Research & Forecast Report OMAHA | RETAIL Second Quarter 2018 The Retail Landscape Market Indicators Relative to prior period Q1 2018 Q2 2018 Q3 2018* Is A Changin’ VACANCY NET ABSORPTION The vacancy rate for the Omaha retail market decreased slightly CONSTRUCTION to 8.3 percent in the second quarter of 2018 from 8.4 percent in RENTAL RATE the first quarter. In the second quarter of 2018, 57,826 square * Projected feet of positive absorption took place and 49,780 square feet of newly constructed space was delivered. A new strip center on the The Omaha market will soon take a big hit that will be difficult to southeast corner of 204th and Pacific Streets opened 57 percent fill. After Bon-ton Stores’ announcement earlier in the year that pre-leased and is now nearly 100 percent leased. Another strip they would close both Younkers stores in Omaha (Oak View Mall center opened, at the site of the former Venice Inn, mostly occupied and Westroads Mall locations), Sears released the news that they by Legends Bar and Grill. would be closing their Oak View Mall location. Both stores will While there has been much news nationally and locally about the be closing their doors in September. These vacancies will add changing retail landscape, Omaha has weathered the changes well. over 300,000 square feet of negative absorption to the market in Other retailers or alternative types of users have backfilled much the third quarter of 2018. With the loss of two of the four anchor of the space left vacant by the closure of national retailer stores. tenants, Oak View Mall will likely become a “dead mall” or be While traditional malls are struggling, there was positive activity in redeveloped in to another use as there are very few, if any, retailers the Omaha market. Sierra Trading Post opened in April, occupying that could fill those large spaces. The ring road surrounding Oak the remaining 20,000 square feet of what used to be Kmart. At View Mall has changed over the years with the former Linen’s N Home is now occupying the former Shopko at the Marketplace in Things space now an entertainment center and the former HyVee Council Bluffs. It was announced that Alamo Drafthouse will take space now occupied by a church and a cheer club. Dick’s Sporting the place of the Marcus Theater at Midtown Crossing in the fall or Goods closed their doors last quarter and ToysRUs went out of winter of this year. In the former Brix space at Village Pointe, a business, closing all their stores in the second quarter of 2018. Oak Bently dealership will open in December of this year. Furthermore, View Mall is located in a western suburban area of Omaha with four additional tenants were announced at the Capitol District strong population density and incomes. This site would be perfect downtown; Jewell Jazz Club, Epoca Cantina, Burgerim and for mixed-use or multi-family development. As with other mall Moe & Curly’s. redevelopments, it will likely be several years before anything happens. Sale volume for the Omaha retail market was fairly quiet. Only 154,933 square feet of retail product in the Omaha metro traded Retail Vacancy hands for the quarter. While volume was slow, the sales that did occur commanded an average of $154.15 per square foot. 10% Vacancy Investment sales of single-tenant, long-term leased product can sell for a much higher price than multi-tenant properties with shorter 9% lease terms and any vacant space. 8% Nationally, retail sales are up overall but more sales are taking place online and fewer sales are taking place within malls. According to the U.S. Census Bureau’s preliminary June report, U.S. retail sales 7% increased 6.6 percent year-over-year. The largest increase was 6% a 21.6 percent increase in gas station sales, reflecting increases Q4 16 Q2 17 Q4 17 Q2 18 in the price of gasoline. If you removed that category, the annual increase was 5.4 percent. Of those increases, non-store sales increased at 10.2 percent annually. The big headline in national online retail was the U.S. Supreme Court’s June ruling that states can now force online sellers to Asking Rental Rates collect online sales tax. Tax-free purchasing has always been a major incentive for online shoppers. Perhaps this ruling could put $16 more money back in the pockets of brick-and-mortar stores. This is good news for states and could mean $30 to $40 million more $14 annual revenue for the state of Nebraska. In conclusion, Omaha will experience negative absorption in the $12 short term. There are unanswered questions regarding the future of traditional mall space, but other retail product is performing $10 Q4 16 Q2 17 Q4 17 Q2 18 admirably. E-commerce will continue to disrupt the retail landscape, but growth in this sector could slow due to a change in the federal All Types Neighborhood/Community Center law regarding sales tax. Strip Center Regular Power Center Strip Ctr Recent Transactions - LEASE AND SALE ACTIVITY Reg/Pwr Ctr Nbrhood/Comm Lessee/Buyer Lessor/Seller Property Size SF/Sale Price All Types US Bank National Association JSMN Mall LLC Brentwood Village Shopping Center $4,100,000 Pudami Omaha NE LLC T L Street Marketplace Pads NE LLC L Street Marketplace Building T $3,775,000 JD Heiskell & Co George & Susan Venteicher 180th Plaza Phase III $2,200,000 Kwik Shop Inc Dillon Real Estate Co Inc Kwik Shop Portfolio $1,892,900 Eagle Land Holdings LLC Access Bank Access Bank $1,450,000 2 Omaha Research & Forecast Report | Second Quarter 2018 | Retail | Colliers International Market Overview Omaha - Retail Overview VACANCY ABSORPTION CONSTRUCTION RENTS Total Vacancy Vacancy Net Absorption Under Const Rental Rate Submarket SF SF % Q2 SF 2018 SF SF Avg ($/SF) CENTRAL 6,061,568 322,407 5.3% 15,752 9,077 11,800 $13.36 COUNCIL BLUFFS 4,155,213 676,037 16.3% (3,150) (29,233) - $13.17 DOWNTOWN 196,016 2,085 1.1% 5,820 5,820 247,769 $16.00 NORTH 1,933,222 225,479 11.7% (629) 46,500 - $9.47 CENTRAL NORTHEAST 976,288 27,572 2.8% 5,103 (5,103) - $10.92 NORTHWEST 3,161,321 193,801 6.1% 3,748 37,771 77,848 $13.80 SARPY EAST 4,780,342 337,399 7.1% (11,382) (11,080) 665,685 $14.60 SARPY WEST 533,792 35,978 6.7% - 4,204 13,800 $19.56 SOUTH 989,588 47,510 4.8% 9,550 12,335 - $9.21 CENTRAL SOUTHEAST 1,144,073 173,222 15.1% 13,601 19,550 - $10.21 SOUTHWEST 8,892,259 805,858 9.1% 17,888 5,457 96,513 $13.00 W DODGE ROAD 2,115,806 64,030 3.0% 1,525 10,890 - $15.46 CORRIDOR TOTALS 34,939,488 2,911,378 8.3% 57,826 106,188 1,113,415 $12.78 About Colliers International MARKET CONTACT: Colliers International Group Inc. 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The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 3 North American Research & Forecast Report | Q4 2014 | Office Market Outlook | Colliers International.