Commercial Real Estate in Lincoln – June 2021
The COVID pandemic affected nearly every segment of the economy, and Lincoln’s Commercial Real Estate (CRE) industry certainly did not go untouched during the rollercoaster ride of 2020. The retail and office markets took major hits after retail lockdowns and the massive move to remote working for a majority of the city’s office-based businesses.
The downtown area was hit maybe the hardest, as consumers and office workers worked from home, college students took classes online, and COVID led to mandated shutdowns. By the end of 2020, the retail vacancy reached 7.1%, up from 6.6% year-on-year, and the office vacancy rate reached 9.6%, up from 8.3% year-on-year. At the same time, however, the industrial CRE sector thrived, driven in great part for increased demand for warehouse space for online companies creating delivery hubs.
Nearing the halfway mark of 2021, however, the Commercial Real Estate market is showing signs of renewed life, as uncertainty fades, vaccinations are well underway, and equity markets are attractive against low Treasury yields.
“We are seeing quite a bit of activity with smaller businesses and new ventures,” said Guiderock Commercial Realty LLC (guiderockrealty.com) Broker and Certified Property Manager Cathy Kottwitz. “We’re also seeing more discussion about space utilization, particularly allocation of share areas versus private areas.”
Still, rising construction costs are posing a bit of a challenge in getting improvements done in a cost-effective way, and it remains unclear when that might stabilize.
“We hear often from people that they expected a bigger drop in pricing for both leased spaces and properties for sale,” Cathy said. “Lincoln has always been a less-volatile market, though, and for the most part, pricing has not declined given fairly strong demand. Since there are a variety of factors that go into decisions about commercial real estate, we help our clients figure out the best path within the current market to get what they need most.”
Guiderock Commercial Realty understands that commercial real estate is an ever-evolving industry, they strive to help you get the most out of your transactions and help you make the best decisions possible about leasing and investing in commercial real estate, with services including representing tenants and buyers, follow-up after every transaction, property management, and other real-estate consulting services.
“Whether you need brokerage services or other assistance, we can serve as your guide to commercial real estate, keeping you focused on everything else you need to do,” Cathy said.
Highs and Lows
Greenleaf Commercial Real Estate (greenleafcommercial.com) Director of Brokerage Services Brett Harris says that office leasing is probably the softest sector in commercial real estate market in Lincoln right now, but the local market overall is fairly strong—in spite of the disruption created by the pandemic.
“The uncertainty of what the office sector’s space needs will be going forward has created a softening in the demand for office space,” Brett said. “Overall, though, quality properties are selling at good prices, and there are a lot of investors on the sidelines looking for acquisition opportunities. The scarcity of available properties is driving prices up and keeping cap rates low.”
In the office sector, many companies have been reluctant to commit to new leases so they are looking for flexibility in their lease terms due to the uncertainty about how the work model might change as a result of the pandemic.
“The trend toward a more remote workforce has been accelerated by COVID, and although there will be some return to normal as this year progresses, many companies will rethink their space requirements,” Brett said. “As lease terms expire over the next several years, it is likely that we’ll see more companies downsizing their footprint and using the space they do have differently.”
Creating flexibility and adapting to change are also the way of the retail real estate marketplace on the downside of the pandemic.
“Everyone has had to adapt to the pandemic,” Brett said. For retailers and restaurants, there’s been a premium on drive-thru, takeout, and delivery services. As a result, well-located properties with a drive-thru are in high demand for food retailers.”
Construction costs are one of the biggest concerns in the commercial real estate market right now, and the uncertain outlook makes economic markers difficult to meet.
“Commodity prices for supplies like lumber and steel have increased dramatically this year, and it’s unclear when they might stabilize or drop back down,” Brett said. “This trend is making it more difficult to make projects economically feasible. It will be difficult for the Lincoln market to support the rents necessary for new projects going forward if conditions don’t change.”
EXIT Realty Professionals (exitrp.com) in Lincoln is another fabulous real-estate brokerage company in the local marketplace. Operating under a franchise umbrella of EXIT, their partnership yields advantages in the form of tools and resources for agents and clients in meeting the changes in the marketplace today.
“We deal mostly in apartment complexes, and have sold multiple ones over the years,” said EXIT Realty Professionals Broker/Owner Terry Lindstrom. “Things seem to be selling high, because people are betting on interest rates and people raising rents. Meanwhile, strip malls with local businesses are taking a big hit because of Big Box stores that are able to purchase products in bulk, at lower prices than any locally owned business.”
Whatever your real estate needs, EXIT has in-depth market knowledge, a cooperative culture, shrewd negotiators, smart marketing, geolocation technology and more to help you get what you need, be it commercial or residential.
“The EXIT philosophy—all the way up to corporate—it to treat clients and agents like family,” Terry said. “It is about identifying your needs and wants and fulfilling your life dreams.”
HIP Realty (hiprealty.com) (Holroyd Investment Properties) offers commercial “executive suites” that are in high demand and a good fit for times of uncertainty. HIP leases an office in these suits to a professional—everything from attorneys to stockbrokers to therapists—and then provides shared common areas, like a kitchen and conference room, as well as providing a shared receptionist to answer calls and welcome guests.”
“The demand for these types of facilities is strong,” said Founder and President Michael Holroyd. “And it rolls well with the trend that has more people working remotely, especially now. We have options that allow people to work from home but basically lease a receptionist and a professional address for their business. It’s a perfect fit in COVID times when uncertainty and remote working are the norm.”
Even with all of the challenges in the current commercial real-estate marketplace, super-low interest rates are so attractive for companies looking to buy.
“Those rates make it appealing to purchase property,” Michael said. “It’s such a good time to buy, but there’s so much uncertainty that people are apprehensive to jump into something new. It’s a bit of a Catch-22, but I am optimistic about the long term. Once we get kick-started and get the momentum moving forward as an industry, we’ll recover really well.”
With the challenges and volatility of the commercial real estate market in 2021, it’s crucial that you have a broker/agent who knows the Lincoln market well. We recommend contacting the professionals featured here to navigate the journey with you!