It’s a constant refrain when asking brokers and developers about the Omaha commercial real estate market: Everyone points to its resilience.
The Omaha CRE market seems to be built to weather challenging times. And that’s never been more evident than in 2024. High interest rates and construction costs remain major challenges in commercial real estate. The struggles of the office sector show few signs of lessening.
But in Omaha? Yes, the city does face these same challenges. But its commercial real estate market continues to display its resilient nature. Investment sales activity and new development are down here. But deals and developments are still happening, despite the country’s economic challenges.
And leasing activity? It remains strong in most sectors, especially for industrial and retail space.
The professionals working this market say that they expect 2025 to be an even stronger year, one that should feature an increase in sales and development, while leasing activity remains strong.
Jon Blumenthal, chair of the Real Estate Group at Omaha-based law firm McGrath North, said that demand for industrial buildings in and around the Omaha market remains incredibly high.
“Leasing demand remains very strong in Omaha’s industrial market,” Blumenthal said. “There are still more users looking for data, warehouse, storage and production sites than there is existing supply. Omaha’s office and retail markets are not as robust as in past years, but remain active and resilient.”
Industrial supply throughout the Omaha market still can’t keep up with demand, even though developers are building new options.
But while industrial is seeing the most leasing activity, at least one other sector is also performing well today, retail.
And this sector is doing especially well in Omaha, Blumenthal said.
“Although there has been a fair amount of ‘coming and going’ with turnover, retail leasing remains brisker than in other parts of the country,” he said.
A high amount of leasing activity, though, still hasn’t translated to a sizable jump in investment sales, in any commercial real estate sector in the Omaha market.
Blumenthal says that investors are being more selective than in the past, thanks to interest rates that remain elevated. But as interest rates trend down, albeit slowly, Blumenthal says that the savviest of investors are hunting for high-quality commercial products of all sectors.
Particularly popular? Blumenthal says that investors are still actively looking for triple-net buildings with strong credit tenants.
Another positive trend in Omaha? Commercial developments across the market continue to bring new life to the city and its surrounding communities.
“Omaha is experiencing exciting growth in both the downtown, midtown, and suburban markets,” Blumenthal said.
He pointed to Mutual of Omaha, which is continuing construction of its new headquarters building downtown. Once built, it will be the tallest building between Chicago and Denver.
The City of Omaha continues construction on its new streetcar route, too, a route that will connect midtown Omaha and downtown Omaha and should provide a boost to local business owners.
The Blackstone District continues to grow with new retail and multifamily options, while Heartwood Preserve in suburban Omaha is drawing new office and retails tenants at a fast rate.
“All of these projects throughout different parts of the city are a testimony to Omaha’s strong leadership and disciplined development community,” Blumenthal said. “It’s a great time to live and work in all areas of Omaha.”
Blumenthal said that none of this positive activity is new. Omaha has long had a reputation as one of the steadier commercial real estate markets in the Midwest.
Blumenthal points to the city’s leaders as one reason for this.
“Omaha has had strong, stable leadership in city government and our planning department,” he said. “We have a wonderful and active philanthropic community. We have active participation from multiple Fortune 500 companies, and they all work together with the development community to continue to grow our city. This combination ensures that smart development continues to move forward, even when momentum is slowing in other parts of the country. Omaha has traditionally been built smartly, while not being overbuilt. Our developers are thoughtful, creative and don’t get ahead of their skis.”
The power of resilience
Mandi Backhaus, associate broker with The Lerner Company, said that Omaha remains one of the more resilient commercial real estate markets in the country.
Why is this the case? Backhaus points to several reasons.
“With its robust and diverse nature, anchored by industries such as healthcare, technology and finance, Omaha, although sometimes called a ‘flyover city,’ remains a hidden gem for those looking for a steady yet vital lifestyle at an attractive cost,” Backhaus said. “This favorability trickles down to how real estate is valued and utilized in the area.”
Backhaus agreed that commercial real estate leasing activity in Omaha has remained strong. This isn’t only becaause of high demand, though.
Backhaus said that a growing number of tenants are choosing to lease existing space instead of purchasing land to build because of today’s still-high interest rates and the elevated cost of new construction.
Like other CRE professionals working the Omaha market, Backhaus has seen a slowdown in investment sales in 2024. This slowdown is only a temporary one, though, she said.
As 2024 moves into its ending days, Backhaus says, she has started to see investment sales activity pick up, at least slightly.
“This is especially true in the unique situations where groups are looking for owner-user opportunities,” Backhaus said. “And given limited supply, some groups are also looking at multi-tenant buildings with some vacancy to secure both the owner-user criteria and rental income potential, as well.”
And when it comes to individual sectors? Backhaus says that most of the main sectors are each seeing steady leasing activity.
