Pittsburgh Office Market Snapshot – Q4 2018
WalletHub.com ranked Pittsburgh 15th out of 182 metros on its 2019 list of “Best Cities for Jobs”. Fourth quarter 2018 metrics reflect substantial growth in education and health services – the lifeblood of the region’s economy since the demise of the iron and steel industries. The “eds and meds” sector broke a new record high peaking at 258,700 jobs at year-end. The Pennsylvania Department of Labor and Industry reported that construction added 400 jobs over the fourth quarter 2018 to reach a new record of 65,800 employed in the region. In November, trade, transportation and utilities experienced the largest month-to-month increase of any sector – 3,700 new positions – due to seasonal hiring.
The Greater Downtown / Fringe market continued to be the center of both leasing and development activity within the Pittsburgh region at the close of 2018. Total leasing activity within this submarket was just under 500,000 square feet (sf) at year-end, while new construction projects increased to more than 600,000 sf. Among the most prominent ground-breakings were Oxford Development’s latest phase of its Strip District project called the Stacks at 3 Crossings, which will consist of two, three-story, 55,415-sf office buildings scheduled for completion in early 2020. Additionally, Rugby Realty Company announced its intention to build a two-building, mixed-use development nearby at 21st and Smallman Streets. Construction on the 400,000-sf project begins the first quarter 2019. In nearby Oakland – the region’s university hub – both redevelopment and new construction came to life in 2018. From Murland Associates, LP’s Murdoch Building – a 95,000-sf new office project that is already fully-leased, to Walnut Capital’s recent $8.0 million conversion of a former Cadillac dealership into 41,000 sf of office space, Oakland remains a focal point for investors and developers. In fact, of the 1.6 million square feet of new construction in the pipeline, nearly 60% of it is concentrated in these two submarkets.
Net absorption should improve substantially in 2019 as new tenants to the market take occupancy of projects currently under construction. Overall average asking rents will remain near $20.00 per square foot (psf) gross, but Class A will increase slightly in response to continued capital improvements among the region’s top office buildings.View Attachment