Shopping Centers Today

JUL 2014

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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O N T H E G R O U N D : O m a H a , N E b R a s k a Landlords gain clout as more retailers move in The retail real estate market in Omaha, Neb., is showing positive signs for both developers and landlords, thanks to high absorption and low vacancy. The overall vacancy rate of 9.8 percent is the low- est since 2005, according to a report by The Lerner Co. brokerage, and a marked improvement over the 2012 vacancy rate of 12.3 percent. Even more impressive, though, is that some 860,000 square feet of new retail space came to market last year, the largest addition in five years, and about 1.3 million square feet got absorbed — versus 157,000 square feet in 2012. Additionally, the Lerner report says that landlords have been timid about raising rents, with the exception of the high-impact outparcel or street-retail locations favored by fast-casual restaurants. Because these types of spaces are in short supply, rents are reaching $30 to $40 per square foot there. But moderately increasing rents are expected for all types of retail spaces during the coming year, provided a given shopping center has strong occupancy numbers. "The Omaha retail real estate market has returned to its heyday," said Jay R. Lerner, president of Lerner Co. "High-quality retail spaces are in increasingly short sup- ply, putting upward pressure on rents and landlord concessions. The reason for the high absorption rate is twofold: Much of the newly built large projects are single-tenant buildings, hence 100 percent occupied — Wal-Mart, CVS, Hobby Lobby. Secondly, class-A small-tenant space has been in high demand, particularly by restaurant users." Among the areas performing particu- larly well are the north central and northwest submarkets, with vacancy rates of only 4.5 percent (down from 9.2 percent in 2012) and 6.1 percent (down from 6.7 percent in 2012), respectively. What all of this means for new-to-market retailers is stiff competi- tion for 'A' locations, fewer tenant-improve- ment allowances and increased terms of seven to 10 years with less free rent, says Brian Kuehl, a broker at locally based Inves- tors Realty. "In most new anchored shop- ping centers, smaller tenants, [about] 5,000 square feet, can expect to see rents north of $24 per square foot, NNN," he said. "For those class-B, unanchored neighborhood/ convenience shopping centers, the days of six months' free rent on a five-year deal, significant TI allowances, termination op- tions and below-market rents are slowly becoming a thing of the past, as many owners are enjoying increased occupancy and more favorable terms for the lessor." In terms of new developments, the Lerner report says that 2014 will bring the start or completion of as many as five mixed- use developments with retail components. These include three in the south central submarket's Aksarben Village (a new devel- opment to house the 70,000-square-foot Gordman's corporate headquarters plus 30,000 square feet of ground-floor retail space; the 150,000-square-foot Waitt Plaza, with 40,000 square feet of retail space; and a new multistory building with nearly 30,000 square feet of ground-floor retail). Additionally, the Loveland Centre redevelop- ment, also in the south central submarket, was begun last year with nearly 45,000 square feet of retail space. The Capitol District, in the east downtown area, is a highly anticipated mixed-use project that will contain 90,000 square feet of retail. Also of note is the demolition of the vacant, 196,000-square-foot Nebraska Crossing shopping center, in the southwest submarket, which was replaced by the 350,000-square-foot Nebraska Crossing Outlets. Although the project lacks tradi- tional outlet anchors, some of the big-name tenants here include Coach, Kate Spade and Michael Kors. "The reports are that initial sales were vso strong that several of the existing tenants are already look- ing at expansion options," said Kuehl. The Crossroads Mall, in the south central submarket, is also expected to see redevelopment into a mixed-use project called Crossroads Village. Preliminary plans there call for 400,000 square feet of retail space, plus 400 luxury-loft resi- dential units, 300,000 square feet of of- fices and a 135-room hotel. As an anchor of the coveted intersection of 72nd & Dodge, "the redevelopment of Crossroads Mall will have a very positive effect on reducing the current vacancy rate to a considerably lower figure," said Lerner. Overall vacancy rates are expected to decrease by at least 100 basis points this year, according to the Lerner report, and perhaps by 250 basis points, if the demolition of Crossroads Mall does occur. And with continued declines in vacancy, landlords will be in the cozy position 52 s C T / J u L y 2 0 1 4 C r o s s i N g o u t l e t s 52A_SCT_JUL14_OTG-Omaha.indd 52 6/12/14 5:59 PM

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