116 3rd St SE
Cedar Rapids, Iowa 52401
Downtown Cedar Rapids transitions
Housing rapidly replacing office spaces emptied after the pandemic
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The vacancy rate in downtown Cedar Rapids storefront and office spaces — around 20 percent — is the highest it’s been in years, mirroring what’s happening in other cities since the pandemic.
Yet people closest to the situation say the downtown is bouncing back and evolving, with housing replacing office space, bringing a different vibe that’s attracting young professionals and empty nesters.
Scott Olson, a commercial Realtor, architect, building owner and Cedar Rapids City Council member, said the city projects it will have 1,000 new downtown housing units by the end of next year, pushing the total downtown housing to approximately 3,500 units.
The long-term goal, he said, is to have 5,000 rental units in the downtown core and the Time Check neighborhood, he said.
Downtown housing, Cedar Rapids City Manager Jeff Pomeranz said, “continues to grow at an unprecedented rate for Cedar Rapids.“
More than 200 of the new housing units came with the $49 million development of the Banjo Block, 515 Fourth Ave. SE. It added 224 units, with the majority of them affordable housing.
Development of Kingston Village, on the west bank of the Cedar River, has added 423 new housing units — 300 at market rate and 123 affordable housing, with a mix of rental and for-sale units — since the 2008 flood.
Developer Steve Emerson — who owns more than 30 downtown properties and estimates he’s converted 300,000 square feet of office space to downtown housing — said people want to live downtown because of the amenities.
"They can work, live, play in a four-square-block area,“ he said. ”We'll never have the retail (downtown) that we used to have.“
He and Olson agree the tenant mix downtown is about 50/50 between young professionals and older and retired individuals.
One of Emerson’s more recent conversions was the Iowa Building, 221 Fourth Ave. SE, which now has 35 apartments on floors three through seven — most were leased the first month they became available — with the lower floors a mix of commercial and office space.
Emerson’s downtown housing is leased at market rates: Efficiency apartments are under $1,000 a month. one-bedroom units run about $1,000 a month, and two-bedroom spaces lease for around $1,500 per month.
“We have some of the most affordable housing in the country,” Olson said.
Guaranty building
Emerson’s next big project will be the $30 million redevelopment of the Guaranty Bank building, 222 Third St. SE, and the old Strand/World Theater, 314 Third Ave. SE.
The building’s first floor will be mixed-use, including a personal training fitness center, with 72 apartments on the second through sixth floors. Apartments also will be added on the upper floors of the old theater, with a fitness center on the bottom floor.
In addition, the top two floors of the old Dragon restaurant, 329 Second Ave. SE, will be converted into 13 apartments, with completion expected in the summer.
Emerson said the Guaranty work — estimated to take a year-and-a-half — will begin as soon as the city gives its final approval.
The city’s local match for the conversion provides a 10-year, 100 percent rebate of the increased taxes the project generates. City staff estimates the project will generate $1.15 million in taxes over 10 years, of which $714,000 would be rebated back to the company.
Office spaces
The downtown office vacancy rate that is now approaching 20 percent is up from the 14 percent reported at the end of 2022 before the pandemic’s impact was fully felt.
Cedar Rapids also saw a big jump in downtown vacancies after the 2001 terrorist attacks and the 2001-02 telecommunications bust, when the vacancy rate stood at 22.2 percent in 2004.
Today, about 320 office spaces are available for lease in the metro market, Olson said.
About 15,000 people worked downtown before the pandemic. It’s now about 10,000.
“People are not coming back to work downtown,“ Emerson said. ”Many are still working from home. Some businesses tried to force them to return, but many ended up quitting.
"We're seeing businesses decide what to do with excess space,“ he added. ”They are sorting out how many employees are in the office.“
City Manager Pomeranz concurs.
"The pandemic and working from home certainly has impacted downtown Cedar Rapids,“ he said. ”The city is encouraging businesses to try and bring workers back downtown.“
Pomeranz, Olson and Emerson note the trend is being experienced by cities nationwide. They’re also optimistic about the downtown’s future.
"Our downtown is doing fine. It's in transition phase,“ Olson said. ”Companies are determined to keep space or shift space to other uses. We will continue to see the impact of the pandemic. We will continue to see a hybrid workforce.“
The only new downtown office space to be built in recent years is the new multistory building Cedar Rapids Bank & Trust built adjacent to its bank, 500 First Ave. NE.
"Downtown will be more housing, entertainment, restaurants, bars and less office space,“ Olson said. ”Some (downtown) office buildings have been torn down elsewhere. We are very fortunate that has not happened yet.
"The good news is Cedar Rapids has two or three developers who are taking old buildings and converting them to other uses versus tearing them down,“ he said. ”City incentives for those conversions helps keep downtown strong and vibrant.
"We see losses. We see gains. It's a challenging time, but I guess I'm optimistic.“
Pomeranz noted that while some restaurants and bars have closed, new ones are filling some of those vacancies. He also cited the success of the city-owned McGrath Amphitheatre on First Street SW, which draws up to 3,000 people for events.
Grocery store, hotel rooms
One vital need still missing from the downtown, Emerson said, is a grocery store, which he has tried to recruit, without success.
City leaders also want to see more hotel rooms downtown. The DoubleTree by Hilton Hotel and Convention Center, 350 First Ave. NE, is doing well, but the city loses out on conventions because it doesn’t have enough hotel rooms downtown.
