Pittsburgh Industrial


Economists predict that Pittsburgh will exceed its previous employment peak of 1.16 million within the year. Certainly, the Marcellus Shale and related industries have made the largest contribution to this growth — drilling activity could create more than 200,000 jobs by 2020.

The industrial market received perhaps its biggest boost year-to-date from Royal Dutch Shell and Acquion Energy Corp. Shell, which signed a land-option agreement with Horse-head Corp. for its current zinc operations site in Beaver County, intends to build a world-size ethane cracker capable of cracking 80,000 barrels a day. The company will invest more than $1 billion into the regional economy and produce countless employment opportunities in both construction and production. Horsehead plans to relocate its operation to North Carolina in 2013.

Aquion, the maker of aqueous electrolyte sodium ion batteries used to store renewable energy, has committed to leasing an initial 250,000 square feet at the former Sony plant in Westmoreland County. The 2.4 million-square-foot facility will enable the company to triple its employees and nearly double its occupancy within the next 5 years.


Industrial leasing activity in the first quarter of 2012 increased nearly 500 percent year over year from 2011. In addition to Aquion’s lease, Hostess, HosePower and Vision Works/

Sampco have leased nearly 75 percent of 460 Nixon Road, a 587,227-square-foot warehouse building recently vacated when Bay Valley Foods relocated. Several other leases have contributed to the significant increase in activity as well: All-American Metals & Recycling leased 51,000 square feet at the former Ryerson Steel facility in the Parkway West; Weatherford Drilling leased 53,000 square feet at Leets-dale Industrial Park in the Northwest submarket and Bri-Chem leased 38,000 square feet, also at Leetsdale Industrial Park. Asking rental rates have increased 14 percent year over year to an average of $7.57 per square foot, triple net.


The manufacturing and warehouse sectors continued to post a decrease in vacancy brought about by positive absorption exceeding 1 million square feet in the first quarter. Manufacturing vacancy is consistent with the overall market at 7.3 percent for the quarter, while warehouse vacancy dropped to 6.8 percent. Although a low vacancy rate is attractive to investors and helps to increase rental rates, it is beginning to hinder economic development in the Pittsburgh region.

A lack of quality warehouse product with existing availabilities of greater than 100,000 square feet has created problems for vendors in the Marcellus Shale supply chain who are looking for immediate occupancy and room for growth. The relaxation of commercial lenders within recent months has sparked new speculative construction within the region, particularly in the airport corridor, where many of the energy companies are seeking expansion opportunities. Greenville Commercial Properties plans to start construction on a 100,000-square-foot industrial building at a former railroad site in the West Pittsburgh market. Complete plans include the development of the 52-acre site into more than 450,000 square feet of industrial space. And, The Buncher Company started work on a 70,000-square-foot speculative warehouse building in Jackson Township.


Vacancy and asking rental rates are expected to stabilize throughout the remainder of 2012 as new speculative product is released to the market. Leasing and investment activity should surpass 2011 totals, perhaps even doubling them by year-end, and third-party logistics activity is expected to continue increasing throughout the tri-state area.

— John Lisowski, industrial brokerage and leasing manager and member of the Cushman & Wakefield Global Supply Chain Solutions Group

Pittsburgh Retail

Retail activity in Greater Pittsburgh will likely gain positive momentum through the remainder of 2012, with moderate growth expected in 2013. Grocery stores, local restaurants, fast casual national chain restaurants, medical retail, and upgraded locations for existing national tenants have led the way for recent retail activity in Pittsburgh.

The general atmosphere at the annual ICSC RECon convention in Las Vegas was upbeat and optimistic regarding the retail sector recovery nationally. I believe that the ICSC convention is a strong indicator that retail growth is headed in an upward direction.

The Pittsburgh retail markets are broken into four quadrants: North (Cranberry/Wexford), South (South Hills Village/Mt. Lebanon), East (Monroeville/Murrysville) and West (Robinson). The Cranberry/Wexford market continues to be the most active, with sales being driven by the new 500,000-square-foot McCandless Crossing Development. Tenants there include Lowe’s, LA Fitness, Hilton, Fidelity Bank and Cinemark. The Northern quadrant along the Route 228 corridor continues to develop with new projects, such as the relocation of Dick’s Sporting Goods to a new larger facility and the completion of the Cambria Suites project. Additional activity on the Route 228 corridor includes a new free-standing La-Z-Boy furniture store, GetGo gas and convenience store, and two additional outparcels available for restaurant and hotel use.

Not far behind in development activity are the South (South Hills) and East (Monroeville) quadrants. In the South, construction is under way for new big box retail tenants Dick’s Sporting Goods and Target. In addition to these major retail draws, Bonefish Grill is locating its first Pittsburgh restaurant at South Hills Village. All of this new development is taking place on the Route 19 side of the South Hills Village Mall.

In the East market (Monroeville), the new 16.7-acre UPMC East site is set to open later this summer. The hospital facility will have 156 private rooms, 140 medical-

surgical suites and 16 ICU beds. UPMC anticipates approximately 30,000 visitors to its emergency department. The addition of the regional hospital has increased the interest of retailers and retail developers in the East market. Because the hospital is located in a mature market, I anticipate an increase of redevelopment and re-use construction projects in 2013 and beyond.

