On the verge of a technological transformation, the market sees a flurry of commercial activity Civic and city leaders believe that Omaha is on the verge of a technological transformation that will drive the commercial real estate market into the future.
The seed for the change was planted a couple of years ago by business leaders who moaned about a shortage of engineers and technical wizards, but the legislature gave life to a new $70 million University of Nebraska technological campus in June by appropriating $23 million for construction. The business community ponied up another $47 million.
Word is that a high-tech atmosphere will change the face of Omaha and attract more businesses like First Data Resources.
FDR, the world's largest processor of credit card transactions, donated the land for the high-tech campus adjacent to its own new headquarters campus on a former horse race track site. The company expects to add 2,000 jobs as the result of its expansion.
This comes at a time when Omaha's economy is already peaking.
The city has an unemployment rate that hovers around 2%, leaving developers with the question of what to build and where... not if.
"As a whole, this is the best market we've seen in years," says Bob Kurylo of the Lerner Co.
"It's difficult to make a mistake in today's market... until that market slows," says R.J. Neary of Investors Realty.
Kurylo says the demand is great, the supply is limited "and everyone is scrambling trying to find locations."
Along with the steady and conservative real estate growth that Omaha has experienced all through the 1990s comes a flurry of activity to catch up with the demand for senior citizen assisted-living units.
The decks were cleared for further unrestricted development when the Nebraska Legislature withdrew its law requiring such health-care expansion to go through a certificate-of-need process.
"It's an exploding area, and there is a lot going on," says Chris Held of Dial Realty.
Assisted-living options in Nebraska could become more viable as the state tries to shift its Medicaid dollars from nursing-home care to other less expensive programs. Nebraska currently has 86 of every 1,000 people older than 65 living in nursing homes vs. only 57 out of every 1,000 nationally.
Among the first assisted-living projects in Omaha is Pacific Springs Village, a $35 million community of independent and assisted-living duplexes and apartments near 173rd and Pacific.
Other assisted-living projects include: * a 66-unit project under way at 120th Street and Miracle Hills Drive by Dial Retirement Housing; * Westport Village, a $7 million, 120-bed center in southwest Omaha by Vetter Holding Inc; * Brighton Gardens, a $12.5 million development at 9302 Western Ave. by Marriott Senior Living Services Inc., Washington, D.C.; and * a $6.5 million development by Crown-Point/Crown Villa near 80th Street and West Center Road.
Financing available Along with a healthy demand for Omaha real estate comes a ready availability of financing.
"We get calls from bankers every day of the week wanting to lend money on real estate," says Neary.
Still, typical of Omaha developers, there is a conservative flare that tends to keep things from being overbuilt.
"Omaha doesn't really boom, but it doesn't really bust, either," says Jim Maenner of Maenner Co.
"I question how much depth there is in the market," says Jay Noddle of Omaha's Pacific Realty.
Any talk of development in Omaha needs to start with three significant events: the continued expansion and acquisition by Omaha-based Union Pacific Railroad, the decision by First Data Resources to add 2,000 employees and a massive downtown development revolving around First National Bank.
And the First National Bank project, which along with plans of The Omaha World-Herald and the city, totals about $181 million in construction, has further enhanced prospects for a vital downtown area for years to come. The First National project, handled by Jayhawk L.T.L., could generate $1 billion in construction activity.
Multifamily causes concern If there is a major area of concern among local developers, it is in the multifamily housing area.
The market has attracted interest from out-of-town developers, partly because of an increased tax credit, according to Omaha appraiser Chris Musto.
"We are at the point of needing developers to be more conservative," says Ted Seldin of the Seldin Co., whose analysis of the market indicates that Omaha can absorb about 1,000 to 1,200 new apartment units a year.
Musto says the approximate number of new units that came on line was 2,200, compared to 1,248 in 1995 and 447 in 1994. Rents have been climbing.
Neary of Investors Realty says overbuilding could mean that occupancy levels could go from 97% to 90% or 92%.
Industrial remains tight Developers say the industrial market in Omaha remains tight but expanding.
