Author Archives: Colliers International | Pittsburgh
The fourth quarter of 2013 finished in much the same way it began and maintained throughout the year; solid if unspectacular growth. The vacancy rate fell from 7.9 percent in the third quarter to 7.7 percent in the fourth quarter and dropped three basis points in total over the course of the year. The lack of quality Class A warehouse continues to be a factor with vacancy levels dropping to an astounding 2.97 percent.
The region’s confidence continues to spiral upward with fourth quarter projections from numerous economists that the manufacturing sector will continue to rebound. Optimism is the word heading into 2014. Pittsburgh should be especially bullish given the multitude of story lines that should positively impact the industrial market. These include CSX announcing that they will construct a $50,000,000 multi modal facility in McKees Rocks; the continued expansion of the Southwest Pennsylvania energy sector, and the much needed passage of the state transportation bill. Any of these alone are significant, but taken in total, insure that the region will continue to advance forward.
With the rest of the country’s real estate portfolio just beginning to recover, the Pittsburgh office market has seen unprecedented success in terms of its vacancy rate. The overall vacancy rate for the market, at 8.1 percent, is one of the lowest in the country, but only begins to tell the story of how vibrant the market truly is. At no point in time during the last thirty years has our market been as healthy as it is today, with the potential for vacancy rates to dip even lower.
The number of large blocks (greater than 50,000 square feet) of class “A” space in downtown Pittsburgh can be counted on one hand, with only a limited number of new options appearing on the market. A tenant in the downtown market looking for more than 100,000 square feet has as few as four options, with one being a prominent sublease and another going to sheriff’s sale in the near future. Two projects, The Gardens and 350 Fifth Avenue, may add 300,000 square feet to the mix, but still won’t be able to answer the long term demands of the market.
This article is the first of a series that presents various aspects of real estate investment from a comprehensive wealth management perspective. Various relevant topics will include basic real estate asset-class investment characteristics, varying inflation hedging capabilities of public vs. private real estate investments, the market composition of the current real estate universe, and fundamental considerations necessary when determining cap rates on direct investments.
Commercial real estate in the United States is a $4 trillion asset class; however, traditional wealth management firms have primarily focused on selling funds, funds of funds, REITS, etc. to satisfy real estate diversification requirements. Colliers International | Pittsburgh now offers the “Colliers FO” platform (Family Office), which provides comprehensive real estate portfolio management services to Family Office and High Net Worth Wealth Management clients investing in direct real estate.
Elmhurst Group broke ground December 6, 2013 on Schenley Place, a 105,000 square foot “Class A” office building with seven stories and three levels of underground parking. Schenley Place is located on Bayard Street and Ruskin Avenue in Oakland. Elmhurst Group signed a long-term land lease with First Baptist Church of Pittsburgh for this project, which is estimated to be completed by March of 2015.
The First Baptist Church of Pittsburgh in 2004 hired Paul Horan, Founding Principal, and Ralph Egerman, Principal, of Colliers International | Pittsburgh for assistance in increasing its cash flow and providing funds to improve the 100 year old church building.
Mr. Horan and Mr. Egerman suggested to the Board of Trustees that their parking lot had significant value as a development site, and they were retained exclusively by the Board to develop a Request For Proposal and conduct interviews with carefully chosen developers. The Board of Trustees selected the Elmhurst Group to be the developer for the project and a long term ground lease was executed to improve the Church’s finances.
“Paul and I feel very privileged to have had an opportunity to work with the Church and Elmhurst, on this exciting project. Colliers International | Pittsburgh is proud of our work on behalf of non-profits and our role in the growth of our city,” said Ralph Egerman, Principal at Colliers International | Pittsburgh.