Pittsburgh Office Snapshot – Q2 2018
Pittsburgh’s unemployment rate dropped to 4.5% in Q2 2018, its lowest point since the 1970’s while adding nearly 13,000 new jobs to the region during the same period. Information technology and robotics led the region as the most active sectors for business deal and job creation, according to PitchBook-NVCA Venture Monitor. Investors poured $26.8 million into 18 local tech firms in Q2 2018, up 33% over the same period in 2017. Mid-year 2018, investments in all sectors are ahead of 2017 with 40 companies receiving a combined $80.2 million in investments year-to-date (YTD) compared with 33 companies receiving $40.6 million in the first half of 2017.
YTD new construction starts approached the 1.0-million-square-foot (msf) mark in Q2 2018, up 47% year-over-year. After months of speculation, Philips’ Sleep and Respiratory Care business unit committed to relocating its regional headquarters to Bakery Square in Pittsburgh’s East End neighborhood. The company will move up to 1,250 employees from its current location in Murrysville, Westmoreland County submarket, to a 234,000-square-foot office building developed by Walnut Capital. Upon completion, the new building will be the last phase in the Bakery Square complex and is expected to deliver in late 2020.
Though the overall vacancy rate rose 100 basis points (bps) year-over-year, YTD leasing activity topped 1.5 msf at the close of Q2 2018 and Class A rents were up 3.8% over Q2 2017, ending the quarter at an average of $26.00 per square foot (psf) annually.
Users requiring large blocks of space will continue to face limited options, with only a handful of direct, contiguous availabilities greater than 60,000 sf within the CBD and fewer than 20 spaces in Pittsburgh’s entire inventory. Landlords will continue to push asking rates and demand longer terms in order to recoup capital improvement expenditures and larger tenant improvement allowances for the foreseeable future. Many tenants may consider exercising early renewal options in order to lock in current rates and conditions.View Attachment