That situation may be alleviated with plans to build a hotel on Second Avenue SW near the Pickle Palace and another hotel in the NewBo District, just south of downtown.
"We're trying to bring new businesses downtown," said Craig Byers of Q4 Real Estate, owned by The Ahman Company of Hiawatha, which is behind much of the development west of the Cedar River. That includes Kingston Yard and the recently opened Big Grove Brewery and Pickle Palace.
Construction is to begin next year on two or three mixed-use buildings on what is now a parking lot on First and First NW, across from the Pickle Palace. That construction will add more offices, commercial space, apartments and condos, with the condos facing the Cedar River.
Byers and Olson co-chair a Downtown Housing Committee through the Cedar Rapids Metro Economic Alliance that meets two or three times a year to discuss housing trends in the downtown and surrounding core areas.
U.S. Bank building
One of the larger downtown office buildings with vacancies is the U.S. Bank building at Second Avenue and Third Street SE, where the bank closed its downtown branch in September 2023.
John Breitinger, executive managing director at Cushman & Wakefield of Minneapolis, a commercial real estate firm that owns the building, said the company is “exploring alternatives for the redevelopment of the properties,” which includes the adjacent surface parking lot and the 236-stall parking ramp across Third Street.
"We will likely redevelop the entire property," he said of the bank, which opened in 1926 as Merchants National Bank.
The properties have 145,000 square feet of office space, Breitinger said.
“When done, there will be (much) less office space,” he said. “We're projecting a boutique hotel and apartments in the bank building. The housing may be a little bit more upscale with more amenities" than what is offered in some of the downtown housing.
Four floors of space opened in the bank building when the Shuttleworth & Ingersoll law firm moved to the former Gazette building, 235 Sixth St. SE, that it is leasing from Emerson after extensive remodeling.
The law firm, founded in 1854, wanted to remain downtown and chose to move because the Emerson building offered single occupancy, external signage, easier access for clients, on-site parking and a basement storage area, according to Laurie Dawley, a senior partner in the firm.
The Simmons Perrine Moyer Bergman law firm continues to occupy four floors in the bank building and is “committed to downtown,” attorney Brian Fagan, a former Cedar Rapids City Council member said.
Breitinger said his firm is talking to developers and working with the law firm to see what will be the best fit for it in the redevelopment. One possibility, he said, is a new building on the parking lot at First Avenue and Third Street SE.
The Gazette office is now located at 116 Third St. SE, on the ground floor of the parking ramp. How might the redevelopment affect the newspaper? “Probably not at all,'” at least not initially, Breitinger said.
Of the 11 buildings his Minneapolis firm owns, the Cedar Rapids project is “one of the more exciting,” Breitinger said. “I feel good about the Cedar Rapids market and the building."
It’s possible the redevelopment work will start next year, he said, adding it probably will take a couple of years to finish. The plan is to start with work on the bank building and then make the parking ramp more user-friendly.
Breitinger said the office vacancies in Cedar Rapids’ downtown are similar to that in many cities. For instance, he said, downtown Minneapolis now has a 30 percent vacancy rate, most of it office space.
Lynch Dallas law firm
Another law firm, Lynch Dallas, is looking to sell its building at 526 Second Ave. SE and move, but the law firm “wants to stay downtown,” lawyer Wilford Stone said.
"Our law firm underwent a reorganization of staff and practice areas at the end of 2023, which led to a reduced need for office space,“ Amy Reasner, the law firm's president, stated in an email.
”We are working on a letter of intent so that Lynch Dallas may remain downtown,“ she said. ”Our firm has been in downtown Cedar Rapids for almost 100 years, and we hope to mark that milestone in 2026."
Alliant Energy
Many of the downtown buildings that are vacant or have empty space are along Third Avenue SE with others scattered throughout.
One that may surprise many people is the vacancies in the Alliant Energy tower that spans Second and Third avenues SE along First Street SE.
Alliant's empty space is advertised on an online realty site as 18 spaces, or about 100,000 square feet for lease, at $17 to $19 per square foot, in the multistory, 265,192-square-foot building. Available space includes floors 20 and 21, two top floors of executive offices and some main floor space. Space also is available on the 15th and 19th floors, according to the listing.
Alliant company spokesperson Melissa McCarville, in an email, cited the flexible and hybrid work environment that started with the pandemic, “resulting in fewer people in the office on a regular basis. As part of our commitment to financial discipline and customer affordability, we continuously evaluate the use of our office space, including working proactively to lease around 100,000 square feet in the Alliant Energy Tower."
In 2022, the city bought a vacant downtown building — the former United Fire Group and Rush Nicholson law firm building at 101 First St. SE — for $2.5 million.
Olson said the 27,186-square-foot building — across the street from City Hall — will be renovated, beginning next year. The building is to house police department training rooms, storage and possibly a joint communications center.
Parking
City officials acknowledged they’ve received complaints about the city's hourly parking payment system and there not enough downtown parking and.
Olson said for people seeking more than just an occasional parking space, "there are over 1,000 parking spaces downtown, ranging from $65 to $100 a month."
The city is now seeking proposals for a comprehensive downtown parking study that also will include NewBo and Czech Village, Bill Micheel, the city’s director of economic development and services, said.
The last study was done in 2017 and focused on parking ramps, Micheel said. The study should be finished by next summer.
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