One step forward, but two steps back. That’s how J.P. Raynor, an office specialist with Omaha’s Investors Realty, describes the Omaha office market.
It’s true that Omaha’s office sector is seeing more new leases than it did during the height of the COVID-19 pandemic, Raynor said. But tenants are also downsizing. Employees are continuing to work from home. This combination has brought plenty of uncertainty to the Omaha office market.
And the same thing is happening in other Midwest office markets, from Chicago to Cleveland and Detroit to Minneapolis: Workers have learned during the last more than two years that they can work effectively from home. They don’t want those long commutes. And they’re not ready to come back to cubicle life.
That’s turned into a challenge for the office market across the country.
Investors Realty regularly talks to chief executive officers and chief operating officers of companies throughout the Omaha market. These company leaders say that about 50% of workers want to work from home on a permanent basis, Raynor said. Another 25% want to work on a hybrid schedule, spending two or three days a week in the office. The remaining 25% want to be in the office on a full-time basis, as they were before March of 2020.
That makes it difficult for companies, especially today, to consider expanding their office space. But Raynor said that the reluctance of workers to go into the office might not be as permanent as some think.
“Business owners have told us that they think it is more efficient to have employees in the office. They say it leads to more collaboration when employees are not working from home,” Raynor said. “Right now, we are in an employees’ market. That is dictating the work-from-home strategies we are seeing. Sometime in the next five years, the market might switch back to an employers’ market. When that happens, I think you will see a shift back to people working in the office.”
It’s important to note, too, that not all employers have embraced remote working. Raynor said that smaller companies, those generally occupying under 5,000 square feet of office space, typically have more employees working more often in the office.
Larger companies, though, are still determining when they will bring most of their workers back to the office, Raynor said, with many of their employees still working remotely.
“It has been more difficult for larger companies,” Raynor said. “They have more people working for them, so it’s challenging to allow for social distancing. Because of this, small- and medium-sized companies were bringing people back to the office on a more regular basis.”
One type of office user that is common in Omaha are medical staffing companies. Raynor said that these users thrived during the COVID-19 pandemic, providing a boost to the local office market.
“Medical staffing companies were prospering and leasing a lot of space,” Raynor said. “That helped prevent the office market from becoming disastrous during the pandemic.”
There has been some good news in the downtown Omaha office market during the pandemic. Earlier this year, insurance giant Mutual of Omaha announced that it will develop a new headquarters tower in downtown Omaha. At the same time, the city of Omaha has committed to launching a modern streetcar line that will travel through downtown Omaha. In a press release, Mutual of Omaha officials said that the addition of this public transit option is one reason why the company has committed to downtown.
Raynor agreed that the streetcar will be a positive for downtown Omaha’s office market. Many corporations are looking for locations that offer public transit options for their workers.
“Public transit is a box that corporations want to check,” Raynor said. “Omaha has never had that box checked. Hopefully, with the addition of rapid buses and the streetcar, that will start to be a positive for us instead of a negative. It will bode well for Omaha in the long run.”
As in most other office markets, building owners in Omaha are focusing increasingly on higher-end amenities to attract tenants. And companies are looking for buildings that feature these amenities as one tool to help attract workers back to the office.
In a jobs market that favors workers, companies are also highlighting these amenities – everything from onsite gyms and healthy eating options to rooftop gardens and collaborative areas – to attract and retain the best talent.
Raynor said that newer Class-A office buildings today feature underground parking, onsite gyms, collaboration spaces, bars and game rooms. He’s even seen companies employing masseurs and chiropractors at their offices.
Also as in many other markets, tenants today are looking more frequently at office space in suburban locations than they are in downtown Omaha. But Raynor said that this, too, isn’t a permanent trend. He pointed to Mutual of Omaha’s decision to build in downtown, along with the ongoing riverfront revitalization project taking place now along the city’s riverside, as two reasons why downtown Omaha is set for a resurgence in office activity.
“I think the trends will start to shift in downtown Omaha’s favor again,” Raynor said. “Every four years or so it shifts. I think that will happen again.”