Retail Snapshot Q4 2014
Unemployment at year-end dropped to 5.5%, 1.3 percentage point (pp) lower than 2013. Though the region fell in global rankings for economic and employment growth in 2014, the Brooking’s Metropolitan Policy Program listed Pittsburgh as one of only a few U.S. metros to have fully recovered from the recession.
United Van Lines reported that Pittsburgh was the only Pennsylvania metro where more people were moving in than out, with 58% of the company’s Pittsburgh business coming from inbound residents. With new residents come new retailers, and Pittsburgh is no exception to this concept, particularly in the restaurant sector.
National chain Noodles & Company has added five additional locations to the Pittsburgh region over the past 18 months, while homegrown concepts have kept pace with several openings of their own. Burgatory, a local chain, has opened six locations with a seventh scheduled to open in Q1 2015, and BRGR now has four locations in the market. Hello Bistro, a fast casual concept centered on a 50-item salad bar, opened its third location – this one in the CBD – in Q4 2014.
RETAIL MARKET OVERVIEW
Pittsburgh’s retail market saw little change in year-over-year vacancy, dropping from 4.0% to 3.7% in Q4 2014. Year-end absorption was positive 165,683 square feet (sf) with approximately 748,439 sf of new space delivered and 126,894 sf currently under construction. The market’s consistently low vacancy rate has contributed to a significant increase in rental rates, particularly for new construction projects where asking rents are topping $27 per square foot (psf) triple net. Class A second generation space averages approximately $23 psf triple net while classes B and C are in the range of $20 – $21 psf triple net.
Despite a 68.0% drop in new project starts year-over-year, new construction deliveries in 2014 increased 16.7% over 2013. Among the most significant deliveries for the year was The Old Mill, a 215,594-sf shopping plaza located in the Washington County submarket and anchored by Hobby Lobby and Field & Stream. The development site is 93.4% leased and features several inline shops and restaurants as well as surrounding outparcels. Closer to the CBD in Pittsburgh’s Greater Downtown neighborhood of Lawrenceville, Doughboy Square Apartments welcomed 19,000 sf of new street-level retail atop 45 apartments that includes Pinot’s Palate, Paul Michael Jewelry and Senti Italian Restaurant. The next phase of the project, Square View Apartments, is now under construction and will offer an additional 4,300 sf of retail space. Located just across the river and adjacent to Heinz Field and PNC Park, North Shore Place I and II will open in the Q2 2015 and will offer Toby Keith’s I Love This Bar & Grill, Burgatory and North Park Lounge and Cabana Bar.
All national indicators point to improved consumer spending for 2015 and the Pittsburgh market should follow the trend. With fewer new projects slated to come out of the ground in the next year, vacancy rates should remain very low while rental rates will continue to rise. Renewed interest in redevelopment opportunities will shift the construction focus for the next 12 to 18 months.View Attachment