Market for Office Buildings in Downtown Pittsburgh on the Upswing
The economy and lending environment for investors in large office buildings are positively influencing Downtown Pittsburgh real estate sales. This good
news is also trending nationwide. According to the Pittsburgh Tribune-Review, Pittsburgh, along with Chicago, San Francisco and New York are getting the nod for major office buildings on the market. But Pittsburgh’s commercial real estate market, which offers strong demand and record low vacancy rates, has a financial advantage.
The Pittsburgh Post-Gazette reports that PNC is set to announce Monday that it will be developing a new office building in the east block of Wood Street between Fifth and Forbes avenues. The block, home to vacant buildings and lower-end retail outlets, has long been targeted for redevelopment by city and civic leaders. The new office project will be the second major development undertaken by PNC in the past five years. The 23-story Three PNC Plaza, which cost more than $170 million to build, opened in 2009, transforming a shabby stretch of Fifth Avenue filled with vacant storefronts and rotting buildings between Wood and Market streets.
Prior to this announcement, the Pittsburgh Tribune-Review reported that the most recent to be offered for sale was landmark PPG Place, joining the Henry W. Oliver building, 11 Stanwix Street, the Manor Building, the John P. Robin Civic building, Macy’s, and the American Red Cross building, all Downtown.
Last month, Mark Karasick of New York led a group of investors in the $250 million purchase of U.S. Steel Tower, Downtown.
“We have seen office buildings placed on the market in the stronger markets, such as Pittsburgh,” said Gary Horwitz, president, Hertz Group, owner of the four-building Gateway Center complex in Downtown. “Sales are increasing because the debt market has become available, especially during the past six months,” to finance deals, he said. Lenders are again working with investors in a big way, and there is great opportunity for owners because property values are increasing, he said. “We have seen this occur within the past 120 days,” he said.
The Hertz Group listed Gateway Center for sale last year, but later took if off the market because “it is performing better than 11 other markets where we have properties,” he said.
“The potential PNC office development on Wood Street would really round out the Downtown Pittsburgh Renaissance nicely,” said Gregg Broujos, Managing Director and Founding Principal at Colliers International | Pittsburgh. “When this transformation of that block occurs, it will mark another milestone in Pittsburgh’s resurgence. We are very lucky to have property owners locally, like PNC, and nationally, like the Hertz Group, who take such pride in our city and make commitments and sacrifices to stay active here.”
Statistics from CoStar’s State of the Office Market First Quarter 2011 webinar show that office property sales have come in strong, with more markets and property types showing improvements. Office transaction volume has already hit about $12 billion this past quarter — about double from the same periods in the last two years. As information on more sales is verified, CoStar is estimating that total volume for the quarter could approach $15 billion.
According to the CoStar’s Market Trend article, the Pittsburgh office market ended the first quarter 2011 with a vacancy rate of 9.3%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 368,424 square feet in the first quarter. Vacant sublease space decreased in the quarter, ending the quarter at 181,408 square feet. Rental rates ended the first quarter at $18.61, a decrease over the previous quarter. There was 62,652 square feet still under construction at the end of the quarter.
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Posted on May 11, 2011, in Economy, Office and tagged Class A, Leasing, Pittsburgh Commercial Real Estate, Pittsburgh's best rankings, Tenant Representation. Bookmark the permalink. Comments Off on Market for Office Buildings in Downtown Pittsburgh on the Upswing.