Q4 2014 Office Market Report
In the fourth quarter of 2014, Pittsburgh office vacancy decreased by 0.03% for an overall vacancy rate of 8.1%. Contributing to this growth is Pittsburgh’s continued momentum in the areas of energy, banking, health care and research and a vibrant CBD housing market. Although growth continues to be promising, anticipated major vacancies will occur in buildings such as 525 William Penn Place and USX Tower. Adding to the pressure, the newly purchased Union Trust Building will be bringing approximately 250,000 square feet of newly retrofitted space on line this year. Net absorption for the overall Pittsburgh market was a positive 868,224 square feet in the fourth quarter of 2014. Tenants moving from large blocks of space include: UPMC Health Plan vacating 168,802 square feet at One Chatham Center and taking 140,967 square feet at Heinz 57 Center and Computer Sciences Corporation moving into 57,501 square feet at Penn Liberty Plaza I.
While the concept of adaptive reuse of office buildings is not new, Pittsburgh has retrofitted 2 million square feet of office space for conversion to hotel and residential uses since 2011. Primarily this has affected older buildings allowing for the development of two new Class A high rise office towers for PNC, which will deliver approximately 800,000 square feet of space when PNC completes its second tower this summer.
The Class B office market recorded net absorption of a positive 482,239 square feet during the fourth quarter. Class B buildings reported a vacancy rate of 8.7% and Class C buildings reported a vacancy rate of just 7.5%.