The COVID-19 pandemic has slowed even the strongest commercial real estate markets in the Midwest. For proof, just look at the second quarter Omaha Economic Index report released this week by Colliers International|Omaha.
The Omaha commercial real estate market has been one of the strongest and steadiest in the Midwest for the last five-plus years. But after the first full quarter of the global COVID-19 crisis? The Nebraska city’s Economic Index fell 3.7 percent in the second quarter of 2020 when compared to the first three months of the year.
And the current quarter Omaha Economic Index is at its lowest point since the second quarter of 2017.
Colliers updates its Omaha Economic Index on a quarterly basis. The company factors in more than two dozen key indicators from federal, state and local government sources. Colliers uses these data points to measure the economic health of the seven counties that make up the Omaha MSA.
The index came in at 154.2 in the second quarter of the year. That is down from 160 in the first quarter and 156.4 in the second quarter of 2019.
Not every economic indicator, though, was on the decline in Omaha during the second quarter. Colliers reported that average hourly earnings in the MSA increased 3.7 percent from the same quarter a year ago to $29.43 an hour. The house price index increased 3.1 percent from the second quarter of 2019 to 223.9.
There were negative drivers in the second quarter, though. Omaha’s unemployment rate hit 6.9 percent in June, an increase of 360 basis points from 3.3 percent in the second quarter of 2019. That 6.9 percent unemployment rate is high for the Omaha area, but is still 420 basis points lower than the national unemployment rate of 11.1 percent at the end of the second quarter.
Colliers also reported that commercial real estate deals almost came to a standstill in the second quarter. The number of commercial sales transactions decreased 83.5 percent on an annual basis, while commercial sales dollars decreased by 43.5 percent annually.
Vacancy rates, though, haven’t soared even during the COVID-19 pandemic. Colliers reported that the local industrial market still boasts a low vacancy rate of 3.1 percent, while the vacancy rate for retail hit a low 8 percent in the second quarter. This sector, though, had seen little new construction even before the pandemic hit, so it has not been overbuilt.
This doesn’t mean that retailers don’t face challenges. Colliers says that local taxable retail sales fell 15 percent in the second quarter of 2020 when compared to the same quarter in 2019. Many families sheltered at home and purchased only necessities during this quarter and held onto disposable income because of economic uncertainty.
And for the future? Colliers wrote that the nation and Omaha both face plenty of uncertainty. The country could face more job losses, foreclosures and a further dip in consumer spending. Colliers did say that it expects that these economic downturns won’t affect the local Omaha economy as severely as they will the national economy.