CRE c Nebraska

The CRE boom far from fizzling in Omaha

The CRE boom far from fizzling in Omaha,ph01
The headquarters building of Kiewit Corp., developed by Noddle Companies, is the centerpiece of Omaha’s Builder’s District development. (Art courtesy of Noddle Companies.)

Sometimes steady is best. Just ask the brokers doing business in Omaha. The commercial real estate market has been strong here for nearly a decade now. And it’s shown this strength without needing the soaring highs or dizzying lows exhibited by some of the bigger, more volatile markets across the Midwest.

Consider the area’s multifamily market. The multifamily market is strong across the Midwest, of course, and Omaha is no exception. But Scott Koethe, director of investment sales with Cushman & Wakefield/The Lund Company, points to this sector’s stable, solid growth as one of the main reasons it is so attractive to investors.

“The investors still love Omaha,” Koethe said. “This is really a steady Eddie kind of market. We have rent growth, but we don’t have crazy rent growth. Even in the downturns, our rents don’t drop too much.”

Koethe isn’t alone in this viewpoint. The brokers working this market appreciate its conservative nature. Developers don’t overbuild, and that helps keep demand high. You’ll hear more about this recipe for success at REjournals’ and Midwest Real Estate News’ third annual Omaha Commercial Real Estate Conference held Nov. 8 at Noah’s Event Venue in Omaha. The event will focus on the strength of all the commercial sectors in the Omaha market.

Koethe points to a multifamily property that he recently represented. The owners had held the property starting in 2007, and had kept track of their asking rents for every month since purchasing the building. The asking rents in the building only dropped by $40 a month during the worst four months of the Great Recession, Koethe said.

This shows just how steady the apartment market here has been.

“You don’t get those big awesome upsides,” Koethe said. “But you are safe when you invest in this market. You look at a market like Houston. That is a huge boom market. A market like Omaha can help investors balance out their portfolios and add some stability.”

The apartment market here has been strong for a long time. But Koethe says that he doesn’t see a downturn coming anytime soon.

The multifamily market here has only been what Koethe would call extremely busy during the last two years or so. That’s different than in much of the rest of the country, where apartment activity has been soaring for a longer amount of time, Koethe said.

“We tend to lag a bit behind the rest of the country when it comes to trends like that,” Koethe said. “I’d say that we have four or five years left on this multifamily run in Omaha. There are developers who aren’t building right now even with the demand because the cost of construction is a little bit high. We have a huge need for additional multifamily housing in this market.”

The Omaha apartment market, though, is not entirely uniform. Koethe said that there are significant differences between the downtown and suburban multifamily markets.

The downtown market is seeing a greater amount of concessions, while developers here are extremely active, bringing in new product designed for those renters who want to walk to restaurants, public transportation, shops and entertainment.

The suburban market might be an even strong one, though, Koethe said. Demand is especially strong for modern multifamily developments in the communities surrounding Omaha, he said.

“They can’t build it fast enough in the suburbs,” Koethe said.

To attract renters both in the city and the suburbs, developers must offer the latest amenities. Koethe said that this includes spacious outdoor patios, dog parks, fire pits and the best possible interior finishes.

Apartments that don’t offer these amenities? They’ll struggle to attract renters.

“Renters can get all the amenities of a million-dollar house. They just have to share them with their fellow renters,” Koethe said. “It might seem that they are overpaying in these new buildings for the amount of square footage they get in their units. But they have access to more amenities that don’t show up in the rents-per-square-foot numbers. You are getting more than what the figures say.”

A long hot streak

Nancy Johnson, senior vice president with Omaha’s CBRE|MEGA, said that investors continue to sink their dollars into the Omaha market. This isn’t surprising, she said, considering just how strong all of the commercial sectors are in this region today.

“The thing about Omaha is that it is a very stable market,” Johnson said. “We don’t have the high highs and low lows that many other markets have. We also don’t’ have as much product on the market that some other cities have. This means that Omaha, especially today, is even tighter than many other strong markets across the country.”

As an example of how attractive Omaha is today, Johnson points to the recent 66,000-square-foot office lease by Flywheel, a web hosting company.

Flywheel is leasing this space in the Millwork Commons development in Omaha to serve as its new headquarters. Flywheel will be the anchor tenant of the $300 million mixed-use development and will occupy one-and-a-half floors at the property by the summer of 2020.

Barry Zoob and Chris Mensinger of Colliers International represented Flywheel in this big lease transaction.

“The tech market is certainly very strong here,” Johnson said. “The headhunter type of businesses are very active here, too, and are occupying a significant amount of space.”

To attract tenants, office and even industrial users must focus on amenities, Johnson said. With the right amenities, users can attract and retain the best talent.

And that’s an advantage these users need in today’s low-unemployment environment.

“They have to provide the Millennials with an environment they want to come to,” Johnson said.

The same holds true for Millennials and the apartments that most attract them, Johnson said.

“The Millennials will spend a little more money to live in an apartment, but they want the amenities,” Johnson said. “They want to be able to walk to the bar. They want the Amazon pick-up locker in their hallways for their deliveries. There is so much more that the multifamily developers have to put into their projects to attract that type of customer or tenant.”

For more information on the strong Omaha commercial market, sign up today for the Omaha Commercial Real Estate Conference.