by Dan Rafter
Most people are surprised when they learn that so many Fortune 500 and 1000 companies do business from Omaha. But David Levy, partner with Omaha law firm Baird Holm, said that they shouldn’t be.
Levy said that the city has plenty to offer these big companies, and that the diverse array of businesses in the market is one reason why commercial real estate activity here is so strong.
“It’s a combination of this being such a strong and vibrant metropolitan area of almost 1 million that remains a very livable place,” Levy said. “It’s easy to get around. It’s relatively affordable. But it has a large and fairly diverse and talented workforce. That’s the kind of workforce that you get when you have two major universities in the city.”
The many benefits of Omaha help explain why this city remains such a strong, and often overlooked, hub of commercial real estate activity in the Midwest. And the best news? The commercial pros doing business here say that this trend isn’t about to slow.
Levy points to the support that businesses receive when they do locate in Omaha as one of the main reasons for this city’s bustling CRE market. This support has given the market a reputation as being pro-business, which helps Omaha continue to attract new businesses to the city and its suburbs.
“We have a very active chamber of commerce and city government when it comes to promoting Omaha,” Levy said. “We have a strong business community that is a big promotor of Omaha. All of those things help.”
How busy is Omaha’s commercial real estate market these days? Jeffrey Wyatt, vice president with the Omaha office of Colliers International, said that in 2015 this market saw the largest volume of real estate sales in its history, eclipsing a previous high set in 2006.
“We continue to see positive indicators here,” Wyatt said. “The medical networks have started to expand in Omaha. The city has always been a really good Class-B office market, so we continue to see a lot of activity on that front. Mixed-use developments are performing very well. Centrally located office developments are performing very well. In all, the entire market is doing well today.”
CRE pros doing business here say that they don’t expect any overbuilding in the Omaha office market, even in the busy downtown area. The developers that work here are largely cautious, they say, and that approach has always served them well.
“We have never seen anyone venture off and do much spec office building in the Class-A market,” Wyatt said. “I expect that we will not see much of that behavior in the immediate future. Even last year at the market’s peak, no one really pulled the trigger to do that. This is a conservative market when it comes to new construction.”
While most commercial real estate is selling and leasing at a brisk pace in Omaha, Wyatt said that the area’s industrial market is performing especially well today. Wyatt said that this sector boasts a vacancy rate of under 3 percent. That rate should stay low. Wyatt said that not much new industrial market has entered the Omaha market.
At the same time, the Class-A office market has been a strong performer, too, Wyatt said.
“Class-A office and industrial are our shining stars right now,” he said. “In general, though, well-located product here trumps all. Well-located retail properties perform extremely well. Well-located office performs well. It really is all about the location in the Omaha market.”
This doesn’t mean that the Omaha market doesn’t face some struggles. Wyatt pointed to legacy office and retail products as being an example. These older Class-B-minus and Class-C retail and office buildings are struggling to attract tenants today.
“There are so many better opportunities for tenants now,” Wyatt said. “That legacy product that hasn’t been modernized is a hard product to move today.”
Public transportation is another issue. The city simply doesn’t have enough of it to serve its residents. Levy, long a proponent of boosting public transportation in Omaha, says that this is slowly starting to change.
First, Omaha Metro Transit, the city’s public transit system, has reconfigured many of its routes and schedules to provide better service, Levy said. Second, there are plans for a bus rapid transit line that would serve the city’s Dodge Street corridor. There’s even an ongoing study of the possibility of an urban circulator or streetcar line that would serve downtown.
Levy, though, said that these new plans are all in the earliest stages. He does have hope, though, that the city will one day boast a more robust public transit system.
“There are some exciting plans being discussed now,” Levy said. “It’s too early to say what will come of them, but at least people are talking about and studying the issue.”
It’s not surprising that much of the new office development in the Omaha market is taking place in the city’s downtown, especially in the busy Capital District.
Engineering and architecture firm HDR has announced its plans for a new headquarters building in this downtown section, a building that will stand 18 to 20 stories tall. Next to it will rise the Capital District multi-use redevelopment project that is now under construction.
This mixed-use project will include about 1.3 million square feet of offices, retail shops, residential and a full-service hotel, in addition to a sizable amount of indoor parking.
Wyatt said that he is eager to see what impact the new multifamily buildings will have on the Capital District.
“It will be interesting to see what happens with all those rooftops down there. Will it spur more retail development in downtown Omaha?” Wyatt asked. “It takes bodies to move the retail market. The first job is getting more people down there, getting more rooftops downtown. It will be good to see those new apartment buildings go up. If more people are living in and near downtown Omaha, that might bring more retail to the downtown area, too.”
Plenty of hotspots
Aksarben Village is another hotspot for commercial development. This development, a mixed-use project in the Midtown section of Omaha, is in the middle of a development boom. Last year, Pacific Life opened a new headquarters office building here, and this year will see the opening of a new building for Green Plains Energy.
The Lumberyard District, a mixed-use development under construction now in the southwest Omaha community of Millard, will include new apartments, offices and retail uses, too, when it is complete in 2018. This development is attracting plenty of commercial real estate activity.
Levy said that the multifamily market remains strong in Omaha, too. This isn’t surprising; apartment development is booming in urban areas across the country and the Midwest. Omaha has plenty to offer renters who want the urban experience.
“When you look around, you can see how well multifamily is performing today,” Levy said. “There is a lot of activity in that sector. Multifamily residential is probably the top performer right now.”
Levy sees plenty of activity, too, though in the office, mixed-use and retail sectors. Levy points to the Aksarben Village and Midtown Crossing mixed-use projects as being especially active today. Both of these developments include multifamily and entertainment options, and both have attracted a steady stream of tenants.