Pittsburgh Industrial Market Snapshot – Q1 2019
The U.S. Department of Labor’s Bureau of Labor Statistics reported that manufacturing employment in the Pittsburgh region was approximately 84,700 employees in February 2019, its lowest in a given month since 1990. Pittsburgh ranks 18th among all U.S. metros for jobs in fabricated metals manufacturing – a division that makes up approximately one-fifth of the total sector – but the lack of skilled workers has deterred growth with more than 90% of employers reporting an inability to find the right workers for their job openings. With Pittsburgh’s unemployment rate reaching near historic lows in the first quarter 2019, employers have become more competitive, offering higher wages and more comprehensive benefits to secure top talent.
Year-over-year overall industrial vacancy rose approximately 80 basis points (bps) in first quarter 2019, with the most significant increase occurring in the office service sector at 230 bps. Despite a significant decline in overall net absorption, new construction projects increased an astounding 420% year-over-year and leasing activity for the quarter topped 1.0 million square feet (msf), up from just under 300,000 square feet (sf) in first quarter 2018. Butler County and the Parkway West continued to lead the region in new construction, with approximately 70% of the total 750,000 sf of projects underway located in those submarkets.
Pittsburgh’s perpetually tight warehouse/distribution sector has caught the attention of major industrial investors over the past several quarters, particularly STAG Industrial, the 12th largest of industrial investor in the U.S., according to National Real Estate Investor. The company completed the purchase of its fourth industrial property in the Pittsburgh region in first quarter 2019, bringing its local inventory to just over 1.0 msf. STAG entered the Pittsburgh market in 2017 with the purchase of a 297,200-sf warehouse facility in Clinton Commerce Park that is fully leased to Berlin Packaging Company.
The commencement of the $700 million Southern Beltway – the last leg of a major infrastructure project designed to improve access from the south and east to the Airport Corridor – will substantially boost both construction and leasing activity in the South Pittsburgh and Washington County submarkets over the next 24 to 36 months. Leasing activity within these already tight markets will push vacancy into the low single digits.View Attachment