Monthly Archives: May 2014
Activity in the office leasing market in Pittsburgh leveled off in the first quarter of 2014, but overall the market performance continues to exceed typical expectations for the region. The overall office vacancy rate in the region is up slightly to 8.3 percent from 8.1 percent at the end of 2013, while Class A office space in the CBD market has one of the lowest vacancy rates in the country at just 8.1 percent. The fundamentals reflect a tight office market and are testament to why Pittsburgh continues to attract serious outside consideration from institutional investors. A prime illustration is the recent acquisition of the venerable Union Trust Building by Boston based, The Davis Companies. The company’s immediate plans are to maintain the 517,000 square-foot building for office use, pending additional research into the market.
As Pittsburgh emerges from one of the coldest winters in recent memory, a number of positive economic news items have been published, which reflect continued momentum for the region and potential reasons why interest from the outside investment community will continue. For instance, the Pittsburgh Regional Alliance (“PRA”) recently announced that economic development deals increased by 12 percent during 2013 to a total of 302 throughout the 10-county region. In its March press release, the PRA stated that the deals or “wins” were related to “new facilities, expansions of existing companies, attraction/retention of companies and startups around Southwestern Pennsylvania.” The announcement by the PRA provides further evidence to Pittsburgh’s growing economy and substantiates interest from outside real estate investors.
Pittsburgh’s retail market experienced minimal impact the first quarter of 2014. The vacancy rate remained the same at 4% from the previous quarter in 2013, ranking Pittsburgh 12th out of 63 markets nationally, the lowest being San Francisco at 3.4% and the highest is Cleveland at 15.2%. Researchers are forecasting the national average vacancy to drop from 12% to 10.6% in 2014. This will be the first time rates have dipped below 12% since 2009, a far stretch from a low 7.5% in 2005.
While the vacancy rates remain stagnant, the rental rates continue to rise. The rates increased 0.7% this quarter bringing the total increase over the past four years to 5.88%.
The net absorption for Pittsburgh was positive 234,553 square feet, a significant difference from the fourth quarter of 2013 at 494,762 square feet. New Class A retail development continues to be in demand for retailers. There were a total of 11 new retail buildings and a total of approximately 200,000 square feet delivered last quarter with an additional 216,000 still under construction.
Q1 2014 Off to a Good Start
The first quarter of 2014 bodes well for the remainder of the year. The market is not only active, but deals are closing. This is welcome news given the fact that while the market has seen activity over the last four quarters, the actual transactions were often slow to materialize. The deal volume continues to put a strain on inventory with class A vacancy further shrinking to historic low levels. Users of significance will soon have no option but to resort to build to suit developments or settle for less than ideal existing options.
The Pittsburgh market witnessed both major newspapers taking additional space. The Post Gazette with a major repositioning of their operations, leased the former Flabeg building in Clinton Commerce Park with plans to move 227,000 SF of their printing operation from downtown into the Parkway West Corridor. The Tribune Review continues to streamline operations and expanded an existing facility in Youngwood to a 50,000 SF footprint.
Jake Machel joins Colliers International | Pittsburgh as a Research Analyst and Broker-In-Training. His responsibilities include collecting and analyzing past, present and future real estate market statistics; tracking market trends and business movement; and assisting in the formulation of Quarterly Market Reports. While serving as research analyst, Jake is also currently studying the real estate coursework required to obtain his Pennsylvania Real Estate License for a future transition into brokerage services.
Prior to joining Colliers International | Pittsburgh, Jake and his father acquired investment real estate as well as a popular restaurant in Market Square. He was responsible for the research and purchase of cash-flow residential and commercial properties, and handled financial duties for “My Big Fat Greek Gyro” such as payroll, payroll taxes, sales objectives and day to day operations. He was also partially responsible for a $97,000 increase in revenue in the restaurant’s second year of operation.
Machel graduated in 2013 with a Bachelor of Science degree in Political Science and a minor in Economics from Washington & Jefferson College. During his college career, he was a Dean’s Scholarship Award winner. Machel also played professional hockey for a then-affiliate of the St. Louis Blues. Machel grew up in Peters Township where he currently resides.