HEARTLAND SNAPSHOT, NOVEMBER 2005

Omaha Retail Market

The Omaha Retail market is alive and well, with continued expansion by the dominant general merchandisers and power store retailers, as well as growth in the casual dining and fast casual restaurant sectors.

According to Rick Quinlevan, president of brokerage services at Omaha-based The Lerner Company, Wal-Mart and Target have been particularly active in the area, with Wal-Mart set to open 7 supercenters in metro Omaha by 2007.   But this activity is not good news for everyone. “The growth of Wal-Mart's grocery business is having a devastating effect on most traditional supermarket operators, with only Hy-Vee seeming able to hold up well to the challenge,” Quinlevan says.

The restaurant market is also faring well. Approximately 35 new fast casual restaurants have opened in the past 3 years, many of them located within a small area of west Omaha. “Sales in this geographic submarket have gone somewhat soft, and we expect restaurant operators to by and large avoid west Omaha during the near term as they continue to expand into other portions of the market,” says Quinlevan.

The Lerner Company, Red Development and Kimco Development, among the more active retail developers in the area along with Cormac Companies, have been busy with projects throughout Omaha. According to Quinlevan, the majority of development is taking place around the southern and western perimeters of the metropolitan area, where median household incomes range between $75,000 and $100,000, and trade areas served by new developments typically experience population growth of 5 percent per year.

Village Pointe, the first large-scale lifestyle center in Omaha, opened in summer 2004 at the intersection of 168th and West Dodge Road in west Omaha. The 650,000-square-foot project, developed by Red Development, is anchored by Wild Oats, Bed Bath & Beyond, Cost Plus World Market, Best Buy, Scheel's Sporting Goods and a 16-screen Douglas Theatre. “Apparel retailers have been reporting strong sales at Village Pointe,” says Quinlevan. As a result, The Gap, Baby Gap, Gap Kids and Banana Republic recently joined Village Pointe.

Kimco Development, in a joint venture with Omaha-based Woltemath-Otis Development, is developing Sorensen Park Plaza, a 600,000-square-foot power center located in north Omaha at the intersection of 72nd and Sorensen Parkway. Announced anchor tenants include Target, Linens ‘n Things, Marshall's, PetsMart and OfficeMax. Sorensen Park Plaza is scheduled to open to the public in October 2006.

Shadow Lake Towne Center, an 850,000-square-foot power/lifestyle center being developed through a joint venture between Red Development and The Lerner Company, will be located at the intersection of 72nd and Highway 370 in Sarpy County and will include anchor tenants Best Buy, Bed Bath & Beyond, T.J. Maxx, Hy-Vee and PetSmart. The center is set to open in March 2007.

New retailers to the Omaha market include Bed Bath & Beyond, Whole Foods Market and Scheel's. “Lifestyle center developments have brought a number of specialty store players into the market for the first time, including Z Galleries, Pottery Barn and Pottery Barn Kids, Ann Taylor Loft, DSW Shoe Warehouse, Coldwater Creek, J. Jill and Sur la Table.

Vacancy rates in anchored centers have remained relatively stable at approximately 7 percent. “There has been an abundance of unanchored junior centers built during the past 5 years,” Quinlevan says, adding, “While the initial lease-up of unanchored projects has generally been successful, the perception is that many retailers are underperforming in these unanchored projects and we expect significant vacancy.” There is also a probability of declining rents within the shopping center format, should there be an economic slump.

Quinlevan advises that people should keep an eye on the southern and western portions of the metro area, with an expected development of a second large power center in Council Bluffs, Iowa, just east of Omaha.

©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.