Retail continues to be robust with extremely low vacancy, especially in the Class-A product, Backhaus said. She added that she has seen base retail rents increase year over year on certain retail spaces because of the high demand for them.
“Retailers continue to think outside the box and be creative just to plant their brick-and-mortar flag in the Omaha MSA,” Backhaus said.
As in other cities, the office sector remains in flux, experiencing significant ups and downs, Backhaus said. Office owners, though, are getting creative with their spaces today, something that could help bring some stability to this troubled sector.
“I think we have seen both landlords and tenants alike get creative on how to best utilize the space,” Backhaus said.
Agreeing with other local CRE professionals, Backhaus said that the industrial sector continues to be strong. She pointed to the Sarpy county submarket as a particularly strong industrial hotbed, one that has seen a significant amount of new inventory.
Multifamily, too, remains a hot sector, Backhaus said, with demand here driven by the need for affordable housing in the Omaha metropolitan area.
“Historically speaking, multifamily buildings have outpaced single-family homes in terms of development over the past decade in Omaha,” Backhaus said. “On the Iowa side of the river, there is an extreme demand for new affordable housing in Council Bluffs, Iowa, opening a plethora of opportunities for multifamily developers. As a whole, I think we will continue to see more development and strong leasing, especially in the growing submarkets of the metro areas.”
As in most Midwest markets, new commercial development has slowed in Omaha as interest rates and construction costs have risen. But Backhaus said that this, too, is only a temporary setback. She said that she expects to see more development activity in 2025 and beyond.
“Even with elevated interest rates, inflated construction costs and labor challenges, the landscape of new development in Omaha is certainly not doom and gloom,” Backhaus said.
The activity in Omaha backs this up. The metropolitan area continues to see new projects, such as retail projects near the 180th and West Maple corridor and 192nd and Highway 370.
The Omaha market is also seeing important redevelopments, such as Crossroads near 72nd and Dodge and the repurposing of old boxes into mixed-use projects.
“As the Omaha-Council Bluffs MSA continues to evolve, savvy investors and developers are well-positioned to capitalize on the opportunities presented by adapting to changing consumer preferences, leveraging strategic locations and embracing innovative concepts,” Backhaus said.
“The future of Omaha’s retail landscape holds promise, driven by a resilient economy and a commitment to staying ahead of the curve in the dynamic world of commercial real estate.”
Looking toward an even brighter future
Jack Warren, broker with Omaha’s Investors Realty, said that even the troubled office sector is showing resilience in the Omaha market.
Warren pointed to the 7.8% office vacancy rate in the Omaha market. That’s higher than it’s been in the past. But it’s significantly lower than the national office vacancy rate of 13.9%.
“Toward the end of 2024, we have started to see larger tenants in the market that we have not seen in the past 18 to 24 months, which is a great sign heading into 2025,” Warren said.
Warren said that the office sector still faces challenges in adapting to the hybrid work model. A growing number of companies in the Omaha market, though, are asking their employees to come back to the office on a more frequent basis, he said.
That could bring some relief to the Omaha office sector in 2025 and beyond, Warren said.
Warren, too, identified the industrial sector as a standout performer, boasting an exceptionally low 3.3% vacancy rate and strong demand fueled by e-commerce and onshoring trends.
But while leasing activity remains strong here, Warren, too, said that investment sales activity in the Omaha market has been subdued compared to previous years.
Certain sectors, though, are seeing more investment sales, Warren said.
“Sectors such as industrial continue to attract significant interest, particularly for speculative developments,” Warren said. “This contrasts with the office sector, where investment activity is more cautious. With that said, you are still seeing quality office buildings trade at better than market cap rates.”
Jorge Sotolongo, senior associate for investment services with Cushman & Wakefield|The Lund Company in Omaha, agreed that investment sales activity should increase in the coming year and beyond.
As Sotolongo says, Omaha’s commercial real estate market remains an attractive one for investors looking for steady returns.
“While investments sales volume remains down in 2024, we are seeing a slight increase in activity as investors look toward 2025 and beyond,” Sotolongo said. “With the potential for rates to tick down again, Omaha’s stable and steady market will continue to attract local and ou-of-state investors alike.”
Omaha’s resilient nature is showing up in the amount of development activity that is still taking place here, despite high interest rates and construction costs.
Warren said that about 1.2 million square feet of office and 3.7 million square feet of industrial space are under construction in the Omaha market.
This incudes high-profile projects such as Heartwood Preserve and the Omaha Airport terminal expansion
“While nationwide development has slowed, Omaha’s steady growth and strategic projects keep activity alive,” Warren said.
Sotolongo said that the strength of Omaha’s downtown core continues to help it attract new developments. The decision to boost downtown with new parks and amenities has turned out to be a wise one, he said.
