NORTHEAST SNAPSHOT, NOVEMBER 2007

Pittsburgh Industrial Market

The Pittsburgh industrial market has transitioned from a manufacturing center in excess of 300 million square feet in the 1970s to a diversified light industrial/distribution market of approximately 120 million square feet and growing. Brokers in the region expect most of the growth to come from within as users move up from older, less desirable and functionally obsolete space into functional, well-located, Class A space.

Class A light industrial/warehouse space will have a very strong 2007 with significant absorption and several speculative buildings under construction. The west submarket will benefit from significant investments in infrastructure, which will bring more than 1,500 acres of land in and around the Pittsburgh International Airport into play. Some of the major developments in the Pittsburgh region include the 70-acre McClaren Woods Business Center, the 90-acre Imperial Business Park, the 300-acre Chapman Commerce Center at WestPort, the 100-acre WestPort Site 2, the 640-acre WestPort Site 3 and the 120-acre Clinton Commerce Park.

In addition to the west submarket, a majority of industrial development has occurred in the northwest submarket, which includes the I-79 North Corridor and the Marshall Township/Cranberry Township areas, over the past 5 years. This is due to the existing transportation infrastructure and availability of development sites. However, now that this market is maturing and being dominated by residential and commercial development, industrial property is scarce.

Pittsburgh still remains a local developer market although regional and national developers are starting to notice the activity and strength in the market. The market has been dominated by the small- to mid-size users of value added manufacturing, assembly and warehouse distribution in the 30,000- to 100,000-square-foot range. However, several warehouse buildings are under construction in the 200,000- to 400,000-square-foot range with other sites being prepared to accommodate 500,000- to 1 million-square-foot users.

Pittsburgh is benefiting from a broad and diversified tenant list looking to occupy space in the region. Several significant leases have been signed recently, including: Packaging Specialists’ lease of 197,000 square feet at 499 Nixon Road; Bay Valley Foods’ lease of more than  300,000 square feet at 460 Nixon Road; Air Products’ lease of 50,000 square feet at 360 Leetsdale Industrial Drive; Shaw Industries’ lease of 50,000 square feet at 700 Brickworks Dr.; Calgon Carbon’s lease of 44,000 square feet at 2000 McClaren Woods Drive; and PittPenn Oil’s lease of 64,000 square feet at 100 Papercraft Park.

These new tenants are entering a market with increasing Class A rental rates for new construction, currently measuring $5 per square foot. Meanwhile, vacancy rates are decreasing; they are currently in the 8 percent range and falling to 6 to 7 percent for Class A space.

The Pittsburgh industrial market, particularly the west submarket, should see some positive growth in 2008 with plenty of new space coming online. With more than 1,500 acres of available land, the west submarket is poised to accommodate more than 75 percent of future development based on available sites and proximity to the Pittsburgh International Airport and Interstates 79, 70, 80, 376 and 76.

— Louis Oliva is the senior vice president of Grubb & Ellis’ industrial services group in Pittsburgh.

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