Authored by Charles "Chic" Noll
When you hear the words Pittsburgh Real Estate Update, we expect to hear the usual conversation about a cap that seems to be on the growth of Central Business District rent rates or how development at Southpointe or the airport corridor is sluggish, but that was not the case when three of Pittsburgh’s seasoned real estate executives took the stage on March 17, 2017, to update NAIOP Pittsburgh’s membership.
Lou Oliva of Newmark Grubb Knight Frank, Herky Pollock of CBRE and Jason Stewart of JLL were all upbeat about rising rental rates and the prospects for increased activity and new signings in the CBD along with other real estate markets such as the Airport Corridor.
The trend of the sale of downtown Pittsburgh choice property continues with plans to improve the amenities offered to the tenants of renovated office buildings. A prime example cited by Jason Stewart, is The Davis Companies’ award winning renovation of the Union Trust Building in downtown Pittsburgh (the subject of a past NAIOP article by the author). With $105 Million in renovations, the result is a building with new amenities for the business occupants and new public spaces for the citizens of Pittsburgh.
There are new developers and new capital coming to Pittsburgh! The downtown Central Business District and the surrounding urban centers such as The Strip and Lawrenceville are the targets. These new investments are mixed-use in nature and looking to feature amenities to tenants to highlight the developed asset.
Herky points out that there is a huge push for retailers looking to come to the urban core. These renovated assets are just the vehicle to support this demand. New leasing opportunities will be coming to newly renovated and spaces with a selection of amenities. Of the 15 recent leasing opportunities completed in the Pittsburgh marketplace, 13 were at an increased cost to the tenant. These leasing deals were more than 650,000 square feet of space.
Retail rents are at the highest they have been in Pittsburgh, but not a lot of new development is happening. Some of the re-development of properties has been of the mixed-use variety. Numerous projects have dotted the landscape from Lawrenceville, the Strip and into the Central Business District.
New restaurants and retail shops are helping to make the city an attraction for tourism. Where is the next development to bring new and better ideas to the marketplace? Realtors are getting new inquiries every week for information as to where that can happen. Herky notes that “we need to keep the momentum going with new development and new projects”.
Morgan, GMH, McCaffery, Milhaus and Village Green are all out of town residential developers coming to Pittsburgh and bringing these mixed-use developments to the region. They are defiantly having an impact on the landscape of Pittsburgh and setting a new standard for real estate development. These properties are being developed with a range of amenities that will bring tenants to their doorstep.
Industrial space is robust with out of town developers and builders bringing with them their outside capital. Lou Oliva indicates the landscape is expanding with these out of town groups to bring more speculative development. Speculative development is tough to do around Pittsburgh but is happening in the industrial market segment. Industrial speculative development has thrived in the past because was there. However, Pittsburgh is a slow growth market as reflected in the velocity of the real estate rental transaction history.
The real estate executives noted that developers, owners and investors are looking to Pittsburgh as a safe-haven for their dollars in asset valuation. If we can keep proposed taxes and increased regulation away from the current development trends, we should enjoy similar growth rates as we have seen in the past. Slow and steady is a very acceptable pace of growth for the clients of the Pittsburgh real estate marketplace.