Lincoln, Nebraska, has been steadily carving out a place for itself in the commercial real estate landscape. While larger cities often dominate the conversation, Lincoln’s commercial sectors—retail, office, and industrial—are experiencing significant growth, reshaping the future of the city and its economic development. The local market is evolving, with investors and developers recognizing the potential in the Heartland, making it an exciting time to examine the shifts happening across these key sectors.
Retail: Local Resilience Meets National Expansion
The retail scene in Lincoln has seen a transformation in recent years. Traditionally, retail markets have been susceptible to the fluctuations of economic trends and consumer behavior, particularly with the rise of e-commerce. However, Lincoln has bucked this trend, showing resilience with a growing demand for both local businesses and national brands.
In the last few years, the city has experienced a steady decline in its retail vacancy rates. From a high of 6.6% in 2021, the rate dropped to 5.9% by the end of 2022, marking the lowest vacancy rate in four years. This decline is a clear indication of Lincoln’s retail market strength, which has been propelled by a mix of local entrepreneurs and large national retailers finding opportunity in the area. Lincoln’s central location and its appeal as a regional hub for business have made it a prime target for brands looking to tap into a steadily growing market.
For example, the Gateway Mall, a key retail location in Lincoln, has attracted national retailers like Burlington and Sierra Trading Co. These brands are moving into spaces previously occupied by larger department stores, such as Sears, signaling that there is still significant interest in Lincoln’s retail landscape despite broader industry struggles. This shift indicates that both local resilience and the continued expansion of national retailers are contributing to the city’s retail boom.
The growth of local businesses is also an important factor in this resurgence. Consumers are increasingly looking for unique shopping experiences and the opportunity to support small, local businesses. In response, retail spaces in Lincoln are being revamped to create modern, inviting environments that cater to both independent retailers and chain stores. This blend of local and national retailers makes Lincoln’s retail market diverse and dynamic, a characteristic that will continue to draw both consumers and investors alike.
Office: Adapting to New Work Environments
The office sector in Lincoln, like much of the country, has had to adjust to the shifting demands brought on by the COVID-19 pandemic and the rise of hybrid work environments. Many companies have re-evaluated their office space needs, shifting toward flexible work arrangements and, in many cases, downsizing their office footprints. However, despite these challenges, Lincoln’s office sector has shown signs of growth and stability.
In the first half of 2022, Lincoln’s office vacancy rate hovered at 10.3%. By the end of the year, that rate dropped to 8.5%, reflecting a significant recovery in the market. While office space demand has not yet fully returned to pre-pandemic levels, this decline in vacancy rates suggests that companies are adapting and seeking office spaces that align with their changing needs. The fact that Lincoln’s office vacancy rate is now close to pre-pandemic levels indicates a return to stability and a potential for future growth.
The demand for office space in Lincoln is being driven in part by new developments and businesses continuing to invest in office spaces. One major project currently underway is the construction of a new 140,000-square-foot Sampson Cancer Center by Bryan Health. This state-of-the-art medical office building is just one example of how the office sector is adapting to new needs and remaining a key contributor to Lincoln’s commercial real estate development.
Additionally, the hybrid work model has influenced the design and use of office spaces in Lincoln. Businesses are focusing on creating environments that support both in-person and remote workers. This shift has resulted in increased demand for flexible, adaptable office spaces that can cater to both individual workers and teams. In response, developers are designing office spaces with more collaborative areas, open layouts, and advanced technology to support the changing work styles.
While some sectors have seen a decline in office space demand, Lincoln’s market has proven resilient, adjusting to new workplace norms and positioning itself as an attractive location for businesses of all types.
Industrial: The Heart of Growth
Among the three commercial real estate sectors in Lincoln, the industrial market has perhaps seen the most impressive transformation. Driven by the growth of e-commerce, shifts in supply chain dynamics, and an overall boom in logistics-related activities, the industrial sector has flourished in recent years.
In fact, Lincoln’s industrial vacancy rate has dropped to an all-time low of just 1.1% by the end of 2022. This is a staggering statistic, indicating that demand for warehouse and distribution space is at an all-time high. Developers are responding to this demand by rapidly building new facilities to accommodate the needs of e-commerce giants, logistics providers, and manufacturers.
One of the main drivers behind this growth is the city’s strategic location. Lincoln’s proximity to major interstate systems and transportation hubs makes it an ideal place for logistics companies to set up operations. The construction of the South Beltway, a major transportation project, is expected to further enhance Lincoln’s position as a logistics hub, improving access to regional and national markets.
The increasing demand for industrial space has also pushed rental rates higher. In some cases, rental rates for industrial properties have more than doubled since the onset of the pandemic. This price increase reflects the heightened demand for industrial properties and the limited supply available in the market.
Speculative development has been a key component of the industrial market’s success. Developers are building large industrial facilities without secured tenants, banking on the high demand and anticipating that spaces will lease quickly. This approach has proven successful, with numerous projects being leased or sold shortly after completion. For example, Las Brisas Land Development Co. completed a 500,000-square-foot industrial space, all of which was leased or sold within a short period.
The industrial sector’s rapid expansion is not only providing significant returns for developers and investors but also transforming Lincoln into a key player in the national logistics network. With e-commerce continuing to grow and supply chain needs expanding, the industrial market in Lincoln is expected to remain a critical focus for both local and national investors.
The Investment Outlook: Opportunities Ahead
As Lincoln’s commercial real estate market continues to evolve, it presents significant opportunities for investors. The city’s economy is stable, and its diverse commercial sectors provide a range of options for investors looking to diversify their portfolios. Commercial investment properties in Lincoln, particularly in the industrial and retail sectors, offer promising returns, with industrial properties showing strong growth and retail spaces benefiting from increased local and national interest.
The city’s growing infrastructure and strategic location make it an appealing market for commercial real estate investment. As Lincoln’s population grows and its economy continues to diversify, the demand for both office and industrial space is expected to increase. Retail, too, will continue to play a critical role in the city’s development, particularly as it evolves to meet the needs of a new generation of consumers who value both local businesses and national brands.
With cap rates for industrial properties ranging from 6.22% to 7.03%, Lincoln presents an attractive environment for commercial investors looking for stable returns. The city’s resilience, coupled with its growing infrastructure, makes it a promising location for long-term investment.
Conclusion: A Bright Future for Lincoln’s Commercial Market
The commercial real estate market in Lincoln, Nebraska, is heating up, with retail, office, and industrial sectors all showing signs of growth and resilience. The city’s evolving market, fueled by both local and national interest, is positioning it as a key player in the Heartland’s commercial real estate scene. As demand for space continues to increase, especially in the industrial sector, Lincoln offers a wealth of opportunities for developers and investors alike. With its strategic location, favorable economic conditions, and dynamic growth, Lincoln is well-positioned for a bright future in commercial real estate.
