42A — February 10 - 23, 2012 — Pennsylvania — Mid Atlantic Real Estate Journal
www.marejournal.com
W ESTERN PA S POTLIGHT
By: Louis V. Oliva, Grubb & Ellis Company One Year Ends/Another Begins
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Strip District of Pittsburgh; Dynamic’s purchasing 115,000 s/f for expansion in Harmar/ Northeast; Three Rivers Ma- rine purchasing 100,000 s/f in Speers/Washington County; and Pitt Ohio Express purchasing 54 acres in Harmar/ Northeast for expansion. Major leases include the fol- lowing: UPMC leasing 148,000 s/f for warehousing in Cranber- ry/Northwest; ModCloth consol- idating its office and warehouse functions into 146,000 s/f in Crafton/West; AMCOM con- solidating its office/warehouse into 35,000 s/f in Findlay/West; American Tire Centers expand- ing to 150,000 s/f in Findlay/ West; Mitsubishi Electric Power Products expanding by 50,000 s/f in New Sewickley/Beaver; Gardner-Denver expanding into 100,000 s/f in Washington County; Weatherford expanding into 50,000 s/f in Washington County. Several new projects were an- nounced; some as a result of sev- eral significant Commonwealth of Pennsylvania economic de- velopment initiatives includ- ing RCAP Grants which were awarded in the third/fourth quarters of 2011. Within the Airport/West Sub- market, Phase II of the Findlay Industrial Park at Westport will provide 225 acres of shovel ready sites to accompany the 300,000 s/f of recently com- pleted projects. Several other projects are in due diligence or various stages of infrastructure development to meet the future needs of the region. In Westmoreland County, the former Sony Plant will be transformed into a multi-tenant facility providing over 2,100,000 s/f under roof to manufacturing related occupiers. With ap- proximately 1,300,000 s/f cur- rently available, this facility is uniquely positioned to provide large scale manufacturing space to fast growing companies from 200,000 s/f to 800,000 s/f. 2012 Forecast As stated previously, given the dearth of speculative construc- tion in 2010-2011, coupled with a return to normal absorption levels in excess of 1M SF annu- ally, the Pittsburgh Industrial Markets finds itself with a 91% occupancy rate and a growth inhibiting vacancy rate of only 5% or 1,700,000 s/f in total for newer Class A inventory. The largest contiguous space is 500,000 s/f and there are only a handful of buildings avail- able for 100,000 s/f industrial occupiers. Continued on page 43A
he Pittsburgh Indus- trial Market continued to defy its Rust Belt
the other market sharing that distinction is Houston, Texas, the center of the energy indus- try in the United States. While on a smaller scale, areas includ- ing Houston Pennsylvania have enjoyed job growth and indus- trial development related to the oil/gas exploration throughout the Marcellus Shale region. With the expectation of the site selection for a new Cracker Plant, the Pittsburgh market should continue to benefit from energy related industrial devel- opment for years and possibly decades to follow. In addition to a return to normal absorption levels, the lack of new construction and speculative inventory has cre- ated a healthy environment for landlords and an ever tighten-
ing market for industrial oc- cupiers. 2011 Recap While 2011 got off to a slow start, the late summer and early fall leasing activity ran contrary to worldwide eco- nomic concerns. Despite the Euro Debt Crisis and the US Congress Debt Ceiling Debate, absorption picked up dramati- cally in the second half of the year. Continued strength in the energy sector combined with in- creasing transaction activity in non-energy related industries drove net positive absorption and pushed the overall vacancy rate lower. The fourth quarter of 2011 was a continuation of the momentum achieved in the third quarter as 2011 finished with solid results.
Year to date absorption ex- ceeded 1,200,000 s/f (1% of total inventory) and overall vacancy dropped from 9.5% to 9.2%. ClassA inventory is at extreme- ly low levels of 1,700,000 s/f or 5.7% of Class A inventory. With only 321,000 s/f of construction in the pipeline, and a majority of it for owner occupied projects, the market should tighten fur- ther for 2012. Therewere a significant amount of large transactions throughout 2011 in many submarkets. Major sales include the follow- ing: Rugby Realty purchasing 570,000 s/f in Crafton/West for speculation; Cellone’s Bak- ery purchasing 131,000 s/f in Crafton/West for expanding operations; Restaurant Depot purchasing 150,000 s/f in the
n e i g h b o r s with a year o f p o s i t i v e a b s o r p t i o n t hr oughou t t h e s o u t h - westernPenn- sylvania re- gion. Despite several large
Louis V. Oliva
scale plant closings in various manufacturing sectors, the energy industry continues to be a catalyst for growth in our region. In fact, the Pittsburgh metropolitan area is one of two markets in the country to have recovered 100% of the jobs lost to the latest recession of 2008. It may be no coincidence that
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