expects the deal to be completed by the end of the fourth quarter. In a statement issued by the company, Wells Fargo Chairman Dick Kovacevich called the deal "an incredible fit."

In a brief statement, the Federal Reserve said that it would "immediately" begin consideration of the request by Wells Fargo to acquire Wachovia.

Citigroup backed out of negotiations with Fed officials and Wells Fargo on Thursday, ending a nearly weeklong battle for Wachovia Corp. after the banks failed to come to a resolution over how to split up the Charlotte, N.C.-based bank.

While Citigroup decided not to ask that the Wells Fargo deal with Wachovia be prohibited, Citigroup said it remains willing to complete its original deal with Wachovia.

New York-based Citigroup said it believes it has strong legal claims against Wachovia, Wells Fargo, and their officers and directors for breach of contract and plans to pursue its claims "vigorously."

[DMRyan]

Might as well turn this into the general thread about the effects of the souring economy on Des Moines. An article by the Des Moines Business Record reports that speculative retail projects have nearly ground to a halt in the metro, a result of tightening financing by lendors and tepid response from businesses wishing to expand or relocate at this time.

Spec retail projects slow amid economic crisis
BY TODD RAZOR

As the economy tumbles and banks become more cautious in their lending practices, speculative retail projects are diminishing in the metro area.

"We're seeing exactly what the other developers are seeing," said John Knapp, a commercial agent with Iowa Realty Commercial, referring to the slowdown in construction of speculative projects.

Knapp said he doesn't know of any developer who is comfortable putting up speculative retail space right now, adding that vacancy rates are on the rise in many retail centers.

"It's largely been driven by the banks," said Jeff Saddoris, a broker with Knapp Properties Inc., noting that two years ago "money was flowing freely through the banking system" and a lot of retail centers were going up on a purely speculative basis, with little or no money down.

In the past six to eight months, however, financial institutions have been less active in lending, a trend that has been exacerbated by the collapse of developers such Regency Homes and Walters Cos., Saddoris said.

Around the time those companies folded, lending started to taper off, construction slowed and banks began requiring larger down payments on speculative projects. Concern with the amount of unleased space in the market is also prompting lenders to require more equity.

And today, Saddoris said, an increasing number of banks are not in the market for speculative projects at all.

"Clearly the environment has changed," said Tom Stanberry, CEO of West Bank, referring to the attitude of financial institutions when considering whether to extend credit for a retail center or small office building that has yet to secure commitments from tenants.

"In this economic environment, banks are requiring more equity in projects and a higher level of pre-leased space prior to" the start of construction, Stanberry said, adding that in some instances not only are banks asking for personal guarantees from people of significant net worth, but also requiring collateral to shore up those guarantees.

West Bank considers not only the financial strength of the development company and its owners, Stanberry said, but the size and scope of the project as well, adding that each loan is looked at on a case-by-case basis.

Though larger developers may have an easier time obtaining a loan without pre-leasing a percentage of the space, Knapp said, "mom-and-pop" operations have been affected more adversely by the credit crunch.

"The stronger the developer, the less the bank is looking at those leases and the more they are looking at the developer's bottom line," he said, concluding that "everybody is taking a more cautious approach at this point."

For Knapp Properties, being cautious translates into a less aggressive approach to retail development and being careful to pre-lease space in order to secure financing for new construction.

"We would not build purely on a speculative basis without a tenant," Saddoris said, adding that Knapp Properties, which owns approximately 375,000 square feet of retail space in Greater Des Moines, wants 30 to 40 percent of new space to be leased before beginning construction on any given project.

Rick Tollakson, president and CEO of Hubbell Realty Co., is more optimistic about speculative retail, saying his company currently has three speculative projects under way, including Greenway Crossing in West Des Moines, which is 100 percent leased.

But Tollakson admits that Hubbell has been, for the most part, "fairly conservative," and though the company has a moderate amount of speculative retail space in its portfolio, it will "see how that leasing goes before we really start looking to anything else."

Another aspect is the slowdown in demand for new retail stores. Though Des Moines may be faring better than larger coastal markets, "we are not completely isolated," Saddoris said.

