Omaha's Commercial Real Estate Market Navigates Interest Rate Challenges While Industrial Sector Thrives

Written by:

Steve Marcinuk

Date:

09 Sep 2025

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The Omaha commercial real estate market presents a study in contrasts, with industrial properties experiencing high demand while office spaces struggle with elevated vacancy rates. After nearly five decades in the industry, John Dickerson, Executive Vice President at OMNE Partners, offers a seasoned perspective on how current market conditions compare to previous cycles and what lies ahead for investors and developers.

Market Fundamentals Remain Strong

Despite national economic headwinds, Omaha’s market fundamentals remain resilient. The metropolitan area has grown to over one million residents, with a 3.2% unemployment rate below the national average. Consumer spending increased 2.4% in the first half of the year, with retail sales growing 2%.

“Omaha never gets as affected by the economy as other areas like the coasts and down south Texas and Louisiana,” Dickerson explains. “We’re strong. We still have one of the lowest unemployment rates.”

Omaha attracts new residents with its low cost of living and high quality of life. Offutt Air Force Base, the Midwest’s largest military installation, contributes to this migration pattern.

“It’s interesting that Air Force people that get stationed at Offutt might even get transferred before they’re done with the service. And where do they move to? They move back to the Omaha area and stay here for the rest of their lives,” Dickerson notes.

Industrial Sector Leads Market Performance

The industrial sector stands out with vacancy rates at just 2.5%. Nearly 5 million square feet of new construction is underway, reflecting steady demand from technology companies and industrial users. Google and Facebook have expanded their presence, driving demand for various industrial properties.

“There were 81 lease deals done in industrial so far this year, and most of those were 10,000 square feet or less,” Dickerson reports. “There were some bigger deals done, but most of them are the smaller deals.”

The prevalence of smaller transactions suggests a healthy mix of established companies expanding operations and new businesses entering the market.

Retail Market Shows Stability

Retail properties have a healthy 5% vacancy rate, though leasing activity is measured. Only 66,000 square feet of retail space has been leased year-to-date, with 329,000 square feet under construction. Much of the new retail development is concentrated in western Omaha, following residential growth.

“There was a day early in back in the 50s that there was nothing west of 72nd Street. Now, Omaha area goes out past 204th,” Dickerson observes.

Office Sector Faces Headwinds

The office market faces challenges, with vacancy rates reaching 13%. While this is below distressed markets like San Francisco and New York, it’s a notable increase from pre-pandemic levels.

“There are no totally vacant buildings. However, our apartment sector is very massively growing and developers are taking over office buildings downtown and repurposing them into apartments,” Dickerson notes, with two very tall office buildings being converted to about 600 units.

The office sector reflects broader national trends as companies reassess space needs. New construction has virtually ceased, with developers taking a wait-and-see approach.

Apartment Development Surge

Multifamily development is active, occurring “from downtown all the way out west, northwest, southwest.” Apartment vacancy rates remain low at 4%, indicating strong absorption despite new supply. This boom responds to a shortage of single-family homes, creating demand for rentals. New apartment construction mirrors retail patterns, following population growth into suburban areas.

Interest Rate Impact on Investment Sales

Investment sales face significant headwinds due to the disconnect between seller expectations and current financing realities. Properties purchased during the ultra-low interest rate era are marketed at prices that don’t align with today’s costs.

“Properties that come on the market to be sold are being put on the market by people who bought them back when interest rates were really low. Cap rates got much lower, and now, because of the economy and interest rates are back to normal, they’re asking these outrageous prices, and it doesn’t work for an investor,” Dickerson explains.

Most current sales involve owner-users purchasing single-tenant properties for their own operations.

Federal Reserve Policy Critique

Dickerson offers pointed criticism of Federal Reserve policy, arguing that interest rates should have been normalized much earlier.

“The Federal Reserve did not lower interest rates soon enough. They lowered them when we had the economic downturn in 2008. They should have probably started raising the rates again back in 2015 at the latest, and all these overpriced purchases would never have happened,” he states.

This perspective reflects frustration among real estate professionals who must navigate asset price distortions caused by prolonged monetary accommodation.

Land Values and Development Costs

Land sales provide insight into development economics, with 44 sites sold year-to-date at an average price of $69,000 per acre. These values reflect confidence in Omaha’s growth prospects while remaining reasonable compared to coastal markets.

Developers remain active in site acquisition, positioning for future projects as market conditions improve.

Looking Forward

Market participants are closely watching Federal Reserve policy for signals about future interest rate direction. Any reduction in rates could unlock pent-up demand from buyers and sellers awaiting better financing terms.

“My prediction is that if the Fed does start lowering their interest rates back a little bit, things are gonna get more active, because there are people out there that want to buy, and they’re waiting,” Dickerson predicts.

Omaha’s strengths, population growth, economic diversity, and reasonable costs, position it well for recovery once financing normalizes. The industrial sector provides a foundation for broader improvement, while apartment development addresses housing needs.

For investors and developers, Omaha remains a market where patience may be rewarded. The disconnect between pricing and financing creates challenges, but also opportunities for those ready to act when conditions align. The city’s steady growth and resilience suggest current headwinds are likely temporary rather than structural.