Pandemics, soaring inflation and rising interest rates. Omaha’s commercial real estate market has remained resilient during all of them.
Why? What makes Omaha’s commercial real estate market such a strong one? Why has demand for multifamily, industrial and retail properties in this city remained so high for investors? Why has leasing and sales activity remained so strong throughout most of Omaha’s commercial sectors?
The commercial pros working this market point to a pro-business government that encourages development and entices companies to open national or regional headquarters here. They also cite the strong workforce in Omaha and the commitment city leaders have to constantly improving the neighborhoods that make up Omaha.
That last point is especially important today. Several high-profile commercial developments are springing up across Omaha and its suburbs. These new office towers, mixed-use developments and multifamily properties are pumping new dollars into the city. And they are attracting new residents and companies.
So even though the national economy is far from stable today, Omaha’s commercial real estate market is showing few signs of slowing.
A solid office sector
The performance of Omaha’s office sector is a prime example of the strength of the city’s CRE market.
Sam Noddle with Omaha’s Noddle Companies said that the office market in Omaha is busy today, with leasing activity high all the way from downtown Omaha to the urban core neighborhoods to the suburbs.
And if that sector, which is struggling so much across the country, is holding its own? That’s a sure sign that Omaha’s entire CRE market is performing well.
“I would say that we are shocked at how busy the office market is in Omaha,” Noddle said. “All of our office space is leasing. Like with all markets, we are seeing companies looking for more valuable tenant improvement packages. And the cost of construction has gone up so much. But we are seeing activity in our office market that is much stronger than I think anyone could have expected.”
Noddle points to the thriving Aksarben Village mixed-use development, of which Noddle Companies has played a key role in developing and managing. Toast, a merchant processor for food and beverage companies, recently signed a 50,000-square-foot lease in the village. This lease means that for the first time all the office space in Aksarben Village is fully leased.
“What we have noticed is that a lot of officer users still want office space, and for the most part they still want the same amount of space,” Noddle said. “They need a place for their team to huddle and work. But they are designing the space differently. They want more collaborative space. Workstations are designed for three- and four-day workweeks. But they still need that office space.”
Amenities matter, too, as companies look for anything they can offer to entice their employees back to the office. That’s a positive for Omaha developments like Askarben Village, Noddle said. The village, for instance, offers a food hall with a wide variety of vendors. There’s a dog park with a bar that operates out of an old Airstream trailer.
The retailers that occupy Aksarben Village give office workers plenty of options, too. Noddle points to the yoga studio that holds outdoor classes, the running shop, bookstore and flower shop.
“All of these retailers and amenities have made it so easy to lease office space in Aksarben Village,” Noddle said. “Office workers want to be around this kind of atmosphere.”
Noddle said that Omaha’s retail market has remained solid, too. Again, he pointed to Aksarben Village. There is only about 5,000 square feet of space left to lease there, all of it retail. Noddle said that this space probably could have been leased, but that Noddle is waiting for the right retail for this location.
Noddle said that this space doesn’t need more restaurants. Instead, Noddle is looking for something different, preferably a fashion-based retail use, something that is missing from the village now.
The goal, Noddle said, is to bring in retailers that provide excitement to the community. The fact that Noddle can be so selective? That, too, speaks to the strength of the commercial real estate market in Omaha.
“People are more excited about being out there right now,” Noddle said. “Since the COVID restrictions have been lifted, sales in our food hall have grown tremendously. They are up about 40% year-to-date. The bar that we opened last year is extremely busy. We have noticed a lot more excitement in the air. People are eager to get out there and be social again.”
Another major project in Omaha is the Builder’s District, also being developed by Noddle Companies. Kiewit, when it moved its headquarters to 15th and Mike Fahey streets in Omaha, provided the impetus for this project. The goal here is to populate the area surrounding this building with multifamily units, office space, retail and an urban park.
The project will cover about six city blocks and will include a 130,000-square-foot office building made primarily of timber. Noddle says that the project will include sports courts, giving people space to play volleyball and pickleball.
Noddle expects to break ground on the project early next year.
“I am cautiously optimistic when it comes to the commercial real estate market here,” Noddle said.
Noddle did say that the cost of construction and materials remains a challenge for companies like Noddle Companies. The long lead times between ordering materials and receiving them is a problem, too.
“It doesn’t matter what it is, a heat pump, an electrical panel or even a door,” Noddle said. “There was a door system we were going to buy. The price was crazy and it had a 16-week lead time. That has certainly changed the way we are thinking about deals. The costs of construction and lead times are definitely impacting this business.”