How the Omaha Retail Market Is Adapting to Big Box Store Closures
The pace of evolution in the retail sector is accelerating in a manner that few would have anticipated even five years ago. E-commerce has proven to be a very powerful disruptor, affecting both retailers and property owners alike.
For some who have had the foresight and financial resources to adapt to this change, the disruption has brought opportunities for growth and increased market share. Clearly, not all have been able to adapt — some due to lack of execution and others seemingly caught in circumstances beyond their control.
Despite the turbulence within the retail category, overall U.S. retail sales grew a very respectable 4.2 percent during 2017, according to the U.S. Department of Commerce. The growth is attributed to continuing gains in employment and a marked improvement in economic growth during the second half of the year.
On the local level, the Omaha retail market exhibited moderate improvement during 2017, following a year of weak performance in 2016. The market absorbed just over 364,000 square feet during the year (see chart), slightly under the average annual rate of 378,000 square feet for the past five years. The overall vacancy rate decreased from 11.2 percent to 10.5 percent during the year as vacancy improved in four of the seven submarkets.
The bulk of the improvement occurred in the Southwest submarket, which absorbed more than 331,000 square feet. A large portion of Omaha’s new housing supply is in this market, with the remaining in the Northwest and Sarpy county submarkets.
Consolidation has continued to occur within the junior and anchor box portion of the market. During the last 14 months, retailers Shopko, Gordmans, Kmart and Office Max have collectively closed a total of 10 stores containing just over 703,000 square feet. Excluding the anchor vacancies within Crossroads and Mall of the Bluffs, the Omaha market now has 29 empty boxes comprising approximately 1.45 million square feet, which represents 40 percent of the total vacancy.
While consolidation has taken its toll, several anchor retailers have been adding new stores. TJ Maxx, HomeGoods and Burlington recently opened within the former Kmart at Eagle Run Shopping Center located on the northwest corner of 132nd Street and West Maple Road.
Aldi and Cavender’s took advantage of prime space that was left vacant at 72nd and Jones streets when Sports Authority went out of business. Also, Fresh Thyme opened its second and third Omaha stores at 132nd Street and West Center Road and 175th Street and West Center Road.
Five years following the initial announcement that the Capitol District would be developed in downtown Omaha, the much anticipated entertainment and restaurant component is coming to life, with as many as a dozen tenants expected to open during the coming year.
Ross Dress for Less just opened its first Omaha store at L Street Marketplace and could have as many as three additional stores open by year’s end. Ross is eventually expected to operate as many as six stores in the Omaha market.
Sierra Trading Post will join its TJX sister stores TJ Maxx and HomeGoods when they open at Eagle Run in April. Five Below, a discount store that primarily focuses on teen and pre-teen customers, is actively negotiating multiple letters of intent, although the Five Below stores are not expected to open until 2019.
TopGolf, an exciting entertainment and event venue, will anchor a 14-acre project under development immediately west of Westroads Mall on 102nd Street. TopGolf is expected to open for business in early 2020.
Noddle Development continues to pursue anchors for the retail component of West Farm at Boystown and is known to be targeting multiple retailers that currently don’t have a presence in the Omaha market. West Farm is expected to open in 2020.
In summary, the Omaha retail market remains vibrant despite the pressures imposed by e-commerce and consolidation in junior and anchor box categories. Omaha’s economy is very healthy. We expect improving conditions for at least the next 12 to 18 months.
— By Rick Quinlevan, President of Brokerage Services, The Lerner Company. This article originally appeared in the April 2018 issue of Heartland Real Estate Business magazine.