NORTHEAST SNAPSHOT, NOVEMBER 2006
Pittsburgh Office Market
The office sector continues to recover from the 2001 to 2002 recession. Office development remains controlled, although large office developments are few, and are of a mixed-use nature where office is augmented by a retail and residential component.
client services manager,
Grubb & Ellis.
With the exception of the Central Business District (CBD) and smaller urban projects, the majority of development has been occurring in the North and South because of highway access. The development of the first new office building in the CBD since 1987 is perhaps the most notable new development in Pittsburgh. PNC Financial Services Group has begun clearing the way for a 23-story, 752,000-square-foot complex that will include a garage, condominium, hotel, office and retail space. The skyscraper is being constructed as a green building using environmentally friendly or recycled materials and energy-efficient heating and cooling systems. Across the street, local developer Millcraft Industries is redeveloping the former Lazarus Department Store into Piatt Place. This project will include 180,000 square feet of office space, 50,000 square feet of retail and 65 condominiums.
Suburban developments underway include Horizon Properties’ Southpointe II, located South of Pittsburgh in Washington County. This 217-acre development will consist of approximately 1 million square feet of office space, 375,000 square feet of retail space and will house a residential neighborhood and cultural center.
In the Northern submarket, the 223-acre Tech 21 Office and Research Park will accommodate 16 parcels as well as pads for a hotel, two restaurants and a 120-unit multifamily residential development.
The completion of the Findlay Connector will provide highway access to land in the West submarket. While the major developments on the drawing board as a result of this roadway are industrial in nature, there will likely be office, retail and residential components added at a future date.
In the immediate future, the North and South submarkets will continue to draw interest as will Oakland. And, of course, the CBD-CBD/Fringe, with a potential new hockey arena, the new PNC mixed-use development, redevelopment of the Lazarus Building into a mixed-use facility, various residential projects and the impending announcement of the location of a slots casino will all have an impact on the office sector.
During the past 12 months, Del Monte came out of captive space and moved into 200,000 square feet in a newly constructed office building in the North Shore of the Fringe submarket. American Eagle recently purchased a newly constructed, 186,000-square-foot building in the Southside of the Fringe submarket. EDMC leased 60,000 square feet in an existing building in the Strip District of the Fringe submarket.
In addition, there are several users currently in the marketplace looking for large blocks (200,000+ square feet) of expansion space including the University of Pittsburgh Medical Center and Equitable Resources. Further, Pittsburgh awaits site location decisions from Westinghouse and US Airways, which will house 2,000 and 450 new employees respectively.
The average asking rental rate range for Class A space among all submarkets is $19.50 to $25 FSG. Although there are some properties that will fall above and below this range.
As of the end of the second quarter 2006, the vacancy rate for the overall market was 19 percent. The vacancy rate in the suburbs of Pittsburgh was at 18.7 percent and in the CBD/CBD Fringe area the vacancy rate was 19.3 percent.
Pittsburgh has historically been a consistent market that never hits the peaks and conversely the valleys of first-tier markets. However, the marketplace has been resilient and weathered industry changes and economic uncertainties. Well-positioned for future growth, Pittsburgh is home to several renowned universities, ranks high in affordability and quality of life and is at the forefront of research and development in robotics and biotechnology.
— Pamela Lowery is the client services manager for Grubb & Ellis in Pittsburgh.
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