HEARTLAND SNAPSHOT, JULY 2008

Omaha, Nebraska Industrial Market

In Omaha, there is a tightening of available industrial space across the board, in both new and existing opportunities. No one is building new product due to cost of development and the fact that rents are not keeping up with the increased price of development. Tenants are opting for existing properties in good locations that can offer price advantages.

Most new development activity that has occurred has been for owner occupied buildings for companies expanding in the market. There is one industrial park under construction in the Bellevue, Nebraska, submarket south of Omaha, but it will be approximately 2 years before it is online. The majority of development activity is focused in southwest Omaha in the La Vista, Nebraska, suburb because of its access to Interstate 80, and surplus of available zoned and shovel-ready land.

H Street Ventures and Alliance Commercial Partners have redeveloped the former Crown, Cork & Seal facility in La Vista, Nebraska, into the Crown Industrial Park, which includes a renovated 330,000-square-foot, multi-tenant facility, as well as 22 acres of undeveloped land for future buildings.

Just north of I-80 on 72nd Street in the La Vista submarket, Washington, D.C.-based H Street Ventures and Denver-based Alliance Commercial Partners have teamed up to purchase the former Crown, Cork & Seal facility for a rehabilitation project. The joint venture is redeveloping the approximately 330,000-square-foot building into a multi-tenant industrial facility, and installing infrastructure and roads to facilitate the development of the site’s 22 undeveloped acres.

Google has had the biggest impact on the area’s industrial scene in recent years. The company recently purchased two warehouses in Council Bluffs, Iowa, just west of Omaha. Google has also acquired more than 1,000 acres of land in two locations in Council Bluffs for a major expansion. The technology provider’s new server farm has been under construction for more than 1 year and may take another year before it is up and running.

With regards to leasing activity, owners and landlords are not focusing on any one type of user, but on the quality of the tenant. High-tech users are great, but an established distributor pays rent just as well. Owners are content with stability in their tenant base and are focusing on that. Recent transactions include Outlook Nebraska’s 80,000-square-foot lease at 72nd and F streets in Omaha, and Tel-Mar’s 60,000-square-foot deal in Carter Lake, Iowa. Lozier Corporation

Rental rates range from $3.25 per square foot triple net for the lower end of the market up to $5 per square foot for new multi-tenant distribution bays of approximately 8,000 square feet. On average, $3.50 to $4 per square foot is what we are seeing space go for in the Omaha market. The vacancy rate for the overall industrial market is currently at 6.42 percent.

There are three types of property that will garner interest from investors and developers in the near future. First, any area with economic incentives or advantages, such as the submarkets offering tax increment financing opportunities or tax abatements on the Iowa side of the Missouri River. Also, larger available tracts of properly zoned land, which is now available only on the perimeter of the city, will draw interest. Finally, watch for growth in western Sarpy County between Highway 370 to the south and Giles Road to the north. Omaha has a history of businesses wanting to locate around their competitors or customers, and this is where the growth has been and will continue to be in the near term.

With the cost of fuel negatively impacting virtually all businesses, location is more important than ever. Having a central location off one of the principal east/west interstate systems in the country, such as I-80, may begin paying dividends for Omaha. The market has historically been resilient in the face of economic downtimes, and it appears that Omaha is holding up so far as this economic down cycle shows signs that it is settling in.

— David H. Maenner is vice president of brokerage, industrial, with Omaha, Nebraska-based CB Richard Ellis|MEGA.

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