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Lincoln retail, office vacancies appear to stabilize, report finds
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Lincoln retail, office vacancies appear to stabilize, report finds

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lincoln floral market

Lincoln Floral Market is one of several smaller Gateway Mall tenants that has opened this year.

Aug.06 -- Redfin CEO Glenn Kelman discusses how home and office sales have been affected by companies deciding to delay return to office plans as cases of the Covid-19 delta variant surge. He also talks about his company’s 2Q earnings and climate change’s effect on real estate. He speaks with Emily Chang on “Bloomberg Technology.”

Commercial real estate appears to have stabilized in Lincoln after a rough patch caused by the coronavirus pandemic.

The latest report from NAI FMA Realty shows that the local retail vacancy rate remains at the same level it's been for the past year, while conditions in the office market improved slightly in the first half of 2021.

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The report shows that the retail vacancy rate in Lincoln remained at 7.1% at the end of June, which, while historically high, is the same as it was both at the end of 2020 and at the same point a year ago.

The good news is that, after a wave of store closings both large and small in 2019 and 2020, there were few if any of note in the first half of 2021.

The bad news is there also weren't any major store openings to fill up the hundreds of thousands of square feet of empty big box space around the city.

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There is some movement on that front, though. Ross Dress For Less appears to be getting close to opening its first Lincoln store at Gateway Mall in the former Forever 21 space. And Hy-Vee has announced plans to open a new large standalone liquor concept in the former Bed Bath and Beyond space along North 27th Street.

There also has been some success in filling smaller retail spaces.

Gateway has filled a number of its smaller spaces with local and regional tenants over the past year, and national chains such as dollar stores and auto parts retailers continue to open new Lincoln locations.

"Pent-up demand from tenants in the small- to- mid-sized range were the retail market drivers in the first half, with many leases signed by tenants in the 1,500- to 2,000-square-foot range," NAI FMA sales associate Sally DeLair said in the report.

While the retail market is holding steady, the office market actually has improved somewhat.

NAI FMA's report showed the office vacancy rate was 9.2% as of June 30, still well above the 8.3% rate from a year ago but lower than the 9.6% vacancy rate at the end of 2020.

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Office vacancy soared in the second half of last year as many companies kept most or all of their workers home due to the pandemic. Some of those workers started coming back in the spring and early summer as COVID-19 cases started to decline sharply and vaccinations ramped up, but some companies halted or reversed plans to bring workers back as cases rose again due largely to the delta variant.

In June, before COVID-19 cases started to rise again, the Downtown Lincoln Association surveyed 109 companies with offices downtown representing more than 4,300 employees.

The survey found that only 55% of the workers were working in-person on a daily basis, and only 31% of the firms expected to have all employees working in person within the next three months.

Downtown Lincoln Association president and CEO Todd Ogden said the organization plans to survey companies again in October.

Richard Meginnis, president of NAI FMA, said in the report that there remains a large amount of "shadow space" in the office market, or space that is leased but not actually occupied because employees are still working at home.

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"There will come a time when companies must make a decision on their (long-term) plans for the space while facing a workforce reluctant to return to buildings," he said.

The other commercial real estate sector, industrial, saw its vacancy rate rise, but from a record low at the end of 2020.

The rate stood at 3.2% at the end of June, up from 2%, the lowest rate ever recorded in the market, at the end of December. The rate was 3% at the end of June 2020.

The report says that demand in the industrial sector has stayed strong but is starting to wane largely because of a lack of available space to lease, buildings for sale or land to develop.

Reach the writer at 402-473-2647 or molberding@journalstar.com.

On Twitter @LincolnBizBuzz.

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Business reporter

Matt Olberding is a Lincoln native and University of Nebraska-Lincoln graduate who has been covering business for the Journal Star since 2005.

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