The Omaha retail market is continuing to see new store development by the dominant general merchandise, grocery and home improvement chains, especially around the western and southern perimeters of the metropolitan area. Trade areas served by these new developments are typically experiencing population growth of 5 percent per year with median household incomes ranging between $70,000 and $95,000.

Rick Quinlevan President, Brokerage Services The Lerner Company

Lifestyle centers have emerged as a significant retail venue, with approximately 800,000 square feet of lifestyle space scheduled to come online during the next 12 months. Scottsdale, Arizona-based RED Development has begun construction on Village Pointe, Omaha’s first large-scale lifestyle center. The 650,000-square-foot project will open in May 2004 in west Omaha at the corner of 168th Street and West Dodge Road. Anchors include Wild Oats, Bed Bath & Beyond, Cost Plus World Market, Scheel’s Sporting Goods and a 16-screen Douglas Theatre. “We look for the emergence of lifestyle retail to have a significant impact upon Omaha’s enclosed regional malls,” says Rick Quinlevan, president of brokerage services for Omaha-based The Lerner Company.

New store growth in the grocery segment is also inflicting extreme pain on older grocery locations, with some stores performing at 20 percent to 50 percent below their sales volumes of the mid-1990s, according to Quinlevan. There is also significant competition between many casual dining and fast-casual chain restaurants with rapid expansion plans for scarce, prime outparcel and end-cap opportunities, according to Quinlevan.

RED Development, in conjunction with local developer John Lund, is redeveloping the 171,000-square-foot Regency Court. While the center has been underused for many years, it is home to several prominent local retailers, including the 45,000-square-foot Borsheim’s Fine Jewelry. New retailers moving into the center include Ann Taylor Loft, Williams- Sonoma, Pottery Barn and Pottery Barn Kids. Regency Court will re-open this month.

Denver-based Flatiron Development is developing a 450,000-square-foot project at the northeast corner of 132nd Street and Industrial Road in southwest Omaha. The project is being developed on the expansive greenspace fronting the massive Avaya manufacturing facility and will be anchored by The Home Depot, Wal-Mart Supercenter and Sam’s Club.

The Lerner Company is developing Papillion Promenade, an 850,000-square-foot retail project located on 135 acres in Sarpy County at the corner of 72nd Street and Highway 370. “This high growth area is underserved by the existing retail structure in Sarpy County, and the list of logical anchor tenants is long,” Quinlevan says. Papillion Promenade is scheduled to open for business in the fall of 2005.

Omaha is home to several well-established retail developers including The Lerner Company, Noddle Development, Dial Companies, Seldin Company, Cormac Company and PDM. According to Quinlevan, the most active developers of large new projects in the Omaha market during the next 3 years will be RED Development and The Lerner Company.

Most new store development during the past 2 years has been by retailers that already had a presence in the Omaha market. RED Development’s new projects will bring Bed Bath & Beyond, Scheel’s Sporting Goods, Ann Taylor Loft, Pottery Barn and Pottery Barn Kids to the market for the first time. Galyan’s Trading Company recently opened an 80,000-square-foot store at Westroads Mall, and Dollar Tree has opened eight new stores in Omaha and the surrounding communities during the past 12 months.

While entry to the market by new retailers has been somewhat limited, many new restaurants are coming to Omaha. In the casual dining segment, P.F. Chang’s China Bistro, Timberlodge Steakhouse, Carrabba’s Italian Grill and Red Robin have recently opened in Omaha, and California Pizza Kitchen, Elephant Bar, Cheeseburgers in Paradise, Ted’s Montana Grill and Coulton’s Steakhouse all seem poised to close on pending deals, according to Quinlevan. The fast casual market is even more frenzied with Chipotle, Panchero’s, Panera Bread, Bare Rock Café, Noodles & Company, Nothing But Noodles, Starbucks Coffee, Cold Stone Creamery and Maggie Moo’s competing for a limited supply of high-impact locations.

The vacancy rate in anchored retail centers, currently at 6 percent, has been stable for a lengthy period of time, hovering between 5 percent and 7 percent since 1996.

“The majority of retail development during the coming years will continue to occur in the high growth areas of west Omaha and to the south in Sarpy County,” Quinlevan says. In west Omaha, the current dominant trade area along West Center Road is nearing maturity with little land available for large sized developments. Consequently, much of the future retail development in west Omaha will occur in the West Maple Road corridor and at 180th Street and West Dodge Road near Village Pointe. In Sarpy County, it is clear that much of the future retail development will take place at the intersection of 72nd Street and Highway 370.

OMAHA ABSORBS INDUSTRIAL SPACE The Omaha industrial market has remained strong with the vacancy rate hovering at 9 percent for the past 18 months. This trend will continue, if not improve, during the next 6 to 12 months. Omaha’s national central location at the intersection of Interstates 80 and 29 makes the area an ideal location for distribution centers. A highlight within the market is the central Omaha submarket, which has an occupancy rate of 95.2 percent. Business parks located in the southwest and west Sarpy submarkets have occupancy rates of 94.2 percent and 90.4 percent, respectively, and the markets finally saw some speculative construction from 1999 and 2000 absorbed. Fortunately for landlords, new significant speculative projects for the Omaha area have not occurred in the past year. Turning off the speculative spigot has helped Omaha absorb its existing space at a much faster pace than what was happening 3 to 4 years ago. Only one major speculative development, with initial phases boasting two buildings totaling more than 175,000 square feet of warehouse distribution, is under construction. This development is taking place across the Missouri River in Council Bluffs, Iowa, by an institutional investor. The average asking rental rate in Omaha is $4.13 per square foot for warehouse distribution space and it is $6.02 for R&D/flex space. In terms of investment, a steady number of transactions recently occurred including the sale of a 500,000-square-foot Vickers plant, currently planned for a retail development. — Thomas Jacobs is an associate of advisory services with Omaha, Nebraska-based Grubb & Ellis|Pacific Realty.

©2003 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.