West Dodge Vacancy rates

[Coyote]

Buildings along expressway fill up again

Some West Dodge Road landlords are making sure they don't get left in the dust of expressway or office construction.

As new buildings opened farther west and construction started on a five-year project to build an elevated expressway along West Dodge Road, Miracle Hills and Old Mill, two of Omaha's original suburban office parks, struggled with higher-than-average vacancies in 2003 and 2004.

But both parks have seen a flurry of recent lease-signings.

Tenant-friendly lease packages as well as new investments - remodeled lobbies, refreshed landscaping and upgraded common areas - are credited for the rebound.

Miracle Hills, with a vacancy rate as high as 19 percent in 2003, now is at 6.7 percent, said Scott Heider, an executive vice president at Grubb & Ellis/Pacific Realty who represents nine buildings in the park.

More than 67,000 square feet of Miracle Hills space has been absorbed since Jan. 1, 2004, and that doesn't include renewals, Heider said.

Old Mill, which peaked at 23 percent vacant in the middle of 2004, dropped below 20 percent at the end of 2004 and then hit 21.4 percent for the quarter ending this week. Pacific Realty's latest survey put the overall suburban vacancy rate at 14.2 percent.

Two owners with 14 buildings between them, Magnum Resources and Dial Properties, are among those with a lot at stake in the two office parks.

"Those two owners are rolling their sleeves up, investing money back to make them the best properties they can be," Heider said. "That turns heads."

It got the attention of Preferred Professional Insurance Co.

The company, which specializes in medical liability insurance for physicians in Catholic health-care systems, now is in 9,000 square feet at 10707 Pacific St. and recently leased 13,400 square feet at 11605 Miracle Hills Drive, a Dial building that Heider represents.

Preferred Professionals plans for its 42 employees to be moved in by July 1, said Mel Epstein, chief operating officer.

He said company officials were looking for space that would accommodate board meetings and the addition of two or three people a year for the next four or five years. Company officials wanted to be close to the Interstate and remain west, where most of its employees live.

The Miracle Hills space, Epstein said, offered the best value of the five or six office buildings considered.

"They offered us several incentives to sign," he said, declining to disclose details.

Epstein said the construction of an elevated expressway along West Dodge Road was a minor consideration in his company's decision to relocate to Miracle Hills.

"We know there will be a short period of challenges," he said. "But you don't sign a multiyear lease based on that."

S. Scott Moore, a senior associate with CBRE/Mega, said he believes apprehension about the construction project was worse than the reality has turned out to be.

"The last year and a half, people have said it's not that big of a deal and positioned themselves to be in Miracle Hills or Old Mill, and rightfully so," Moore said. "If you looked at a map of Omaha and put your finger in the middle, you'd be in Old Mill."

Trenton Magid, president of Coldwell Banker Commercial World Group, agreed. The State Roads Department and its contractor have done a good job of informing people about what to expect from the expressway project, he said.

World Group market consultant John Luce found tenants in the past year to fully lease 10831 Old Mill Road, Magid said. The company also has leased retail space in the area. And World Group last week moved its own offices to 780 N. 114th St.

Moore predicted that in five or 10 years, demand to be in the Old Mill area will be so great that some of the smaller office buildings will be torn down and replaced with larger ones.




For now, the emphasis is on remodeling the late-1970s to mid-1980s buildings.

"Get rid of the old chrome and get wood, get rid of the olive green bathroom tile," Moore said.

More Old Mill landlords should be taking that route, said Greg Hornish, whose Hornish Co. finds space for tenants.

"A couple of the two-story buildings, you walk in and feel like you're in Fort Knox," he said. "They show terribly. Price-wise, it's appealing, but that's obviously not enough. There are too many other products out there, and people much prefer new."

Heider said landlords wanting to compete with newly constructed buildings need to "reposition" their property and re-introduce it to the market, and that usually involves some new investment.

He said Magnum Resources invested $400,000 in 11422 Miracle Hills Drive for new elevators and restrooms and a refurbished atrium lobby with new cherry wood floors.

The building, once about 70 percent leased, now is more than 95 percent leased and home to several new tenants: Marcotte Insurance (7,000 square feet); CoBank (7,000 square feet); Avatech Solutions (6,000 square feet); and the Hastings College Foundation (2,000 square feet).

In Old Mill, three Magnum Resources buildings - at 10805, 10815 and 10825 Old Mill Road - that emptied as First Data Resources phased out operations to consolidate at 72nd and Pacific Streets, were remodeled one at a time.

Heider said Applied Underwriters Insurance Co. started with 50,000 square feet in one of the buildings four years ago, increased to 100,000 square feet two years ago and now is taking the third building's 50,000 square feet.

Other Old Mill leases in the last 12 months have included 25,000 square feet to the Gallup Organization and 15,000 square feet to American Title at 10802 Farnam Drive. They are helping to fill the 60,000 square feet that Ameritrade vacated early last summer as it consolidated offices at Southroads in Bellevue.

Some Old Mill buildings continue to struggle, though. A 76,000-square-foot building at 10826 Farnam Drive has been empty for more than two years.

That building, Moore said, has a large floor plate that didn't make sense for most of the companies that recently signed leases. It's waiting, he said, for the rare 25,000-square-foot user.

[Brad]

First Westroads Bank moved from 108 and dodge to 156 and dodge to get away from the road construction.