Though the bigger developers are adopting a "wait-and-see" attitude, Knapp said, smaller retailers that deal in non-luxury, necessity products, such as food and fuel, are becoming more prevalent. And big-box stores, such as SuperTarget, are helping to keep smaller operations going.

Hubbell may also be seeing more activity in retail space that is contiguous to its housing developments. As homes are sold and more people move in, more demand is generated for retailers in those areas.

"Despite what the media says, people are still buying houses," Tollakson said.

[DMRyan]

Moody's Economy.com has this to say about the Des Moines metro, indicating that we are in a recession, but there is light at the end of the tunnel.

The Des Moines economy is slipping. The indirect effects of the June flood and
the contracting macro economy have spilled over into a broad range of industries.
Job growth is slow among Des Moines' high-wage non-agricultural industries,
particularly financial and real estate services and information. Slowing income
growth in these industries and low consumer confidence are weighing on
retail trade. In response, both trade and transportation are trimming payrolls. In
the context of the faltering national economy, the metro area's economy is keeping
its head above water thanks to relatively well-positioned financial firms and
robust government surpluses. Des Moines' economy will weaken well into 2009
but will outperform the U.S.

In the long run, the city's low cost of doing business and relatively young and
educated population will attract investment. In addition, high per capita income
driven by financial services and agriculture-related industries will draw immigrants
to fuel above average growth.

[speeder]

Des Moines grocers say business remains strong
http://www.desmoinesregister.com/articl ... 0301/1136/
DM Register
November 6, 2008
By JOANNE BOECKMAN
jboeckman@dmreg.com

Shoppers are adjusting their spending habits by buying less expensive cuts of meat and fewer national brands.

The economic downturn may have people looking for items to sacrifice in the family budget, but people still have to eat. That's good news for Des Moines grocery store operators.

Merlyn Linn, owner of Linn's Super Market at 3805 Sixth Ave. on the north side, has been in the grocery business more than 50 years. He has not noticed a change in people's shopping habits and said his grocery business has been good.

"In fact, we had record meat sales two weeks ago. It wasn't huge, but it was a record," he said.

Linn said he's heard other grocery stores say business has been down, but he's thankful his store has so far been unaffected by the economy.

"It's puzzling, but I'm thankful," he said. "Maybe we're doing well because people living in our area aren't living in $500,000 homes."

Across the city, the Sav-A-Lot at 3200 S.W. Ninth St. also has been doing good business, manager Greg Engel said.

"In general, I have noticed business picking up a little bit," he said.

New ownership last year resulted in improvements to the store, he said, but he was unsure whether that or the store's lower prices account for the steady business.

Engel said Sav-A-Lot customers - who pay for their grocery bags and sack their own items in exchange for food prices that claim to be 40 percent lower than others stores - are not changing buying habits.

Aldi, a store that operates similarly, reports faring well, too. Martha Swaney, a spokeswoman for the Chicago-based company, said since January nationwide sales of produce have increased by nearly 20 percent, fresh meat by 14 percent, coffee by 30 percent and eggs by about 47 percent.

Des Moines stores are located at 3940 E. 14th St., 2543 E. University Ave. and 500 E. Army Post Road. As a privately held company, Aldi does not disclose its revenue or numbers of customers, but business in Des Moines has been good enough that the company is considering improvements to those stores, Swaney said.

"Aldi's is working on plans to expand or remodel current stores to keep up with demand," she said.

Dahl's Foods vice president of marketing, Mark Brase, and Chris Friesleben, Hy-Vee's marketing director, said their store directors say customers are buying more private labels and fewer national brands.

Dahl's meat department has been selling more ground beef and chicken and it has been featuring less expensive cuts of meat such as steak for $3 or $4 per pound, instead of $7 or $8, said Mike Hoffman, Dahl's meat director.

"We're offering a Denver steak, cut from chuck, that is a new cut. We worked with the Iowa Beef (Industry) Council on it and it's an excellent cut," Hoffman said. "We also have flatiron steaks, the second most tender piece, also cut from chuck, featured at $3.99 per pound."

