Pittsburgh Office Snapshot – Q4 2017
Pittsburgh continued to gain jobs while unemployment continued to fall in Q4 2017. Gains in leisure, hospitality, finance and retail made up for losses in manufacturing, utilities and transportation. Average weekly wages in the seven-county metro grew 4.1% from 2016 to 2017, further confirming the region’s efforts to attract and retain talent. Pittsburgh topped VentureBeat.com’s list of “Four U.S. Tech Hubs to Watch in 2018”. The site attributed the region’s inclusion on the list to its access to Carnegie Mellon University and its concentrated base of entrepreneurs with research or working experience in large tech companies. Ann Arbor, MI, Indianapolis, IN and Raleigh, NC rounded out the list.
Though year-over-year construction completions within the office sector ended 2017 down 13.1% from 2016, posting just shy of 800,000 square feet (sf) of new inventory, new development announcements dominated the news cycle throughout the second half of the year. Among the most substantial projects to kick-off is Hazelwood Green, a mixed-use redevelopment on Pittsburgh’s last large brownfield site. Construction began on the first of three planned office buildings that will house Carnegie Mellon University’s Advanced Robotics for Manufacturing (ARM) Institute. Upon completion, ARM will occupy two floors and approximately 94,000 sf of the 264,000-sf steel beam structure. Burns & Scalo Equities expects to break ground on a six-story, 156,000-sf office building on one of the final parcels available at Pittsburgh Technology Park, adjacent to Hazelwood Green. The Park, which consists of five buildings and 640,000 sf, benefits from its convenient access to Oakland – the region’s university and research center – and has experienced vacancy of 1.0% or less for over four years. Additionally, RDC, Inc., a regional developer, announced plans for District 15, a $22-million, 105,000-sf office project in Pittsburgh’s Strip District. This is an area within the Greater Downtown submarket that has recorded occupancy of 95% or better for several quarters and a current average asking rental rate of $26.07 per square foot (psf). The riverfront project is expected to deliver in Q4 2019 and should help to address the growing demand for larger blocks of space by tech companies.
Despite an uptick in vacancy late in Q4 2017, Pittsburgh’s office market should hold steady at its current overall vacancy rate throughout much of 2018. Continued demand in the CBD’s Fringe markets will drive leasing activity while redevelopment and new construction projects will continue to push average rental rates upward.View Attachment