Mid Atlantic Real Estate Journal — Pennsylvania — February 14 - 27, 2014 — 13C
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Western PA By Tim Goetz, Cushman & Wakefield | Grant Street Associates Economic overview of 2013 & 2014 Outlook
I n the first half of 2013, there were more people working in Pittsburgh
to expand to approximately 120,000 sf and add up to 500 new jobs to the region within the next three years. Outside Investor Interest For Cbd Grows Tightening occupancy levels and increasing rental rates in Pittsburgh’s CBD have drawn new interest from out-of-town investors. In fact, of the last 13 high-profile building sales in Downtown Pittsburgh, 10 have been to out-of-town buyers, including prominent buildings such as the U. S. Steel Tower and PPG Place complex. In No- vember, the 356,440 s/f Koppers
Building was sold to NewYork- based Rugby Realty Co., while the 80,000 s/f Bank Tower sold to Rockmere Capital Partners and Liberty Center sold to Starwood Capital Group, both outside investors. Conversions Lead Construction Activity From PNC Bank convert- ing the former Lord & Taylor store to an open concept call center to PMC Property Group shifting the top office floors of the Clark Building in the Cultural District to 144 apart- ments, conversion projects are driving construction activity
in Pittsburgh’s CBD. The low office vacancy, currently listed at 10.2%, has prompted multi- family and hotel developers to invest in Pittsburgh’s core. The former Federal Reserve Building and the James Reed Building are being developed into a Drury Inn & Suites and a Kimpton Hotel, respectively. At the Henry W. Oliver Building, McKnight Realty Partners are converting the upper 11 floors into an Embassy Suites hotel. Outlook With the current vacancy rate for the region under 10%, the market is expected to see
moderate increases in rental rates across all classes of of- fice properties in 2014 and an uptick in new development. Overall absorption is expected to stay in the positive as a number of major tenants move into new spaces and subleases currently on the market are occupied by newcomers. Tim Goetz is managing principal of Cushman & Wakefield | Grant Street Associates and directs the leasing activity for more than 1.25 million s/f of of- fice space in the Pittsburgh market. n
than ever be- fore, accord- i ng t o t h e A l l e g h e n y Conf erence on Economic Development, who report- ed that 269 separate eco-
Tim Goetz
nomic development projects that could generate as many as 8,300 new jobs for the region were in process. The region has seen five consecutive years of continuous expansion and a current capital investment of $3.2 billion. Despite declines in retail trade, administrative and support services and the leisure and hospitality indus- tries, the region marked a re- cord-high 1,170,500 non-farm jobs mid-year. Pittsburgh’s unemployment rate fell to 6.6% in November, with the seven-county region posting a year-over-year increase of more than 17,400 new jobs outside the seasonal adjustment. Leasing and Construction Numerous new build-to-suit projects for major tenants were nearing completion or were delivered in 2013. Mylan Phar- maceuticals and Ansys, Inc. constructed new headquarters in Southpointe, consisting of 280,000 sf and 186,000 sf, re- spectively, while ServiceLink is constructing a new 106,000 s/f facility at Pittsburgh Interna- tional Business Park and PNC continues construction on its 800,000 s/f The Tower at PNC Plaza, where it will relocate employees from a number of other locations throughout the CBD. Leasing activity in the sec- ond half of 2013 shifted to subleases as the market saw a jump from less than 50,000 sf available for sublease to ap- proximately 360,000 sf. Among the most significant sublease transactions were – 118,000 sf at Cranberry Woods Building Four – by PPG Industries Inc.’s North American Architectural Coatings division which plans to move more than 500 jobs to the submarket; and, Computer Sciences Corporation (CSC) for 57,201 sf at Penn Liberty Plaza. The global information technology services firm will take over space vacated by Education Management Corp. in the Greater Downtown sub- market. The company plans
At Grant Street Associates, putting our clients’ needs and REMHFWLYHVÀUVWKDVEHHQRXU culture since 1993. 7KH+HQU\:2OLYHU%XLOGLQJ D3LWWVEXUJKLFRQIRUPRUHWKDQ \HDUVKDVUHDFKHG RFFXSDQF\ZLWKWKHXSSHU ÁRRUVEHLQJFRQYHUWHGWRDQ (PEDVV\6XLWHVKRWHODQGQHDUO\ VIRIQHZRIÀFHOHDVHV H[HFXWHGLQWKHSDVWPRQWKV 3XWWLQJRXUFOLHQWVÀUVW7KDW·V WKH&XVKPDQ :DNHÀHOG_*UDQW 6WUHHW$VVRFLDWHVZD\ PUTTING &/,(176 FIRST
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