The most tender cut is tenderloin, which can sell for $14 or $15 per pound, he said.

"Our sense is that people are cooking more at home," said Hy-Vee's Friesleben. "The majority of our stores in Des Moines have a dietitian that will show people how to eat healthy foods when on a tight budget."

Customers can find information posted in the stores, or ask at customer service for contact information for the dietitian, and set up an appointment, Friesleben said.

"She will walk the aisles with you and show you the types of foods that are good for you and those you should avoid if you have dietary considerations. She can make suggestions for feeding families with a good, nutritious program," Friesleben said.

"She will walk the aisles with you and show you the types of foods that are good for you and those you should avoid if you have dietary considerations. She can make suggestions for feeding families with a good, nutritious program," Friesleben said.

Just wait until "big brother fight global warming no trans-fat drug kids to cure non-you-can't choose for yourself government" starts making this a rule of law. I am not a fan of Universal Healthcare or Socialized Medicine but I will demand the government control people's eating, drinking, and active habits if the American Tax Payer is footing the bill for healthcare...that just seems fair to me. If you want to eat unhealthy foods or drink unhealthy drinks or participate in sports or other non-essential movement activities, you'll have to purchase supplemental insurance to cover the potential costs of your bad habits.

[DMRyan]

Two job cut announcements for Urbandale (and the metro). Lennox Industries is closing their distribution center right off of I-35/80, laying off of moving 140 employees (some to Marshalltown at least).

From the DSM Register:

Lennox to cut or move 140 Urbandale jobs
By JEFF ECKHOFF • jeckhoff@dmreg.com • November 8, 2008

Lennox Industries plans to close a parts distribution center in Urbandale and move or eliminate 140 full-time jobs over the next few years.

The company said in a statement that 30 to 35 jobs probably will be moved to Marshalltown over the next few years, while another 20 to 25 will be added elsewhere because of the change. Reductions at the site at 4301 121st St. in Urbandale are expected to begin late in the first quarter of 2009.

No new construction is expected in Marshalltown as a result of the shift.

Dice, the reinvented technology company is cutting 10% of their workforce as well.

From the DSM Business Record:

Dice Holdings Inc. lays off 10 percent of workforce

BY JOE GARDYASZ
Dice Holdings Inc. has laid off 32 employees worldwide, including 23 who worked at its Urbandale headquarters, a spokeswoman said Thursday. Dice operates several online professional career site companies; it employed 190 people in Urbandale and 318 in total prior to the layoffs.

"The economic downturn has reduced recruitment activity, and that will impact usage of our services," said Jennifer Bewley, the company's director of investor relations. "Consequently, we believe that will impact our revenues in the future. So we had to align our resources for the environment we see ahead in the coming months."

[dogbo]

Someone reallly needs to look into how Wells Fargo seems to squash any news about job cuts. I always here about people getting laid off, yet they never announce anything. Probably helps with recruiting new employees....

I agree. They sure seem to be slippery when it comes to getting their layoffs in the news.

[Mastermind]

I'm not expressing outrage, just curious if someone inside could explain their communications policy.

[speeder]

I don't work for WF but I would have to say I think their policy is less '13 year old girl at a sleepover' and more lets minimize any pain and we will release only what is required of us or absolutely necessary. Doom and gloom and gossip doesn't seem to fit a company that has been around that long.

[Mastermind]

I don't work for WF but I would have to say I think their policy is less '13 year old girl at a sleepover' and more lets minimize any pain and we will release only what is required of us or absolutely necessary. Doom and gloom and gossip doesn't seem to fit a company that has been around that long.

What? Stating that x number of employees were laid off is gossip? I have no idea what your post implies...

[lunksmoo]

Luckily for Des Moines and the rest of Iowa, Best Buy is the only electronic store to serve the area instead of Circuit City. It looks like most of the Circuit City stores will be closing with their bankruptcy and liquidation.

[Better Life dude]

I think the next wave of closings nation wide will be retail chains either going completely under or closing a large percentage of poorer performing stores. Even Best Buy a well run retail chain - headquartered in Richfied, MN asked ALL of their home office employees to take a buyout. They got 500 employees to take the buy-out vs. risk being layed-off with no benefits. They are working on the inside and know how tough things are.

