Office Snapshot Q2 2014
Bruce Katz of the Brookings Institution, a Washington, D.C.-based, private research organization, says that Pittsburgh is one of a short list of cities best positioned for success in the new economy, citing the city’s platform of government, strength of leadership, blend of universities and corporate assets and its status as a research and innovation hub as key factors in this assessment. Certainly, the region’s declining unemployment rate, down to 5.3% at the conclusion of Q2 2014, is a strong indicator of the city’s resilience. The Pittsburgh Downtown Partnership announced in its annual State of Downtown Report that the population within the Greater Downtown area had grown by more than 40% over the past decade. The city is host to more than 4,450 residential units and boasts a 96% occupancy rate with 517 new units currently under construction.
SPECULATIVE CONSTRUCTION RESUMES IN SUBURBS
With an overall office vacancy rate consistently below the 10% mark for several quarters, local developers have slowly begun to respond with new speculative construction designed to address the lack of large blocks of class A space. Among the Q2 2014 deliveries were Westpointe Corporate Center, a 130,000-square foot (sf) building situated in Pittsburgh’s Parkway West submarket. The building is 60% leased upon Calgon Carbon’s execution of a long-term deal that includes 75,566 sf of office and research and development facilities. The company will consolidate two nearby locations into the center later this year. Additionally, Burns & Scalo completed construction on 2400 Zenith Ridge, a 150,000-sf office building located within Southpointe Business Park. Though the building opened fully vacant, demand for space in the park by Marcellus-related businesses remains strong and should lead to new tenants by year-end. In fact, Crossgates, Inc. announced that its 45,000-sf speculative Southpointe II building had been fully leased to tenants Rice Energy, 18,380 sf; Computer Aid, Inc., 15,000 sf; NiSource, Midstream Services and Stallion Oilfield Services.
NEW DEVELOPMENTS PROGRESS IN CBD
The Elmhurst Group saw a return on its $3 million renovation to the 130,000-sf former FiServ Building when it inked a long-term lease with Pittsburgh start-up 4moms for 81,000 sf. The hi2gh-end baby product manufacturer has outgrown its flex space in the nearby Strip District and opted to move its operations to class-A offices in the CBD. Oxford Development Company in partnership with the Urban Redevelopment Authority of Pittsburgh announced plans for Three Crossings, a 299-unit apartment complex that also will feature 250,000 sf of urban flex office and retail space, as well as, an intermodal transportation facility with 700 parking spaces, bicycle repair station and EV charging stations. The $122 million mixed-use project will be built on an 11-acre brownfield site that sits at the entrance to the Strip District. Rycon Construction, Inc. recently signed on to be the first tenant with plans to occupy 25,000 sf of office space upon completion.
Little change in vacancy or rental rates is expected throughout the second half of 2014, though the scheduled completion of several new projects should impact inventory and absorption levels at year-end.View Attachment