What will it take to lure more retailers downtown? More downtown dwellers and office workers, retail real estate experts say.

Omaha’s downtown scene is not at the point where it could support “real retail” like one might see in Chicago and New York City, said Dan Dutton of OMNE Partners real estate firm. What it can support: restaurants, bars and services like hair salons and dentist offices.

“I’m not sure why we’re in such a rush to build more and more retail down there,” Dutton said.

It doesn’t take a real estate expert to see that downtown Omaha has a glut of inventory and potential redevelopment sites, he said. Dutton represented the three Des Moines-based bars that are now open at the Capitol District in Omaha, off 10th and Capitol Streets.

“I think we do have to at some point as a city talk about the importance of making sure downtown is our central business district and that we do have offices down there so we create that 24-hour population downtowns need,” Dutton said.

Jay Lerner, president of the Lerner Co., which handles leasing for the Capitol District, agreed and wondered whether a drugstore or grocery store could even be successful downtown, especially with Patrick’s Market off 14th and Howard Streets having closed late last year.

“Downtown is really growing residentially with condos and apartments, but I’m not sure there’s enough of that population down there to support a grocery store at this point,” Lerner said.

Lerner also questioned city involvement with development of Lot B of the CenturyLink Center in north downtown.

“From a city standpoint, let’s not compete with ourselves. We’re having problems with the retail we have now. Why add to it?” Lerner said. “There’s not people knocking on the doors saying, ‘I’m looking for retail space downtown.’ It’s the opposite.”

That’s not because downtown Omaha is failing. “It’s just not there yet,” Lerner said.

The downtown retail vacancy rate has hovered between 4 and 7 percent since 2012, according to data from real estate analytics firm CoStar. It’s at about 6 percent this year, CoStar analyst Todd Galvin said, with a negative vacancy absorption rate over the past year — meaning retailers aren’t leasing the vacant space that exists.

“There really hasn’t been too much demand downtown,” Galvin said. The central Omaha area, which includes midtown Omaha and stretches as far west as Interstate 680, has seen retail vacancy rates steadily drop to about 4 percent since 2012.

It’s normal to see fluctuations on downtown vacancy rates, Galvin said, because most cities are revitalizing downtown neighborhoods. As buildings are renovated and new projects sprout up, more space comes online that is then eventually taken on by new tenants.

There has also been a shift in demand for what consumers are buying, Galvin said, from goods to services. More and more retail space is being leased by urgent care clinics, fitness centers and doggy day cares, Galvin said.

“More of the needs instead of the wants,” Galvin said, especially as more people live downtown.

There are unique challenges with operating a retail business downtown, said Tim Smith, owner of the Tea Smith, which closed its Old Market location last year. He still operates a store at 78th and Cass Streets.

Downtown is seeing more and more competition from new areas like the Blackstone District and Aksarben Village, Smith said. And it is becoming less and less of a destination, especially for people who live in west Omaha, he said.

The Old Market store took a hit when big employers left downtown or downsized. Pacific Life Insurance moved from downtown to Aksarben Village in 2015, and Conagra cut 1,000 jobs and moved its headquarters to Chicago in 2015 and 2016. The M’s Pub fire in 2016 didn’t help Old Market businesses, either.

And with more and more bars popping up in the area, there are fewer reasons for families and for people looking for entertainment before 11 p.m. to go downtown, he said.

Parking — which many office and retail tenants cite as a top challenge — was not Smith’s primary concern.

“Not everybody can park in front of their favorite restaurant, but there’s adequate public parking at a reasonable price all over the place,” Smith said.

His store at 78th and Cass Streets now does the same amount of business as the two stores combined, he said.

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