Pittsburgh Office Snapshot – Q1 2018
Pittsburgh’s population fell below 2.4 million in 2017 according to the U.S. Census Bureau – the fifth consecutive year of population decline for the region. Trends in shale exploration and development could be to blame for some of the loss, though that industry has begun to make a comeback and is expected to contribute to job growth over the next several quarters. Unemployment in the region dropped to 4.9% in February, slightly above the national average of 4.1%; however, the labor force continued to contract with a year-over-year loss of 4,900. Despite once again being named one of the Top 100 Places to Live in 2018 by Livability.com, Pittsburgh has struggled to compete with other regions for workers, particularly the 12-state Midwest region where there are 180,000 more jobs openings than people to fill them.
The number of new construction projects breaking ground in Q1 2018 was up 13.2%, even though the overall vacancy rate dropped 110 basis points (bps) year-over-year. Developers continue to focus on the Greater Downtown submarket for a variety of speculative office and mixed-use projects. After several years playing second fiddle to Pittsburgh’s North Shore, which serves as the center for sports and entertainment in the region, the South Side once again has caught the eye of developers and investors alike. Nearly a dozen new projects were announced for the South Side in Q1 2018. Among them, McKnight Realty Partners’ $110-million renovation of the former Riverwalk Corporate Center, a historic former cargo warehouse situated along the Monongahela River. Upon completion, the 868,000-square foot (sf) complex will include creative office space, numerous outdoor amenities and a 1,000-space parking garage. At Station Square, the Freight House Shops are undergoing a complete transformation that will eventually offer six restaurants; and, High Street Residential, a Trammell Crow affiliate, has broken ground on The Glasshouse, a 319-unit apartment complex that is to be the first phase of a more than$200-million planned renovation to include office, retail and a hotel.
Merger and acquisition activity among major corporate occupiers within the region has led to a glut of space returning to the market and sinking average rents. As 2018 progresses, Pittsburgh will be challenged to structure creative ways to attract and retain new tenants – particularly in older buildings – and landlords may be forced to offer more generous concessions.View Attachment