Omaha—The strong economy and rising demand for new units are fueling a boom in this city’s midtown district.
The city experienced healthy job growth in 2007, with wages rising 4.5 percent and the unemployment rate nearing record lows of around 3 percent, according to research and brokerage firm Marcus & Millichap.
Five Fortune 500 companies are headquartered in the area, including Berkshire Hathaway, ConAgra, Union Pacific, and Mutual of Omaha, and the city is also home to the headquarters of The Gallup Organization, TD Ameritrade, and PayPal.
“Omaha has decent employment growth, better than what you’d see in the Midwest, and their population growth is good,” said Sam Chandan, chief economist for market research firm Reis, Inc., based in New York City. “They’ve got strong demographics, which are creating more momentum on the demand side than what we’ve seen in the Midwest as a region.”
Apartment inventory has remained in check, with limited construction in 2007. Developers delivered 420 apartments in the Omaha area in 2007, down from 552 in 2006. The vacancy rate has gone down over the last couple of years, from a cyclical peak of 7.3 percent in the first quarter of 2005 to 5.6 percent in the third quarter of 2007.
That rising demand has given some momentum to rent growth, Chandan said. Owners saw modest rent growth of 1.1 percent in 2007, averaging $640 at year-end, but rents are expected to grow faster for the next few years in response to rising demand. Reis forecasts 2.7 percent growth in 2008, another 2.6 percent in 2009, and further 2.8 percent growth in 2010, with rents averaging $693 by that December.
In response to rising demand, some massive mixed-use infill developments are under way in midtown Omaha.
Construction on Midtown Crossing, a $300 million mixed-use project, began in September 2007. The development will feature seven buildings with 565 residential units consisting of 268 apartments and 297 condominiums, and about 220,000 square feet of retail space. Mutual of Omaha is leading the development, which is located just east of its headquarters.
Another significant development in midtown is Aksarben Village, which is rising from the ashes of the historic Aksarben racetrack. The $240 million, 80-acre development is in the first phase of construction, and will feature more than 600 Class A housing units to go along with 750,000 square feet of office space, 250,000 square feet of retail space, and a 140-room Marriott Courtyard hotel when it is completed in 2011.
Two developers are working on the residential portions of Aksarben Village. Broadmoor Development is building two four-story apartment buildings totaling more than 258 units, and has proposed building 70 townhomes. Alchemy Development is building 121 apartments and 20 townhomes. The lead developer of Aksarben is Noddle Cos., an Omahabased owner and developer.
More residential units are planned for later phases of the development. “There are soon to be a couple of other residential developers doing smaller multifamily buildings, whether for [ownership] or for a lease,” said Jay Noddle, president and CEO. He declined to name the developers, because he said the deals were in the early stages. “I would imagine when we get to full build-out of the village, we would have about 650 units,” he said.
Noddle expects the first phase of the five-phase development to be finished in late 2008 or early 2009.
In the last decade, the city cleaned up about a mile of riverfront along the Missouri River that was previously occupied by industrial ruins. A boardwalk now lines the river, and the city is developing a pedestrian bridge, to be finished this year, that will connect Omaha to Council Bluffs, Iowa.
The main residential development along the river is Riverfront Place. The first phase, a 14-story, 56-unit condominium tower, was finished in late 2006. Construction has begun on a second 50- to 55-unit condominium tower, and is expected to be complete in 2010. In all, the development will span six acres.
These new developments underscore the city’s desirability. It’s not just new construction that’s booming. Omaha’s strong and steady local economy also attracted a lot of investment activity in 2007. Transaction volume was up 25 percent over 2006, and the median sales price in Omaha rose 12 percent in 2007 to $65,500 per unit from about $60,475, according to Marcus & Millichap.