Lincoln is seeing continued growth in commercial real estate much like its Omaha counterpart. Where employees work and how often they maintain a presence in the office is still up for discussion.
Among the bigger drivers of growth are startups and downtown developments.
“Recently, Lincoln saw a decline in the retail, industrial and office sectors of commercial real estate, however [the city] is beginning to see strong economic growth and a rising commercial real estate market,” said Ammar Abu-Hamba, associate with Lee & Associates, Nebraska.
Abu-Hamba noted that Lincoln continues to see low vacancies within the retail and industrial sectors, with 82,000 square feet of retail, 350,000 square feet of industrial, and 52,000 square feet of office delivered over the past 12 months. Under construction is 48,000 square feet of retail, 290,000 square feet of industrial, and 190,000 square feet of office space. Some notable transactions include Lincoln Trucking Co. occupying 45,000 square feet, Distribution Inc. occupying 16,000 square feet, and Animal Addicts occupying nearly 12,000 square feet.
Slow and Steady
“Lincoln’s commercial real estate market remains resilient even in today’s challenging rising interest rates and inflation,” said Andy Widman, commercial advisor for NAI FMA Realty. “Demand for commercial space and development activity has stabilized in the past six months after a couple of years of strong growth, especially within the multifamily and industrial sectors.
“Lincoln continues to see several construction projects commencing or continuing in the first half of the year. Office construction is slower than other sectors in Lincoln as companies continue to assess their real estate needs. Developers are focusing more on upgrading and retrofitting existing office space.”
Widman noted construction has started on the revitalization of The Gold’s Building, with the north side of the building set to house a Hampton Inn Hotel and restaurants, while the south side was demolished to make room for a future high-rise, which may include residential, office, and commercial space.
Other projects include Lincoln Bold, a 22-story mixed-used skyscraper in the downtown area at the corner of 9th and P streets. The largest suburban project will be Bryan Health’s April Sampson Cancer Center, a 140,000-square-foot comprehensive community cancer center anticipated to open in early 2024.
“Industrial activity remains strong largely due to fewer available opportunities in industrial space in the area to meet the demand and land needed for new industrial projects is scarce,” he said. “One local developer, Las Brisas Land Development Co., has built three large spec warehouses over the past couple years that total about 509,000 square feet and all are 100% occupied.”
Robin Eschliman, president of Eschliman Commercial Real Estate, said that while some downtown offices and Class C and Class B office buildings have had some difficulty attracting tenants and buyers, the suburban market in Lincoln is stable and the number of office buildings sold in Lincoln this year is on track with last year at this time.
“Lincoln has always had a robust business community mostly comprised of small companies,” she said. “There is currently a shortage of Class A small office buildings under 5,000 square feet, and we are seeing sharp inflation in prices, not just for new construction, but for good quality office buildings built in the last five years.
“In the warehouse and industrial sector, we continue to have a shortage of buildings larger than 15,000 square feet, although the number of requests for space in this size range has dropped. Most notable is a number of small warehouses under 5,000 square feet that have suddenly come on the market for lease. Most of these types of spaces are occupied by the trades, and interest rates and a slowdown of new home construction has no doubt contributed to this.”
Eschliman said that Lincoln receives a fair share of tourism dollars and due to this, there is a new casino in the southwest portion of the city, with construction for a hotel planned. In addition, the state legislature approved a turnback tax, which could provide approximately $105 million for a potential convention center. And while there isn’t much new retail construction happening in the area, malls and strip centers are largely fully occupied.
“These projects show proof of growth in each corner of the commercial real estate economy,” Widman said. “Locally, as compared to nationally, we continue growing at 1.5% to 2% per year. While we may be slow and steady, we are consistently building during uncertain times.”