Pittsburgh Office Snapshot – Q3 2018
Unemployment remained near the 4% mark through Q3 2018, trending near the 11-year low hit in early 2018, but job growth within the Pittsburgh region slipped during the same period, down 0.7% year-over-year with only 8,000 new jobs created. The burgeoning tech sector has strengthened the local economy while simultaneously tightening the labor pool as companies vie for a limited supply of qualified talent to satisfy growing workforce demands. The education and health care sectors continued to lead the charge with 4,000 new jobs created and about a 1.7% increase year-over-year, while the financial sector cut nearly 1,800 jobs during the same period, approximately 2% of its workforce.
The Strip District – which accounts for more than 11% of new leasing activity in Pittsburgh year-to-date (YTD) – was selected as the new home for Bombardier Transportation, Serendipity Labs and Facebook in third quarter 2018. Set to occupy nearly 250,000 square feet (sf) combined, these three companies join a host of nationally recognized tenants, whose regional headquarters are situated in Pittsburgh’s Silicon Strip, including Uber, Argo AI, Robert Bosch, Microsoft and Apple. This area just east of the CBD belongs to the Greater Downtown submarket, which also leads the overall market in new speculative development, with nearly 581,000 sf under construction – nearly three times more than Oakland, the second most active submarket in the region with nearly 200,000 sf of new projects in the pipeline. Relocations and tenant right-sizing, particularly within the CBD have led to negative YTD net absorption of 339,000 sf and an increase in vacancy of nearly 100 basis points (bps) this quarter. Law firms and professional service organizations are moving to more open, modern floor plans resulting in smaller requirements. As a result, landlords have undertaken substantial capital improvements to accommodate these users, driving up the average asking rental rates across all classes.
Leasing activity should surpass 2.0 million square feet (msf) by year-end 2018 but will fall short of the 2017 total by more than 1.0 msf. Though leasing in the CBD for third quarter 2018 was up 157% over the previous quarter, the urban submarkets will dominate new leasing in 2019.View Attachment