Lincoln commercial real estate market continues to improve
26 February, 2023
Despite high inflation and the threat of a recession, commercial real estate occupancy in Lincoln continues to see improvement, according to the latest report from NAI FMA Realty.
All three categories of commercial real estate — industrial, office and retail — saw improvement in vacancy rates the second half of 2022, according to the report, which comes out twice a year.
The retail vacancy rate fell to 5.9% at the end of the year, down from 6.6% at the end of 2021 and the lowest rate since the end of 2018.
"Overall, the forecast for the retail sector is upbeat and expected to remain strong," the report said.
Much of the retail activity recently in Lincoln is among smaller retailers, according to the report, especially auto stores, CBD and vape shops, and discount retailers.
But there are some larger retailers that have Lincoln plans, including Fresh International Market, which will be moving into the former Fresh Thyme space at 52nd and O streets, and Burlington and Sierra Trading Co., which are planning to locate in the former Sears building at Gateway Mall. Another retailer planning to open a Lincoln location soon is Canoyer Garden Center, which is building a store near 98th and Van Dorn streets.
Sally DeLair, a commercial adviser for NAI FMA Lincoln, said in the report that she expects "to see demand from retail and restaurant concepts to remain high."
The office market, which was hit hardest by the coronavirus pandemic, also is seeing a big recovery.
According to the report, the office vacancy rate in Lincoln dropped to 8.5% in the second half of last year, down from 10.3% in the first half of the year and 9.5% a year ago. It was the lowest rate since the first half of 2020.
The report noted that the market seems to have stabilized at pre-pandemic vacancy rates.
One thing that might be helping is rising construction costs, which are spurring companies to look at filling existing space rather than building new, the report said. As an example, it noted Bryan Health's purchase of the former Lincoln Benefit Life campus near 84th and Van Dorn streets. Bryan paid $16 million in October for the 20 acres with 165,000 square feet of space.
Overall, there was only about $2.8 million worth of building permits for new office space in the second half of the year, a huge drop from $31.7 million in the first six months of 2022.
Despite the improvement in the office vacancy rate, the report is not optimistic that things will continue to get better.
"More space is expected to hit the market in the coming months as companies lay off workers and shed underutilized office space to reduce operating costs," it said.
Perhaps the biggest surprise in the report is that the industrial vacancy rate continued to decline.
The rate was already at a historical low of 1.3% in the first half of last year. But it ticked even lower, to 1.1%, at the end of 2022.
The demand for space, coupled with not much construction, meant rates for space increased significantly, according to the report, which noted that the strong demand is likely to continue.
"All the components in the industrial market show a model that is not cooling down," Marc Hausmann, an associate broker, said in the report.
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Source: journalstar.com
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