The great thing about the Des Moines metro and we learned this when my wife and I decided to move here in the mid-90's is that because of the large insurance company presence here, the local economy was pretty well recession proof. As a rule even when times are not great, people still continue to make their insurance premiums and keep their policies. And insurance companies tend to be risk-adverse conservative investors with their cash - (AIG being the exception to this rule) so they stay in business for many many many years. Bottom line: the economy and job situation in the Des Moines metro doesn't have the wild swings and this will bode well in the very rocky years we'll be having for the foreseeable future. You can already see that.

[speeder]

I don't work for WF but I would have to say I think their policy is less '13 year old girl at a sleepover' and more lets minimize any pain and we will release only what is required of us or absolutely necessary. Doom and gloom and gossip doesn't seem to fit a company that has been around that long.

What? Stating that x number of employees were laid off is gossip? I have no idea what your post implies...

It doesn't imply anything but let me be clearer on what it states... excessively worrying about how many people are laid off from what company is pointless and useless banter more appropriate to a 13 year old girl. In my opinion, the statistics are being used and manipulated to fuel our ever growing "I'm a victim' culture. I've been out of a job... worse things can happen, I mean there are other opportunities for people that will arise through new commerce, we aren't communists... people who've been laid off can move on, none of our occupations are guaranteed for life positions. Certainly speculating about the ethics of a corporation based upon how they release employees and news to the general public in an effort to continue to make money for their investors and retain the jobs they can isn't any more productive than gossiping. I'll applaud WF for dealing with the bumps of business their own way and keeping business to themselves, instead of fueling the insanity that is pushing forward a collectivist agenda. Individualism and innovation will redeem us, not worrying, handouts, and a complete disregard for the risks and rewards of private enterprise.

According to this article: http://www.bls.gov/news.release/empsit.nr0.htm; the last recorded unemployment rate was 7.2% Normal historical avg is around what 4-5%? - which likely includes a number of deadbeat degenerates that COULD work but somehow manage to live for years off the system and overwhelmingly vote for port-side politicians so they have someone "who cares about people" to continue enabling them by funneled tax money to them through our increasingly Robinhoodesque government. Anyway, I believe, considering all the turmoil we've made it through over the past 6-8months...from the 'lets make legislation pushing that everybody needs a home mortgage, who cares what they make and we'll go after your bank if you don't make bad loan to the disadvantaged' mortgage crisis to the "I really really want that, I'll use my credit card.... what do mean I am out of credit, I need more sh*t from Target & Costco to put in my next storage unit!" retail market bottoming out... 7.2% seems like a relief.

I hate to see anyone laid off, I know from experience that it sucks and having more people unemployed only means more competition for the existing jobs, but not having a job for some reason or another happens to everyone at some point... unless, you're chronically unemployed. I do honestly believe that with the disappointment of being laid-off comes the opportunity for something new; again innovation and individuals are a historically surprising combo. We the people just have to make sure our government doesn't make the mistakes of the past, in times like these, and prolong the madness by attempting to grow the economy by gorging itself, devaluing our assets, making false promises that government is the answer to all "our" problems (most notably that when wages fall so do income tax revenues... poor government, might have to shrink...nuts ), and enacting regulations that limit new & proven growth.

[GoVerticalDSM]

Does anyone know what is driving the huge job growth in the Texas cities (throw in OK City, too)??? It looks like they're not in a recession at all, there are many in the top 10.

[Mastermind]

I heard TX does not have state income taxes, also if you have ever watched and type of "flipping" show you will notice how inexpensive housing is in TX. I often think it is cheaper than Des Moines.

[DMRyan]

I have close family living in Houston and housing costs used to be on par with Des Moines, but I now think that it's cheaper to live there, especially when you consider the no state income tax thing.

I think the three large Texas cities benefit from the above, the higher oil prices and profiteering by energy companies (remember this survey was for October 2008), sunbelt climate and high foreign immigration rates. It may truly be the perfect combination to override this recession.