| Pittsburgh Industrial
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 regions
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 Pittsburghs largest concert
venue, Starlake Ampitheater. Both of these developments will
add a great deal of level, usable acreage to the Pittsburgh
The development that could have the largest impact on the
regions industrial market is the second phase of Southpointe,
a mixed-use business park in Washington County. Southpointes
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 Panattonis development of Dicks 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 Dicks 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 Groups 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
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