MIDDLE MARKET HIGHLIGHT, APRIL 2006

LINCOLN
Karen Stone, CCIM

The city of Lincoln, Nebraska’s state capitol, is, quite literally, in the middle of it all. Like its in-state neighbor to the west, Grand Island, Lincoln’s central location is one of its main calling cards. Add to this the strong foundations provided by state government and the 21,000-student University of Nebraska at Lincoln (UNL), and Lincoln has an economy that stays steady even during economic downturns.

Historically, value-added agricultural companies have been the area’s top employers. In addition to expansions in this industry, there have been recent upswings in the influence of pharmaceutical, distribution and logistics, electronics, call centers, advance manufacturing, and insurance processing companies. The result is a steady population growth rate of approximately 3 to 4 percent annually, which outpaces the state average of 1 to 1.5 percent, and growth in capital investment, which reached more than $160 million in 2005 and created more than 2,000 new jobs.

Traditional manufacturing and industrial companies continue to expand, creating new jobs and driving retail development. According to Tom Schleich, CEO of Commercial Investment Property (CIP), the pace of retail development has been moderate and the absorption rate for existing space has been reasonable. The industrial sector has experienced increased vacancy rates as several large users have left the city. However, with a tremendous amount of interest in the recently vacated spaces from several undisclosed companies, the outlook for absorption of this space is positive. “The office market is beginning to pick up,” Schleich notes. “The 10,000-square-foot spaces that are located in suburban areas are currently taking approximately 1 year to be absorbed.” Although the multifamily market is currently very soft, there are some new units coming on the market. Arkansas-based Lindsey Company is currently building a 600-unit community at NW First and Fletcher streets that will feature a nine-hole golf course.

Wilderness Ridge is a 440-acre mixed-use development underway at 27th Street and Yankee Hill in southwest Lincoln. The project, which will include a lodge with convention and banquet space and a golf course, as well as single-family housing, is being developed by Commercial Investment Property.

Across the street from Wilderness Ridge, at the northeast corner of 27th Street and Yankee Hill, CIP is also building the 24,000-square-foot Pine Lake South, a retail strip center with pad sites that is scheduled to be complete this summer. In spring 2007, CIP will begin construction on a second retail center across the street from Pine Lake South, which will consist of 15,000 square feet. On the northwest corner of the same intersection, preliminary plans have been submitted for a 150,000-square-foot retail center on a 16-acre site.

According to a retail-focused study conducted last year by UNL, Lincoln is stealing some of Omaha’s retail business and is becoming a shopping destination for the western part of the state. New development has come to the areas surrounding the market’s two major malls. South Pointe Mall, which is located in the southern sector of the city at 27th and Pine streets, was developed 5 years ago by Lincoln-based Thompson Realty. In the past several years, Scheels Sporting Goods, Abercrombie & Fitch, Gap and Von Maur, a high-end department store, have opened in the immediately surrounding area. Gateway Mall, located in the center of town on O Street, was renovated by owner West Gate Realty in 2005, adding a new small shop wing and updating the existing Dillard’s. Gateway is anchored by JC Penney, Sears and Yonkers.

Since 2004, a strong retail corridor has emerged in the northeast section of Lincoln along North 27th Street near its intersection with Interstate 80. Wal-Mart, The Home Depot, Target and Bed, Bath & Beyond have opened stores in this corridor.

The established industrial and manufacturing sectors continue to drive forward, fueled by Lincoln’s central location and its strong transportation network. The local airport authority, which operates Lincoln Municipal Airport, has developed a hub for distribution, logistics, industrial and light manufacturing companies next to the airport, which features an oversized runway that is fourth in line as a landing spot for the space shuttle. “We have 1 million square feet [of developed product] under roof with rail access that is ready to go,” says Matt Carlson, president of the Lincoln Chamber of Commerce.

Several businesses that are new to Lincoln are expanding their local facilities. In January, New Jersey-based Novartis Pharmaceuticals began an expansion of its facility located on the northeast side of Cornhusker Highway (State Highway 6) approximately 2 miles south of I-80. Product lines that were formerly produced by companies recently acquired by Novartis are being consolidated into the Lincoln location. It is expected that 180 new jobs will be created as a result of the Novartis expansion.

“Lincoln has had a really exciting 2 years, with increased interest in our broad-based economy,” Carlson adds. In addition, Lincoln is beginning to attract new companies and technologies — some with foreign roots, which is an opportunity Carlson hopes will be further cultivated.

“With the strength of our economic diversification, the cooperation of city and county governments, and some needed road and infrastructure improvements, we are hoping to attract some new major employers,” Schleich says. “Once prospective residents have the opportunity to experience Lincoln’s lifestyle, with its safe, small city flavor, affordable cost of living, innovative research and educational environment, and wide variety of outdoor and sporting activities, we feel the opportunity for continued growth is strong.”

“Nebraska in general and Lincoln in particular are coming into their own in industrial and commercial growth,” Carlson says. “Our [economic] engine is strong and as we start to develop more of our capabilities around our resources in Nebraska, we will continue to be an ever-larger presence on the map.”

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