In the West quadrant, the Settlers Ridge development is completing its leasing. That project boasts the first ground-up 150,000-square-foot Giant Eagle Market District store that opened in 2010. Other Settlers Ridge tenants include national retailers such as REI, LA Fitness, PF Chang’s, Ross Dress For Less, Barnes & Noble and Michaels. The entire development is 600,000 square feet and there are only a few storefront and outparcel vacancies remaining. This market recently became the home to two national concepts: Hobby Lobby and The Tile Shop chose the West (Robinson) market to open their first Pittsburgh locations.

The Pittsburgh market has historically been a very conservative development market. Because of Pittsburgh’s consistent moderate growth trends, it has not experienced the highs and lows of other markets such as Charlotte and Atlanta. The retail market in Pittsburgh remains stable, and any improvement in the market may be due to the fact that the region’s population losses have been stopped, and it is experiencing a turnaround with consistent gains in overall population growth. Pittsburgh’s growth in the medical, finance, education, and energy sectors will continue to drive retail development in the coming year. Pittsburgh is poised to maintain moderate growth through the balance of 2012 and into 2013. Pittsburgh — the City of Champions — is a proven place to live, work and do business and with four active retail markets. The sky is the limit for future retail growth and development.

— Brad Kelly is director of Retail Services with Colliers International | Pittsburgh.

Pittsburgh Office


During the first quarter of 2012, job figures in the Pittsburgh metro area reached 1.14 million, the second highest watermark in Pittsburgh’s history. These figures coupled with improved financing options have prompted nearly $5 billion of current and planned investments in the downtown area.

Among the latest projects scheduled for the central business district (CBD) are:

• The Tower at PNC Plaza, an 800,000-square-foot office headquarters building being constructed at the intersection of Fifth Avenue and Wood Street;

• The Gardens at Market Square, a 175-room hotel and 100,000-square-foot speculative office project by Millcraft Industries, that will be anchored by construction management firm dck Worldwide;

• The Buncher Company’s 120,000-square-foot office building in the Strip District;

• Sampson Morris Group’s redevelopment of the former Wholey’s warehouse into 223,000 square feet of Class A office space with lower-level integrated parking; and

• the redevelopment of the 28-acre Civic Arena site. The plans for the former home of the Pittsburgh Penguins call for 1,200 housing units, 600,000 square feet of office space and 250,000 square feet of commercial space, all with LEED certification.

In addition to constructing The Tower at PNC Plaza, the bank also purchased the former Lord & Taylor building in the heart of Pittsburgh’s CBD. Vacant since 2004, the former Mellon Bank branch was converted to an upscale department store in 1998. Following renovations, PNC plans to move approximately 800 administrative employees to the six-story, 120,000-square-foot building in the fourth quarter of 2013 or first quarter of 2014.

Oxford Development Company is seeking an anchor tenant for a new Class A office building to be constructed on the site of the existing 441 Smithfield Street building. The new project, called 350 Fifth, would replace the current building and offer up to 772,000 square feet over 33 stories. If plans for new construction do not progress, Oxford plans to complete renovations to 441 Smithfield, taking it from a Class B building with nearly 100 percent vacancy to a Class A, six-story building offering approximately 120,000 square feet.

Energy and technology drive leasing activity

Google Inc. kicked off the year with a 30,000-square-foot expansion to its Bakery Square offices, bringing its total occupancy to more than 130,000 square feet. The company cited the pipeline of engineering talent matriculating from the region’s colleges and universities as one of its reasons for continued expansion.

M*Modal announced that it would expand into two new floors at its Squirrel Hill office, absorbing an additional 27,000 square feet, and the University of Pittsburgh leased 30,624 square feet on nearby Baum Boulevard for the Department of Biomedical Informatics. In the Parkway West submarket, Calgon Carbon expanded its office space at McClaren Woods to 44,000 square feet and has long-term plans to build a larger facility in the park, while Chevron U.S.A. leased 66,700 square feet to accommodate its Marcellus Shale business units.

Investment activity

Investment activity in the region, particularly within the CBD, has escalated within the past 18 months. Highwood Properties entered the Pittsburgh market with the $214 million purchase of the six-property PPG Place portfolio. Healthcare Trust of America added a third Pittsburgh property to its portfolio with the $54 million purchase of Penn Avenue Place, downtown, while PMC Property Group also expanded its Pittsburgh presence with the purchase of the Regional Enterprise Tower for $7 million. The company plans to convert the top 14 floors of the former Alcoa headquarters into apartments, moving existing office tenants to the lower floors.

A new record for the highest price per square foot for a suburban Pittsburgh office building was set with the sale of the 118,000-square-foot 1000 Westinghouse Drive in Butler County, which sold for $300 per square foot or a total of $36.2 million. The building was purchased by GC Net Lease REIT. Pittsburgh has had a financial advantage over other large cities because equity can be built faster with potentially higher profit and higher capitalization rates — approximately 8 percent compared with 5.5 percent in markets such as Boston, New York, Los Angeles and Atlanta.


The regional economy remains stable and the influx of energy-related and technology companies should continue to drive leasing and build-to-suit construction activity for the foreseeable future. Occupancy levels are the highest they have been in the CBD since the 1980s, and rents in the CBD and surrounding areas are expected to rise up to 7 percent per year over the next 5 years.

— Robert Geiger, principal at Cushman & Wakefield/Grant Street Associates, Inc.

©2012 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.

Search Property Listings

Requirements for
News Sections

Market Highlights and Snapshots

Editorial Calendar

Today's Real Estate News