The burgeoning activity in the Omaha real estate market just keeps rolling along, on the banks of the Missouri River at its eastern border and in the suburbs miles to the west.

The city continues to ride a boom that started in 1993.

"The only surprise that I see is that it has lasted so long," says Kevin Kroeger, a partner with the Valuation Services Inc. appraisal service.

Kroeger did a recent survey of newer downtown apartments - many of them converted from warehouses - and found virtually no vacancies.

The commercial real estate market is still very strong in all sectors, Kroeger says. There's a very short marketing time. It's not showing any sign of weakening.

What Kroeger found out about downtown apartments, others have found to be nearly true of other real estate space in Omaha, a city that struggles to keep up with its successes.

With one of the nation's lowest unemployment rates, the city is begging for workers to build the buildings and then fill them.

Commercial activity in the downtown area is joined by talk of civic projects that promise to add to the city's vitality.

Under consideration are a $275 million convention center and sports complex and a $75 million performing arts center.

"Our downtown will be a neat place to be in the next few years," says Bennett Ginsberg, president of Mega Corp. "And a strong downtown makes for a strong city."

On its far western edge, Omaha has captured an industrial plum - a 500-employee Caterpillar Inc. plant for the manufacture of combines. The plant, to be located in the southwest part of the city, is destined to spur a new round of industrial development.

Omaha has experienced a 73% rise in annual construction in the last 10 years, when measured in inflation-adjusted dollars.

Steve Ruff of Daisley Ruff Financial says money is plentiful and interest rates are low.

"I think this picture, from a borrower's standpoint, is maybe the best it's been in over 10 years," Ruff says.

Real estate experts are hard pressed to find a weak link.

"If you were to look to see if things were starting to get a little saturated," says Kroeger, "you might be looking at new apartments in west Omaha."

Omaha developer Jay Lerner cautions that the cycle will run its course. "We are in an up cycle," Lerner says. "Will there be too many apartments, offices, shopping centers? At some point in time, there always are."

But for now the economic climate, including the one that flows from government, is good. The Nebraska Legislature in 1998 extended an income tax cut, trimmed the state sales tax by a half-cent and is playing out its three-year plan to cut property taxes.

Bulldozers make room for more office

Commercial and industrial property is expected to experience a 13% to 15% cut in property taxes in 1999.

The signs of progress are apparent to anyone visiting downtown Omaha, where the first phase of the 33-block development headed by Pacific Realty Group for First National Nebraska is well under way.

First National is bulldozing buildings around 15th and Davenport streets - in full view of interstate travelers - to make way for a $67.6 million data processing and operations center.

Altogether, redevelopment work totaling $191.4 million is scheduled for the area, including city garages, the Omaha World-Herald Cos. production plant and a $17 million Marriott Courtyard Hotel at 10th and Douglas.

The continuing big commercial developments tend to overshadow the dominating news of last year, which was First Data's decision to build a campus complex at the former site of the Ak-Sar-Ben horse racing complex.

Nebraska is trying to tackle its worker shortage problems by building a University of Nebraska-Omaha Institute of Information Science and Technology campus on ground donated by First Data, near its new campus.

The Omaha office market is strong, according to Mega's Ginsberg. "We're seeing some new product being built in the upper-end (Class-A) buildings, with 300,00 0 or 400,000 sq. ft.," he says. "Those are about 60% to 70% preleased."

Bozell Worldwide, Nebraska's largest advertising and public relations firm, announced it will occupy most of the space in one of two buildings that Valmont Industries is constructing at 144th Street and West Dodge Road.

Ginsberg, whose Mega Corp. is the leasing agent for Valmont, says that the project is an example of a burgeoning rent rate for Class-A space.

"We are seeing rates we've never seen before," Ginsberg says. "$24 to $25, full service, with a minimal amount of incentives."

Citywide, average rent rates were $13.42, with vacancy rates of 8.7%.

In downtown Omaha, the office building excitement that started with a commitment by the First National Bank and The Omaha World-Herald continues.

The First National Bank announced plans to build the tallest building in the city as part of its development that has served to rejuvenate the city's inner core. The building, which will be in the block bounded by 16th, 17th, Dodge and Douglas streets, is expected to have about 630,000 sq. ft. of space and be about 600 ft. tall.

ConAgra Inc. will build a $20 million, three-story building on its campus in downtown Omaha, its fifth on the site. The building will house 200 top commodity traders and support staff, half of them moving from Minneapolis.

Affecting the Omaha downtown office market are plans by the federal government to upgrade its office space, including completion next year of the Hruska U.S. Courthouse at 17th and Dodge streets, as well as a $40 million renovation of the Zorinsky Federal Building at 215 North 17th Street.

In the meantime, the federal government is negotiating with the city of Omaha to see if the city has a need for the Federal Office Building at 15th and Dodge streets, which will be vacated in the year 2000.

By the year 2003, the Defense, Transportation, Interior, Customs divisions will leave other leased space to move into the Zorinsky Building. The Corps of Engineers will also leave offices on West Center Road at 125th Street to move to the Zorinsky building.

Hotel experiences development surge

With a surge in building activity in recent years, the Omaha hotel market has now turned to one of concern about overdevelopment.

