Pittsburgh Industrial Snapshot – Q2 2017

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Economy

Life sciences could battle energy for the top sector driving the Pittsburgh region’s economy. In 2016, the life sciences and healthcare sector experienced the largest capital investment since 2011 – $150 million – and it contributed 10% to the region’s GDP, employing more than 133,000 people. Pittsburgh’s robust network of incubators, R&D centers and high-profile universities earned the area 18 new deals resulting in 2,983 new jobs with 154 companies in 2016.

In addition, the growing robotics industry is helping to drive new development and demand for flex and R&D space in the Greater Downtown and East End neighborhoods. Old warehouses and factories are being repurposed into modern facilities catered to tenant demand. Among the most recent projects to be announced is The Tech Forge, a 64,000-square-foot (sf) flex building that broke ground on a former steel mill site in Q2 2017. The developer, Regional Industrial Development Corporation, secured anchor tenant, Caterpillar, Inc. who will occupy slightly over 10,000 sf upon completion in Q2 2018.

Market Overview

Overall industrial vacancy in the Pittsburgh region dropped 0.9 basis points from Q1 2017 ending the quarter at 4.8%. The manufacturing sector is reporting a resurgence in the region in recent months. Overall vacancy within the sector dropped 1.0 basis point to 4.4% year-over-year in Q2 2017, while the overall rental rate increased to $5.11 per square foot triple net, a 4.7% increase over Q2 2016. Net absorption jumped an astonishing 826% to 414,444 sf at the conclusion of Q2 2017, presumably in response to the nearly 356,000 sf of leasing activity in 2016. Ensinger, a German plastics manufacturer, announced it would move forward with a 214,000-sf expansion to its Washington County headquarters rather than its original plan to relocate to a new build-to-suit project, while Siemens Corporation released its decision to consolidate its energy operations from Monroeville and Northeast Pittsburgh submarkets to more than 230,000 sf at the former SONY facility, a 2.0-million-square-foot warehouse in Westmoreland County. The company also will construct a 60,000-sf facility on an adjacent site.

Outlook

Though tenants seeking large blocks of warehouse/distribution space continue to scour the region for opportunities, the growth of the life sciences and robotics industries will continue to shift local developers’ focus toward creating new life for brownfields and former heavy industrial in order to meet the needs of this new breed of occupier.

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Author: Edie Hartman

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