Chunks of office space for years sat idle in downtown Omaha’s old Grain Exchange building at 19th and Harney Streets before the owner restructured, dropped rent and quickly filled two floors with more than 50 budding entrepreneurs, inventors and startup companies.
Next door, the same landlord is transforming a former insurance company into the Brain Exchange where young minds build communication and information technology skills.
Across downtown to the north, the Mastercraft incubator is about to add another wing; and the soon-to-open Hub is seeking tenants with a similar creative bent, perhaps graphic artists, branding companies, furniture makers, architects.
As Omaha’s downtown is smarting from the loss or shrinkage of a few bigger and more traditional corporate tenants such as ConAgra Foods and Pacific Life Insurance, real estate and business leaders say it is the more edgy entrepreneurial, branding and technology-focused players that lately are filling smaller spaces and driving office activity in the city’s urban core.
“Our traditional tenant audience — the lawyers and title insurance companies — was drying up,” said Kandace Miller, chief executive of the nonprofit AIM Institute that owns the exchange building at 1905 Harney St. “They don’t have to be close to the courthouse anymore — because of technology, they can be anywhere.”
Computer connections that have untethered the downtown workforce of the past are just part of what’s reshaping downtown. Also challenging retention and growth, say real estate and business leaders, are parking hassles and newer and alluring campuses farther west that might be more convenient for clients and employees that over decades have spread out from the city’s core.
Business and real estate leaders say emerging is a downtown workforce that more closely resembles the young professionals also drawn to the increasing number of trendy downtown loft apartments and condos surrounded by entertainment venues such as the baseball stadium and CenturyLink Center.
The more established corporate workforce — and downtown overall — was further jolted by ConAgra’s corporate headquarters move to Chicago. Soon after, HDR announced it would not, after all, build its global office tower for more than 900 local employees at 11th and Dodge Streets.
Before that, Pacific Life Insurance relocated its 350 downtown workers to central Omaha’s Aksarben Village.
Some real estate leaders describe recent setbacks as a pause or a period of recharge not necessarily cause for gloom and doom.
“Every submarket in every community at some point experiences some level of resurgence or a makeover,” said Jay Noddle of Noddle Cos. His development company has built office campuses throughout the metro area, including Aksarben Village, where HDR has opted to build.
Noddle, a board member of the Metropolitan Entertainment and Convention Authority, and others cite reasons for optimism that include ongoing waves of residential complexes that have brought more professionals, millennials and empty-nesters to downtown and its fringes. Retail and other business bustle typically follow such population growth.
Noddle pointed to MECA’s initiative to study and develop the Lot B parking lot near the CenturyLink Center, as well as the nonprofit Heritage Services-led effort to try to inject new life into the Missouri River area.
ConAgra’s downsizing put about 250,000 square feet of office space on the market. That is projected to raise the downtown vacancy rate to about 13 percent, according to commercial brokers.
For comparison, midtown has a 6.2 percent vacancy rate; Miracle Hills has a vacancy rate of 4.7 percent; and what commercial brokers term the suburban West Dodge corridor is at 4.6 percent, according to the latest Xceligent report that tracks office market trends.
Barry Zoob of Colliers International does not expect the available ConAgra riverfront property, on a sprawling campus near a man-made lagoon and a stroll from the Old Market, to be empty for long.
(ConAgra says it is still evaluating its options for a potential longer-term plan for the entire campus; it is renovating three buildings where its Omaha staff will remain, a spokesman said.)
Not counting the empty pair of ConAgra buildings, the downtown vacancy rate, according to Xceligent’s midyear report, was 8.6 percent and near the best it’s been in about 15 years. When adding the ConAgra vacancy, brokers say the rate is about 13 percent.
Compare that with the downtown high of nearly 30 percent in 2004, and Zoob said he considers this downtown dip a “pause and reassessment” that won’t hold down an area he said is brimming with similar energy revitalizing urban areas across the country. “Our downtown will grow again,” Zoob said.
Of course it’s often less complicated and cheaper to build an office facility on a clear and more sizable tract unencumbered by older downtown infrastructure, said Eric Renner of World Group Commercial Real Estate.
Newer central and western Omaha office parks also are touting attributes that traditionally helped draw employers downtown: walkable connections to restaurants, apartments and entertainment.
Former City Planning Director Steve Jensen said a downtown with corporate business muscle is imperative for a thriving city. He said the city, in partnership with other groups, is studying ways to spark more development in the core.
Growth opportunities are dependent, Jensen said, on more mass transit options and better parking management that includes shared spaces and fewer new garages.
(Parking limitations were a factor in HDR’s opt-out of downtown.)
Tim Kerrigan of Investors Realty said downtown also could use a more coordinated leadership effort — similar to a Chamber of Commerce-related group he belongs to that identifies land tracts for new data centers and business parks outside of downtown.
That group of industrial site experts spearheads studies and tries to knock down barriers.
Kerrigan said that while downtown always has had advocates such as MECA and the downtown improvement district, it lacks a more targeted advisory group that could put downtown’s “best foot forward” when luring large companies whose workforces can fuel retail and residential activity.
Growth in smaller doses, meanwhile, has been invigorating fringes of downtown. On the south end, along the 10th Street corridor near Mason Street, the Rail and Commerce Building is being renovated.
Boyd Jones Construction is moving its headquarters there, attracted by downtown energy that its owner expects to help recruit young talent.
A new tenant has just signed a lease for about 30,000 square feet at the Rail and Commerce, said Ryan Ellis of P.J. Morgan Real Estate. He called that a testament to downtown’s brighter future. (Ellis declined to identify the newcomer, which wants to make its own announcement.)
Also recently reviving the 10th Street corridor are retail and entertainment spots including the Blue Barn Theatre, a proposed public market, a few town house projects and restaurants.
Farther north in downtown, the $205 million Capitol District project is rising to feature a hotel, office, entertainment and apartments.
Alvine & Associates has announced that it will build its new engineering and design headquarters at 12th and Cass Streets, not far from a Kiewit training facility already under construction.
Ellis said the Mastercraft, at 1111 N. 13th St., is about 90 percent leased and ready to prepare a 10,000-square-foot shell for more tenants. The former furniture warehouse houses companies such as TACKarchitects, which has tripled its workforce in five years and already has outgrown space it expanded into less than two years ago.
Future Forward, a group led by the Peter Kiewit Foundation, has bought a collection of other north downtown properties to provide affordable rents for what it envisions as a growing community of artists, craftsmen and entrepreneurs.
Kerrigan foresees a heavier influence of that workforce throughout downtown. “The urban scene offers the amenities and environment that creative class seeks,” he said.
The AIM Institute is helping to prepare the tech workers.
Formed 25 years ago, AIM a decade ago bought the century-old Grain Exchange structure across from City Hall and the county courthouse. It advertised open office space, but Miller said many of the old “core” tenant base had other choices.
AIM then shifted its business model away from conventional leasing to provide an economical home for similar-minded organizations. Last summer the Omaha Startup Collaborative moved to the seventh and eighth floors. About 50 mostly software-based startups have spots in small suites, and dozens more members drop in to use common meeting and work areas, said co-founder Erica Wassinger.
Modeled on efforts in Kansas City and elsewhere, the aim is for a central hub where tech startups can link with mentors and support systems such as the Straight Shot business accelerator and Interface Web School.
AIM also is renovating a 4,500-square-foot former insurance office next door for youths to learn about robotics and other technology fields.
Miller said the programs build upon a chamber-led coalition goal to create a “tech district” and to fill 4,000 related positions in the metro area.
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An earlier version of this story included a caption with an incorrect first name for Victoria Novak.