The hotel improvements in 1997 included renovations at the downtown Doubletree Hotel, the Sheraton Four Points Hotel (formerly Sheraton Inn) at 120th and L streets, and the Holiday Inn Central Hotel and Suites at 72nd and Grover streets.

The Marriott Courtyard at 10th and Douglas started work in November, renovating two buildings into a 175-room, $17 million hotel.

Those are in addition to the 20 new hotels that opened in the Omaha-Council Bluffs area in the last five years. During one six-month period in 1997, the area's lodging supply increased by 14.7%, while the demand grew by only 3.2%.

Average room rates over the last five years in Omaha have taken the following path: In 1993 rates averaged $47.95; 1994, $49.35; 1995, $52.43; 1996, $55.05; 1997, $56.32. Five years ago, Omaha hotel rates were 80% of the national average; now they are 75%.

The Omaha market has seen ownership shift in recent years from mostly locals to dominant ownership by out-of-town corporations.

"Omaha is probably now on the radar screen of a lot of companies because of the size of the market that Omaha has become," Ginsberg says.

Industrial softens slightly Omaha's industrial market has softened a bit, mainly because a lot of players took advantage when the market was strong a year and a half ago, Ginsberg says. "However, you are going to see a fair amount of buildings being built in Omaha," he adds. "The economy is so dynamic right now that people are expanding and looking for new space. In turn, there is space opening up in older type buildings."

Rodrigo Lopez, president of newly formed AmerisSphere Financial and former chairman of the Omaha Planning Commission, says Omaha has begun to provide more industrial land.

The best opportunities are to the northwest, along a stretch toward Irvington.

"There is still some land available around the airport," Lopez says, "but construction is more expensive there because of the soils."

Lopez says the Giles Road area, where Caterpillar will locate, provides some wonderful tracts. "The infrastructure is already there," Lopez says. "It's one of the best places for industrial development, and it's not far from residential neighborhoods that provide the labor force."

Industrial vacancy rates in Omaha stood at 23.6% going into 1998, with average rents at $4.49.

Economy boosts retail Omaha's strong economy continued to attract major retailers, keeping major malls virtually full.

The northwest residential growth in Omaha continues to drive the commercial development along West Maple Road, between Omaha and Elkhorn. For one thing, that stretch has infrastructure, including a four-lane road.

Vacancy rates were 5.6% on West Maple, compared to 4% on West Dodge Road and 17% downtown. Omaha's average vacancy for retail space was about 6.4%.

Just a few years ago, the hotbed for commercial activity was at 132nd and West Maple. It just keeps moving west.

Kroeger says there are numerous plans for tearing down and rebuilding along the West Dodge Street corridor.

Kohls Inc. of Menomonee Falls, Wis., opened its second department store in Omaha at the 72nd Street site formerly occupied by Ross Steak House.

Kohls joined several other national retailers who have opened stores within the last two years along 72nd Street near Dodge Street - Barnes & Noble, Borders, Office Depot and Circuit City - making it one of the fastest-growing retail corridors in Omaha.

"Everyone wants to be there," says Trenton Magid of World Group, a development firm. "The rent rates about $15, triple net, on up."

Shopping malls seem to be rejuvenating in the Omaha area, according to a survey by a New York trade association.

Consumers spent about 3.4% more at Nebraska shopping malls in 1997 than in the previous year, representing about 49% of the total nonautomotive retail sales. It was a year in which the number of total shopping malls in Nebraska increased from 250 to 254.

The once-troubled Southroads Mall in Bellevue on Omaha's southern edge welcomed Ameritrade Holding Corp. to 132,000 sq. ft. of space that was once retail space.

Ameritrade expects to add to the space and eventually headquarter 900 employees there, providing services to those who make trades on the Internet.

The Omaha Old Market area's future, in part, hinges on the eventual decision about where to locate a convention center/sports complex. But whether that project ends up next door to the Old Market, or in some other part of the downtown area, the potential for appropriate commercial development should remain strong for the downtown area.

The retail-apartment mode for the Old Market continues with a $4.5 million combination in the same building that houses the Spaghetti Works. Known as Vendor Square, the five-story, 105,000 sq. ft. building has been mostly vacant except for Spaghetti Works.

The eatery is the general partner for the project, which has other local investors. The financing includes $419,000 in tax-increment-financing from the city of Omaha.

Ford Storage and Moving Co. provides a glimpse of Omaha's real estate activity. The company is building two new one-story storage buildings in Sarpy County's Brook Valley II Business Park to the southwest. Its old six-story building at 11th and Dodge Streets and nine-story warehouse at 11th and Jones streets will become renovated apartments, developed by NuStyle Development Corp.

Multifamily tempts fate Steve Ruff of Daisley Ruff Financial agrees with Kroeger that Omaha might be reaching the saturation point in apartments.

"That is the one red warning light," Ruff says. "It's been a landlord's market in the last three or four years," he adds. "It's going to turn into more of a tenant's market. As soon as you have problems, everybody gets hurt except tenants."

But even with those warnings, apartment building permits continue strong in 1998, driven by occupancy rates of 96%. Average rental rates have climbed. In southwest Omaha, for example, they went from $558 in 1997 to $614 in 1998 for a two-bedroom apartment.