Speculative industrial development in Pittsburgh has accelerated during 2004 after being relatively dormant during the preceding 24-month period. Many tenants are beginning to look for newer facilities that can improve their overall efficiency while not dramatically impacting their bottom line.

The majority of new industrial development in the area has occurred in the form of expansions at many of the region’s existing industrial parks, such as Tri-County Industrial Park, Leetsdale Commerce Park and Youngwood Commerce Park, Chapman Properties’ Leetsdale Industrial Park and the various Regional Industrial Development Corporation (RIDC) Parks.

Two recent industrial parks in the western region of the Pittsburgh market will ultimately have an impact on the available industrial market. The Elmhurst Group recently broke ground on McClaren Woods Business Park, which welcomed Lewis Goetz as its first tenant. The Rubinoff Company recently was awarded the rights to market and develop Star Pointe, a 1,200-acre parcel in Washington County adjacent to Pittsburgh’s largest concert venue, Starlake Ampitheater. Both of these developments will add a great deal of level, usable acreage to the Pittsburgh market.

The development that could have the largest impact on the region’s industrial market is the second phase of Southpointe, a mixed-use business park in Washington County. Southpointe’s first phase, arguably the most successful mixed-use business park in the Pittsburgh area, is fully built out, and the infrastructure for the second phase could begin within the next 12 months. The second phase has the potential to provide pad-ready sites within close proximity of Interstate 79.

Due to difficult roadway infrastructure in and around the city of Pittsburgh, the majority of industrial development is taking place near Interstate 79 and the Pennsylvania Turnpike (Interstate 376). In addition, recent developments have begun in the Pittsburgh International Airport 22/30 corridor, partially to tap the employee base of eastern Ohio and West Virginia.

With the exception of the occasional build-to-suit — including Panattoni’s development of Dick’s Sporting Goods’ Smithton, Pennsylvania, distribution center — the majority of new development has been attributed to long-term Pittsburgh area developers such as The Buncher Company, The Sampson Morris Group/Pittsburgh Business Parks, The Rubinoff Company, The Elmhurst Group and Chapman Properties.

Industrial developers have focused their speculative projects on being adaptable to many types of users, specifically those requiring 20,000 to 100,000 square feet of “high buy” clear-span space. The Buncher Company, for example, has four different 80,000-square-foot speculative buildings under construction in its parks.

With the exception of the United States Postal Service, which is in the process of expanding from 206,000 to 313,000 square feet in the Thorn Hill Distribution Center in Cranberry Township, Pennsylvania, and Dick’s Sporting Goods Distribution Center, which is in the process of being expanded from 388,000 to 602,000 square feet in Smithton, tenants in the Pittsburgh region are not absorbing large amounts of space.

Industrial rental rates vary greatly between warehouse space, which is approximately $3.50 per square foot, pure industrial space, which is more than $4.50 per square foot and flex space, which is approximately $9.50 per square foot. Flex space rates have not appreciated because many tenants are looking at pure office buildings due to the very soft overall office market within the Pittsburgh region.

Vacancy rates were 19.6 percent each for flex, warehouse and industrial, according to Co-Star Group’s 2003 Year End Pittsburgh Industrial Market Survey. These rates are starting to improve slowly. Currently, many of the top regional developers have a number of new leases, ranging from 20,000 to 100,000 square feet, pending. While some of these leases represent simple upgrades or relocations, several are true expansions or new groups in the Pittsburgh market.

— Patrick J. Sentner, SIOR, is vice president of GVA Oxford

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.