Pittsburgh Office Snapshot – Q2 2017
Pittsburgh was ranked fifth among SmartAsset’s Top Cities for College Grads survey released in Q2 2017, which could explain why the region also was first among North American small tech markets in millennial population growth – posting a 17.7% increase between 2010 and 2015 – besting popular competitors Austin, TX, Charlotte, NC, and Cleveland, OH.
Pittsburgh’s technology sector grew 12% over the past two years, ranking the region fourth largest among North America’s small tech markets with over 42,000 employees. This growth has increased demand for co-working spaces and pushed the renovation of more than 4.0 million square feet (msf) of office space by landlords looking to lure new tech tenants.
M&J Wilkow, now one of the region’s largest investors, was quick to begin its transformation of the former Art Institute of Pittsburgh, a 154,000-square foot (sf) Late Gothic Revival Building situated along the CBD’s Boulevard of the Allies, into the type of space tech tenants are seeking. The company is converting old classrooms to state-of-the-art offices with exposed ceilings and open concept floor plans, while adding top-flight amenities including a rooftop restaurant, tenant lounge, conferencing facilities for up to 60 people and a fitness complex.
Net absorption for Q2 2017 improved by 77.6% over Q1 2017 ending the quarter at positive 116,172 sf while leasing activity slumped to just under half of the 1.1 msf Q1 2017 total ending at 517,750 sf. The overall average rental rate edged up nearly 2.0% to $19.94 per square foot.
Year-to-date investor activity exceeded 2.25 msf by the close of Q2 2017. The most significant transactions were BPG Real Estate Services, Inc.’s $59.5 million purchase of 375 North Shore Drive, a 303,000-sf office building on Pittsburgh’s North Shore, where Peoples Gas Company maintains its headquarters; and, Atlanta Property Group’s $43.2 million investment in 2000 Park Lane, a 236,000-sf office building in the Parkway West submarket that is fully-leased to Cigna.
Net absorption within the CBD should remain positive throughout the remainder of 2017 as UPMC adds 85,327 sf to its Downtown footprint in the U.S. Steel Tower and at Heinz 57 Centre, bringing its total occupancy to more than 1.25 msf by year-end. And, Evoqua Water Technologies will relocate its 200 Warrendale-based employees into 60,000 sf at K&L Gates Center, which will serve as the company’s global headquarters.View Attachment