4B — March 30 - April 12, 2012 — Commercial Office Spotlight — Mid Atlantic Real Estate Journal
www.marejournal.com
C OMMERCIAL O FFICE S POTLIGHT By John F. O’Donoghue, SIOR, Grant Street Associates Pittsburgh Market Overview $19 billion in 2011.
P
ittsburgh is one of only 26 cities out of 363 U.S. metropolitan ar-
which just leased nearly 70,000 s/f at 600 Cherrington Corporate Park in Pittsburgh’s
of the city, recently announced that it would build an ethane cracker in Beaver County, a $1 billion investment in the region that is expected to pro- duce thousands of construction jobs and supersize the region’s plastics and chemical manu- facturing industries. The significant space re- quired for these energy com- panies to establish Marcellus operations has had a dra- matic impact on Pittsburgh’s office market. The overall vacancy rate for all classes of office space market-wide has dropped to just over 13%, with class A space at just un- der 9%. Washington County,
Butler County and the Park- way West remain the hotbeds of leasing activity for these groups; however, the Central Business District (CBD) has seen an equal share of the ac- tion. Class A vacancy is under 7% in the CBD, with only 10 properties currently market- ing blocks of space larger than 50,000 s/f. The absorption of existing space has led to a surge in new development within the re- gion over the past 12 months, resulting in a 48% increase year over year in commercial construction starts. The total value of new projects topped $3.7 billion in 2011. Among the latest speculative proj- ects scheduled for the Cen- tral Business District (CBD) are The Gardens at Market Square, a 100,000 s/f office and retail project by Millcraft Industries; and a 120,000 s/f office building in Pittsburgh’s Strip District planned by The Buncher Company. In addition, Walnut Capital and RCGLongviewannounced plans for Bakery Square 2.0 in Pittsburgh’s East End. This new mixed-use develop- ment will consist of more than 400,000 s/f of LEED designed office space with first-floor retail, townhomes and single- family homes. Delivery of the initial phase is expected in late 2014. And, both Horizon Prop- erties and Burns & Scalo an- nounced plans for close to half a million s/f of new speculative development in Southpointe II, Washington County. Bargaining power within the Pittsburgh market is shifting to the landlords of class A office buildings. Ask- ing rental rates for class A rose 2.5% year-over-year in the CBD and by 14.3% year-over-year in the north- ern submarkets to $23 per square foot (psf) and $24 psf, respectively, at year-end. The west submarkets, which have posted the highest vacancy levels for the past five years, have benefitted from the overflow of energy companies seeking space along the In- terstate 79 corridor. Asking rental rates in the submarket rose 4% to $21.66 psf at year- end 2011. John F. O’Donoghue, SIOR, is a principal and foundingmember ofGrant Street Associates, Inc., a member of the Cushman & Wakefield Alliance. ■
The Marcellus Shale play has pushed job growth, wage
eas that is expected to recoup pre- recessionary job levels in 2012, thanks in part to the energy sec- t o r, wh i ch now repre-
The absorption of existing space has led to a surge in new development within the region over the past 12 months, resulting in a 48% increase year over year in commercial construction starts.
increases and workforce devel- opment in Western Pennsyl- vania for the past 24 months. Among the larger players are Range Resources, which recently took occupancy of an 180,000 s/f, class A build-to- suit Appalachian headquar- ters in Southpointe Business Park; and Chevron U.S.A.,
airport corridor. Others who have recently absorbed exist- ing office space include Cabot Oil & Gas, Seneca Resources, Talisman Energy USA, Inc. and EXCO Resources, LLC. Royal Dutch Shell, which moved in January into approx- imately 80,000 s/f at Water- front Corporate Center north
John O’Donoghue
sents 16% of the area’s eco- nomic activity. Withmore than 150,000 direct and indirect jobs and 750 companies affili- ated with energy production and distribution, the sector’s gross regional product topped
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