Pittsburgh Office Snapshot – Q1 2017
Though the region added just 4,400 new jobs in 2016, Pittsburgh remains poised for growth in its strongest economic sectors. Citizens Bank announced that it would remain a tenant in 525 William Penn Place, where it occupies approximately 150,000 square feet (SF), citing its view of Pittsburgh as a growth driver for the company. Ford Motor Company inked a $1.0-billion deal with Argo AI, a Pittsburgh start-up that focuses on artificial intelligence and robotics, to expand its research and development of self-driving cars. Ford now is surveying the Greater Downtown submarket for space to construct a 100,000-SF facility to hold the 200 employees it expects to hire over the next 24 months.
Leasing activity in Q1 2017 reported a 23.3% drop from the same period 2016, ending the quarter at just less than 600,000 SF, while overall net absorption dropped an astonishing 171% to negative 143,008 SF. Overall vacancy dropped 0.4 basis point from Q1 2016 to 9.6%. Class A space followed the lead of the overall market in Q1 2017 with leasing activity down 9.5% to 343,260 SF and absorption totaling negative 251,758 SF. Year-over-year overall vacancy was up 3.2 basis points to 11.6%. In contrast to the total market, leasing in the CBD was up 76.9% year-over-year in Q1 2017 with a 6.1% increase in average asking rent posting at $28.77 per square foot.
Investment activity maintained its aggressive pace in the region with nearly 1.7 million square feet sold in Q1 2017. Stark Enterprises, a Cleveland-based group that maintains a diverse portfolio of mixed-use product throughout the U.S., reached agreement with Oxford Development Company to purchase 441 Smithfield Street, a 200,000-SF office building across the street from the Macy’s redevelopment project, Kaufmann’s Grand on Fifth, for $18.75 million. Stark plans to renovate the existing building into fresh office space with street-level retail.
Construction activity should increase significantly in the Greater Downtown area as companies such as Ford and most recently, SAP, aim to creative custom, collaborative environments for their growing workforces. SAP committed to occupying more than 180,000 SF in a new building on one of the two remaining parcels on Pittsburgh’s North Shore. The company will relocate and add to its local workforce in a long-term lease worth more than $70 million. Ford and other major users are expected to follow suit before the close of 2017.View Attachment