Still plenty of office space

Omaha's office market is working down its glut of empty space, a sign that some businesses are or plan to start hiring employees to work in that vacant space.

The job numbers remain small, however, and the market still suffers from a lot of available space — 1 million square feet more than is considered healthy.

Local commercial real estate firms report that the market filled 71,000 square feet in the second quarter and lowered the vacancy rate from 16.9 percent to 16.6 percent.

Barry Zoob, vice president of Grubb & Ellis Pacific Realty, said he was careful not to draw conclusions about what the office market's movement means about the economy. Zoob said the market has stabilized, but its recovery is “slow at best.”

“We're far from what I would call a steady pace of recovery,” he said.

One of the most notable recent deals saw the Red Cross leasing space in Sarpy County for a call center that will add 125 jobs.

Next week, three partnering IT companies — Jelecos, Data Media Solutions and Heimes Resources — plan to move into a larger space at the renovated 450 Regency office building. The companies, which have about 40 employees now, have been growing, with Jelecos recently acquiring design company iAppeal Media.

With room in its office to grow, the companies plan to add 20 jobs in the next three to five years, said Leon Thomas, president of Jelecos, an IT consulting and services firm. But the job creation may not start until 2011 as the economy continues recovering, he said.

Jelecos' Thomas characterized people's attitude about the economy as “cautiously optimistic.” Jelecos has seen an increase in companies considering its IT services, but firms are taking longer to make decisions, he said.

“Our goal is to come out really to have the ability to be a leaner, stronger, much more capable organization,” Thomas said.

Speculative office construction is at a standstill. New construction is limited to offices where tenants are driving the project, including TD Ameritrade's new headquarters and Pinnacle Bank's new headquarters in west Omaha.

That means commercial property owners are counting on job creation to lift the office market.

From its peak in May 2008, the Omaha-Council Bluffs metro area shed 18,300 jobs as of early this year, according to seasonally adjusted figures from the Greater Omaha Chamber. But since February, the metro area has recovered 2,700 of that loss.

The office market's vacancy peaked at the end of 2009 at about 17 percent, according to CB Richard Ellis/Mega. Going back to 2006, the vacancy rate was a more healthy 12 percent — offering enough space for expansion while not far exceeding demand.

Still, more than 3.1 million square feet of space is sitting empty today.

The Old Mill area, which is being rejuvenated by TD Ameritrade's project, has the lowest vacancy rate — 9.3 percent — of any commercial submarket. Northeast and southwest Omaha are next lowest at around 12 percent.

Downtown Omaha offices are 19.7 percent vacant. The southeast part of the metro, including South Omaha and Bellevue, are highest at nearly 27 percent.

T.J. Twit, a brokerage associate with the Lund Co. said he is hopeful that the overall increase in leasing activity indicates the broader economy is improving.

“The economic downturn cut pretty deep,” Twit said. “There's going to be some trepidation. Nobody's really jumping in with both feet right now.”

Contact the writer:

444-1128, jeff.robb@owh.com

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