The commercial real estate industry appears to be firming up, but many mom-and-pop shops across the country are still struggling.
That's according to experts who spoke Friday at the 23rd annual CREW Midwest, a commercial real estate workshop at the CenturyLink Center Omaha.
"Despite negative headlines in the news with respect to troubles of Best Buy, Kmart and Sears, the vast majority of national and regional tenants are very solid companies financially. It's the mom-and-pop shops who are still feeling the effects of the recession," said Robert Nadler, central region president for Kimco Realty, a New York-based company with interests in hundreds of shopping center properties in 44 states.
Nadler said the small retailers are unable to reduce expenses, are still repairing their own balance sheets and are having a tough time getting credit.
Omaha's Mesh, a women's and men's clothing and accessories boutique at the Shops of Legacy that opened during the recession in August 2009, has felt the pinch but has been able to overcome it.
"It's happening here, but Omaha was in a bubble," Courtney Smith, a co-owner of Mesh, said in an interview before the conference. "We got hit, but our bubble never popped."
Through trial and error, Smith said, she has been able to up her sales about 20 percent from 2010 to 2011 by changing her inventory to better suit her customers and offering products and customer service not always available at chain retailers.
"We've realized that the higher-end merchandise does not do well and spending $300 on a pair of jeans isn't what the consumer wants to do anymore," Smith said. "They want to take $300 and come home with a couple of outfits. We try really hard to figure out what they are looking for. Customer loyalty is what we thrive on."
Nadler said that's exactly what small retailers and mom-and-pop shops have to do to survive.
Smith remains excited about the future because she doesn't feel consumer spending and the area economy are back 100 percent yet. She said offers and perks she gets from commercial real estate brokers looking to fill shopping centers are one indication.
That wouldn't happen in a fully recovered market, she said.
To be sure, the industry is still in recovery mode, as reflected in this year's selected title for the workshop: "Boot Camp: Arming Yourself Today for Tomorrow." Workshops ranged from real estate fraud to the impact of the recent Missouri River flood.
In the spirit of the boot camp theme, one popular segment of the conference featured speakers giving quick updates on their fields of expertise. Here's a sampling of what they, and a few others, said:
>> A sign of slowed growth of the Omaha area, said John Hoich of the Omaha Planning Board, is that the board in the past four years has approved only two housing subdivisions for platting. That's the slowest he's seen in his 14 years on the board. He says planners are hesitant to endorse zoning for new retail development because there is an estimated 10 years of unused inventory. Planning officials, Hoich said, would prefer to see new housing and industrial sites.
>> A "positive change" just starting to happen is developers repurposing undeveloped areas intended for retail shops, said Chad Weaver, an assistant Omaha planning director. Retail typically is the money-making end of a project, but rather than wait any longer for retail to come, a few developers have turned the lots into multifamily housing or senior living areas.
>> Omaha's office market is ripe for a new Class A office facility, said T.J. Twitt of the Lund Co. With a low, 6 percent vacancy rate for that top class space, there is a need to build more, he said, especially if the city wants to attract companies seeking a lot of square footage. Class A office space has filled up because landlords, in the economic downspin, offered good deals to attract tenants, allowing many to upgrade.
>> So how, asked Barry Zoob, senior vice president of Colliers International, did the local office market grow by 650,000 square feet without new construction? Several companies upgraded or consolidated into new facilities, he said, leaving their old digs as inventory in need of tenants. The glut of Class B and C space becomes tough for landlords but offers "incredible opportunities" for tenants who can seek discounted rents.
Owners of such midquality properties will have to look at different options to stay alive, said several speakers. Alternatives include modernizing and looking for a different type of use for the building.
Meanwhile, a panel of mostly younger people who have started their own companies said Omaha needs something different to attract growing and creative business types.
"We have to bring in some real estate that's cool," said Ryan Downs, president of Proxibid.
He and others said that young motivated workers likely would forgo a higher salary for a socially engaging work campus, one with access to restaurants, activities and bike trails.
"Young people don't like the physical expression of hierarchy," Downs said, namely the big corner office designated for the boss and the crowded cubicle for the worker.
About 400 people, a record, attended the all-day CREW conference.
Eric Bauer of Schemmer Associates left armed with new and useful information.
"It gives you a barometer of what's going on in the market and the perspectives of other people," he said. "Everyone is here. You have lenders, you have commercial real estate people and you have developers here."
Several conference speakers and attendees said that they were confident that the commercial real estate industry is moving forward in Omaha, though it still is not what it used to be.
Hoich, a developer, said he's filled 32 of 35 strip mall spaces that went vacant when tenants went bankrupt during the recession. The downside is that he had to lower rent to attract them.
He said apartment rentals, on the other hand, remain strong.
Zoob said he was "reasonably optimistic," despite the threat that outside factors like the European debt crisis could change local markets.
"This city has been resilient," he said. "I see things turning around."