Q1 2022 Industrial Market Research Report

Omaha is a natural distribution hub due to its central location, strong agriculture industry, and the ability to transport via rail, road, river, and air. Thanks to the diverse array of demand drivers serving the region, Omaha’s industrial market has remained remarkably robust in the face of a confluence of extraordinary challenges – the COVID-19 pandemic, supply chain bottlenecks, soaring construction material prices, and persisting labor constraints. Bolstered by surging demand for e-commerce and the expansion and transformation of supply chains and distribution networks, demand for Omaha’s industrial space is at record levels. Annual leasing volume in 2021 reached an all-time high, registering nearly 60% more leased square feet than the metro’s next strongest year in 2018 and roughly doubling the metro’s 10-year annual average.

Record low availability rates and shifting ownership profiles have fueled record-setting rent growth. Annual rent growth reached an all-time high by the end of 2021, and has continued its upward climb so far in 2022 Q2. At 7.1%, year-over-year rent growth is roughly 50 basis points higher than the record-setting growth in 2021 and is more than three times the metro’s average annual rent growth witnessed over the past decade.

The confluence of torrid demand-side conditions, structurally tight fundamentals, unprecedented rent growth, and a chronic supply-constrained environment have incited historic development activity. After registering a record-setting year of deliveries in 2021, Omaha’s current under construction stock of 4.4 million square feet sits near an all-time high, roughly doubling the metro’s 10-year average. Consistent with Omaha’s hallmark of mostly built-to-suit developments, roughly 90% of the current supply pipeline is pre-leased. With such robust pent-up demand for modern industrial space and a dire lack of availability, Omaha’s vacancy rate is projected to remain tight at under 4.0% through the fiveyear forecast period
(according to CoStar’s Base Case scenario).

In addition to single-asset trading activity, red-hot investor demand and less uncertainty among all parties continue to generate strong demand for larger industrial transactions and portfolio deals, pushing sales volumes to new heights. A record setting $225 million traded hands in 2021, which is roughly 14% higher than the metro’s previous record set in 2019 and nearly doubles the 10-year annual average.