COVID-19 has spared no Midwest city, even those with commercial real estate markets that were booming before the pandemic hit. Omaha is no exception. But the good news? Omaha is steadily rebounding from the economic hit from the earliest days of the pandemic. And the city’s commercial real estate pros are already looking forward to a stronger 2021.
Mike Potthoff, president and principal with Colliers International in Omaha, sums it up this way: “We are really blessed to be in Omaha. Many of our key industries have weathered the last six months and are holding steady. We have a lot of strong capital in our marketplace that still wants to work. We still have active projects in place. Business leaders continue to push plans forward. The energy in the CRE market is coming back.”
This is true even in some of the commercial sectors that have suffered the most from COVID-19 and business shutdown orders and limitations. Retail is an example. This sector has been especially hard hit by the pandemic, in both Omaha and across the country. But not all retailers are suffering equally.
Ben Meier, vice president with Omaha’s The Lerner Company, said those retailers who were already struggling before the pandemic have suffered the most from COVID-19.
“We see the same story play over and over again with retail lately,” Meier said. “It’s just a different chapter today. The retailers that are seeing the biggest impact from the pandemic are those that were already in pretty dire straits before it. This was the final nail for some of these retailers.”
But which retailers are doing well? Meier pointed to retailers who have been flexible and creative, responding to challenges quickly. One tenant, a restaurant without a drive-through, launched a new app that made it easier for customers to order from them. Meier said this tenant’s sales were up 18.5 percent on a year-over year basis, even with the pandemic.
This creativity isn’t limited to small businesses, either. Meier pointed to Target, which has relied heavily on its own app to boost its curbside pickup and delivery service. The increase in this phase of Target’s business has helped the retailer not only survive but thrive during the pandemic.
“Hats off to them,” Meier said. “They did an excellent job executing that side of their business. The adaption of mobile apps in the retail world is something that everyone knew was necessary. The pandemic just fast-tracked it.”
Another local restaurant in Omaha converted a third of its dining room space into square footage reserved for delivery, mobile pick-up and mobile prep work.
“Businesses have been forced to adapt,” Meier said. “Those that are adapting are surviving.”
Potthoff said that Omaha is fortunate in that many of its key industries — banking, transportation, distribution, medicine and insurance — have weathered the economic impact of shutdowns and stay-at-home orders better than others.
As Potthoff says, Omaha doesn’t have a heavy airline presence. There aren’t any national hotel chains headquartered in the city. Those industries that have struggled the most aren’t a key part of Omaha’s economy.
“Trucks are moving. Insurance policies and commercial insurance are still going strong,” Potthoff said. “Banking is still strong. It’s not a perfect year for the ag industry, but it has been a solid year for our farmers crop-wise. Again, we are going to need to continue to feed the country. These solid industries have stabilized Omaha.”
The pandemic has hit downtown Omaha, of course, which is unfortunate. The downtown area of the city was booming before mid-March. During the height of COVID-19 restrictions, though, Meier said, you could shoot a cannon through downtown and not hit anyone.
Today? Traffic in downtown Omaha has increased, though Meier said foot traffic is still down from pre-pandemic days. He is hopeful, though, that activity will steadily increase.
“I don’t want to say that traffic is the same today as it was pre-pandemic, but people are out,” Meier said. “They are definitely walking around the city. We are seeing people out doing their thing. You see them in stores. Generally speaking, everyone is open for business.”
Meier said that the retail industry remains a divided one, a divide that the pandemic has only heightened. Certain retailers are surviving the pandemic, while others are struggling to keep their doors open. This is nothing new, though.
Before the pandemic, retailers were struggling with the growth of online shopping and ecommerce. Those retailers that have adapted to the threat of ecommerce by adjusting their business models or by offering services and goods that shoppers can’t get online were doing well before COVID-19. Those that didn’t? They were struggling to stay open.
“It’s kind of the same story with ecommerce and retailers,” Meier said. “Class-C retail isn’t going to be retail anymore. Class-C is almost completely gone. Class-B is struggling when you are talking about retail assets that are not well-positioned. Class-A, we are still doing deals and still seeing activity in this segment. I’m thankful for the success we’ve seen in retail in Omaha.”
Experiential retail, in which retailers offered experiences that shoppers can’t get through online shopping, were a big success story before COVID-19 hit. Businesses such as adult-themed bowling alleys, high-end movie theaters and indoor golf ranges were thriving.
Unfortunately, once the pandemic hit, those businesses were ordered shut across the country. Today, then, running an experiential business is a challenge.
Meier, though, said that these businesses are still well-poised to thrive, and should see their business soar once the pandemic is over.
Meier points to Topgolf, the indoor golf-themed entertainment center, that opened this year in Omaha. Topgolf was supposed to open here in the middle of March. That didn’t happen thanks to the pandemic. The busines did open in June, requiring patrons to wear masks. Meier said he was nervous at the time: Would people be comfortable enough to go?
Turns out, Meier’s had little to worry about. He said that today it’s a challenge to reserve a spot at Omaha’s Topgolf. The center has turned out to be extremely popular.
“Humans like interaction,” Meier said. “There is a reason why entertainment has always worked. We’ve gone to this social media bubble. Entertainment has been a way to get out of the bubble and interact with people. It continues. For the next 18 months or so, this interaction might be muted. But people will adapt and life will go back to normal.”
And the future in Omaha? CRE pros say they are optimistic that the CRE market will continue to thrive in Omaha as the pandemic’s grip on the country lessens.
“I am excited for 2021,” Potthoff said. “The excitement here continues to build for 2021, week by week, month by month. We are expecting a strong 2021.”