Moving forward, Pittsburgh’s industrial market will be driven by R&D for AI and robotics (High Tech). High Tech space currently makes up a small percentage of total inventory, but there will be a shift in the number of users in the coming quarters, and a successful startup within the burgeoning High Tech scene could transform the city.
Pittsburgh’s unemployment rate dropped to 3.8% in the second quarter of 2019, which is the lowest rate since 1976, but still lags modestly behind the national average. There were 8,900 new jobs created in the quarter, demonstrating a slight uptick year-over-year.
The U.S. Department of Labor’s Bureau of Labor Statistics reported that manufacturing employment in the Pittsburgh region was approximately 84,700 employees in February 2019, its lowest in a given month since 1990.
Unemployment in the Pittsburgh region hit its lowest level in nearly half a century, dropping to 3.6% in February 2019.
The Greater Downtown / Fringe market continued to be the center of both leasing and development activity within the Pittsburgh region at the close of 2018. Total leasing activity within this submarket was just under 500,000 square feet (sf) at year-end, while new construction projects increased to more than 600,000 sf.
Though year-over-year overall industrial vacancy and leasing activity were virtually flat at the close of 2018, the Pittsburgh industrial market experienced a 373% increase in net absorption during the same period.
Completion of current construction projects is expected to boost fourth quarter 2018 leasing activity and subsequently, improve net absorption for the first half of 2019. Overall rental rates within the warehouse/distribution and manufacturing sectors will continue to rise as developers respond to increased demand for higher clearance heights and more energy-efficient construction.
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.