"The city is searching for areas where industrial and light warehouse and office flex space can be built," says Noddle, "and the reason is we have companies in Omaha that are growing."
Noddle says there is a lot of demand for industrial warehouse office flex space in the 5,000 to 50,000 sq. ft. range.
The biggest recent development has been the 400,000 sq. ft. project of Lucent Technology at 120th and I streets.
"The rents for new industrial space are running $4.25 to $5.25 a sq. ft.," Neary says, "but the interesting thing is that good existing space rents for 50% to 75% of that, about $2.25 or $3."
Neary says land prices have gone from $1.60 or $1.75 to $2.25 over the last few years. Part of the cost increases is a trickle down from theabout FDR and Union Pacific expansion.
"The Omaha office market is sizzling," says Noddle. "The amount of new development is phenomenal."
As an example, the 80-acre First National Business Park at 144th and West Dodge Road, begun barely a year ago, has its last commitment, Noddle says. The park includes a 250,000 sq. ft. building that will be finished and occupied by the end of 1998, the Empire Fire and Marine Insurance building of 135,000 sq. ft., a third building of 70,000 sq. ft. by Noddle Development that is two-thirds committed before construction begins, and a 65,000 sq. ft. building by Ron Cizek.
But the big news is the First National project downtown, which takes up about half of the 32 square blocks in the development area and relocates 48 businesses. Because the area has been labeled blighted and substandard by the city, all developments in the area could qualify for tax increment financing and stand to have cooperation from the city.
The development includes a $9.4 million data and operations building for First National and a 225,000 sq. ft. First National office tower at a cost of $35.6 million. The World-Herald plans to build a new facility.
Omaha office developments are also hitting locations of longtime office hotbeds.
The Exec Centre office building is under construction on a 4.5-acre site southwest of 90th Street and Western Avenue by developer, owner and manager Wiesman Development Corp.
The 85,000 sq. ft. project is one of the few not constructed only for owner-occupants, say real estate analysts. Wiesman purchased the vacant site as part of a packagein 1993, then waited until the market was ready for such an office building. Ninety-five percent of the space has been leased with the remainder expected to be locked up by the building's late summer opening.
Ben Wiesman says Omaha's office market should be leveling off in about two years.
Many West Omaha rents are over $20 a sq. ft., according to Neary. "Many of those buildings that are renting for $21 were renting for $17 just a few years ago," he says.
Strip centers dominate retail The retail trend in the continuing hot northwest sector of Omaha is for strip malls without high-volume, big-ticket retailers.
The 35,000 sq. ft. shopping mall south of 132nd Street and West Maple Road has no major anchor, representing the changing nature of many Midlands strip centers.
An increasing number of these strip centers are becoming "mixed-use" plazas.
A 25,000 sq. ft. Eagle Run Square is under construction near 129th Street and West Maple Road. Developer Dan Malone, president of Investment Property Resources, says the second phase of the $4.5 million project includes a 15,000 sq. ft. retail building.
Overland Park, Kans., developers Michael Hardy and Jeffrey Peterson have proposed a 64-acre shopping center that would feature three major retail stores and a 16-screen movie theater.
The proposed Kennedy Center would be at the Chandler Road exit off the freeway. It would have 450,000 sq. ft. of commercial space.
It was the second large shopping development proposed in Bellevue this year. Already approved is the $34 million, 50-acre Twin Creek Shopping Center.
Jim Maenner says all major shopping centers in Omaha are virtually full. "We are able to get adequate bumps in the rent," Maenner says.
Dennis Gethmann says tenants of Mid-America Realty's neighborhood shopping centers in Omaha are experiencing 4% to 6% increases in sales.
Just when it seemed that the hotel development in the metropolitan area of Omaha might have run its course, with the opening of John Hammons' Embassy Suites on 10th Street and the proliferation of casino hotels across the river in Council Bluffs, along comes Marriott to earmark $17 million for another hotel in east Omaha. It will renovate two buildings into a 175-room hotel on a city block bounded by Dodge, Ninth, Douglas and 10th streets, between entrance and exit ramps to Interstate 480.
Bill Hord writes for the Omaha World Herald from its Lincoln bureau.