“Omaha has invested heavily into its urban core, which has helped to counteract the slowing macroeconomic factors affecting real estate development,” he said. “The Omaha Streetcar will be completed in 2027, which has sparked projects along the line that will have a significant impact on life in the urban core. While The Duo and Mutual of Omaha’s new headquarters continue to rise, the recently announced Omaha Children’s Museum is the latest exciting development in Downtown Omaha”
That museum will add one more high-quality attraction to downtown Omaha. It will be constructed alongside The Beam, a 17-story, mass timber residential tower developed by Nustyle Development, a first for the Omaha market.
While the last several years have been challenging ones, Warren said that he expects both new development and investment sales activity to pick up in 2025. Why? The Omaha commercial real estate market has too many positives for activity to not pick up.
“Omaha offers a business-friendly environment with moderate operating costs, a central geographic location and strong infrastructure,” Warren said. “The city benefits from a growing population, a solid labor market and high quality of life. Additionally, public-private partnerships, such as those backing the downtown streetcar project, foster a supportive environment for growth in various commercial sectors.”
Spencer Secor, senior associate and office specialist with Omaha’s Cushman & Wakefield|The Lund Company, said that the Omaha CRE market has survived this era of high interest rates, soaring construction costs and post-pandemic anxiety as well as any in the country.
“The market continues to keep up with, and in some cases, outpace other similar-sized cities for leasing demand,” Secor said. “Couple that with vacancy rates that are lower than national averages, especially on the office side, and the market is healthy.”
Secor says that one reason for Omaha’s consistently solid performance is its more conservative approach to development.
“Overall, the market never gets too high or too low like some coastal and larger midwestern cities, which helps us stay steady,” Secor said. “Omaha has always had a conservative mindset, and I think it carries over to users’ leasing approaches.”
Like the other brokers contacted for this story, Secor predicted that the coming months would continue to see improved commercial real estate sales, leasing and development activity.
“Specifically on the industrial side, I think our central location has always been attractive to users,” Secor said. “Having I-80 cut through the city allows for quick access for transportation to anywhere in the country. Up until a couple years ago, we didn’t have the supply of larger buildings to accommodate users, but since then multiple projects have been constructed, which has allowed for large users to expand or relocate.”
Working through the struggles to reach an even healthier market in 2025
Pat Regan, president of OMNE Partners, a brand of Omaha-based Seldin, LLC, said that leasing activity in the market varies by sector.
For instance, the retail sector remains solid because its vacancy rate is low and it hasn’t seen much new construction.
“For junior boxes and strip and neighborhood centers located in good trade areas, there is strong demand,” Regan said.
Regan said that the Omaha market is beginning to some major land development and activity along the 204th corridor and Highway 370 for retail and grocery.
“Although lot sales are down year over year, with these new developments we feel there will be merchants looking for outlots,” Regan said.
The office sector’s leasing activity varies according to class. Regan said that office leasing remains robust for Class-A properties. Activity, though, is muted in Class-B and Class-C buildings not located in major employment areas.
Part of the reason for the strong leasing activity in the Class-A office niche? There has not been much spec construction of office properties.
The lack of new development that is resulting in lower vacancy rates isn’t about to change soon, Regan said. The reason? It remains too expensive for private companies to development new properties today, he said.
That doesn’t mean that there are no new developments rising in the Omaha market today, though.
“We are seeing a high level of development in the philanthropic circles or projects that are making Omaha a stronger community, Regan said. “Therefore, projects continue to be announced in the downtown market and ancillary markets. Private development remains muted except for the major commercial areas.”
John Dickerson, executive vice president with OMNE Partners, said that while investment sales activity remains low throughout the Omaha market, he expects this to change in the coming months.
The reason for this is simple: The Federal Reserve Board is in the middle of what might be a long period of lowering its benchmark interest rate. That should result in lower interest rates on all loan types.
The same holds true for development activity. Dickerson said that lower interest rates should fuel an increase in development activity in 2025 and beyond.
And while development activity has been muted in most sectors, it has remained strong in the multifamily arena, Dickerson said.
“Omaha development has slowed, except for apartments,” Dickerson said. “Omaha has had a severe shortage of residential homes and apartments. Most apartment development has been in the urban area with both new construction and renovation/repurposing, such as a major multi-story office building being converted to 400 apartments in downtown Omaha.”
Like other brokers working this market, Dickerson said that the future looks bright for the Omaha commercial real estate market. That’s largely because of the many positives that this market boasts.
“Omaha is a low-cost market compared to other major markets in the Midwest,” Dickerson said. “We have been highly rated as a city to relocate to. Our population is growing and our metro area with three counties each in Nebraska and Iowa now has about 1 million people. Our unemployment rate is one of the lowest, if not the lowest, in the U.S. We are retaining college graduates more than ever. Many of our larger companies are highly rated in their sectors nationally.”
