HEARTLAND SNAPSHOT, NOVEMBER 2006

Omaha, Nebraska Office Market

The Omaha office market is currently experiencing continued absorption in the general office sector. As a result, overall vacancy rates have declined from their highs of 16 percent to a present rate of 13.5 percent. This trend will be tested in the near term, as concerns of a slow down in the economy may impact demand. Also, three major employers are in various stages of exploring build-to-suit opportunities and another major employer recently decided to add approximately 300,000 square feet to the third-party tenant market. In addition, Class A office development activity, which has been somewhat dormant in recent years, is experiencing a mini-boom.

The Bank of the West Business park, located at 132nd and West Dodge Road, is Omaha’s newest class A office park development. It recently announced the sale of the last lot in the park and various entities have announced new projects. Pharmaceutical Technologies, C&A and NP Dodge have broken ground on new headquarter buildings in the last few months and each will contain lease space for the tenant market. These projects, consisting of approximately 215,000 total square feet, will bring an additional 85,000 square feet to the tenant market.

Omaha continues to grow southwest along Interstate 80 throughout the West Dodge, West Maple and West Center corridors. In addition, Omaha is encouraging in-fill development in its midtown, evidenced by the announcement of the Ak-sar-ben Knights mixed-use development and the Destination Midtown initiative.

While the market is not seeing new developers, there is an increased interest from tenant-in-common managers and REITs for product in the area, as the demand for quality in first and second-tier markets increases. Healthcare operators continue to expand as does the growing insurance sector, due to Nebraska’s insurance industry-friendly legislation.

Major lease transactions that closed this year include Universal Warranty’s, a subsidiary of GMAC, lease of 33,000 square feet in the Northpark office park at 120th and Blondo; Farm Credit’s relocation to 25,000 square feet in Metropolitan Business Center at 11128 John Galt Blvd.; and HDR’s 18,000-square-foot expansion at 91st and Western.

With new Class A product in Bank of the West’s park coming online next year, expect leasing activity to pick up in that area. Also, the Old Mill submarket, which has suffered above-average vacancies due to the overpass construction on 114th and West Dodge Road, should garner interest, as the construction was completed in October. First Data Resources is vacating its 100,000-square-foot facility for relocation to its Ak-sar-ben campus space.

True Class A rental rates in Omaha range from $17.50 triple-net to $18.95 triple-net per square foot, with area vacancy rates currently around 13.50 percent.

— David Barton is a vice president of brokerage services at CB Richard Ellis|Mega in Omaha.

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