During the fourth quarter of 2012, Pittsburgh’s overall office vacancy rate decreased to 7.9%, continuing an ongoing positive trend. Behind the stability of Pittsburgh’s banking sector, the strength of local health insurance companies and the under-the-radar growth of many high-tech companies, Pittsburgh continues to be one of the strongest office markets in the United States.
The strength of the overall Pittsburgh office market is not limited to just a few submarkets. While most of the focus has been on the Central Business District, Cranberry and Southpointe, the other submarkets continue to perform well. The Parkway West is as tight as it has been since the “dot-com” days due to growth in both energy and mortgage service companies. In addition, the Parkway East/Monroeville area, while the weakest of the various submarkets, with a 10.5% overall vacancy rate, is actually strong compared to historical levels.
“The Pittsburgh office market is as strong as we have seen it since the dot-com days of the late 1990’s,” said Patrick Sentner SIOR, a founding principal at Colliers International | Pittsburgh. “Only this time the overall fundamentals appear to be much more sound.”
Pittsburgh Enjoys Positive Industrial Absorption – Although Lack of New Class A Industrial Warehouse Product Still Remains
Pittsburgh continued its pattern of ignoring national uncertainty during the final three months of 2012, and enjoyed another quarter of positive absorption.
Unfortunately, the pattern also continued with the sluggish delivery of new Class A industrial warehouse product. Net absorption for the calendar year 2012 was roughly 388,000 SF while overall vacancy fell to 8.2% and vacancy for Class A product came in at a stunning 3.6%.
Pittsburgh is not a market that traditionally experiences a high volume of build to suit activity. Historically most absorption occurs through activity on existing product – either speculative or second/third generation. With the lack of available inventory, it will be interesting to monitor build to suit projects over 2013. Most forecasters do not anticipate a drop off in demand which makes for simple math – excess demand and limited supply equals build to suit. While developers always prefer to build with a tenant in hand, in speculative development one often wins the deal due to timing. Increased build to suit activity will lead to increased competition, perhaps including national players. The risk our market runs for not delivering existing options to meet the demand is that we lose projects to other markets.
“The Colliers Pittsburgh Industrial team remains bullish on the demand for industrial space throughout our region, although our optimism is tempered somewhat by the lack of supply,” said John Bilyak SIOR, CCIM, Principal at Colliers International | Pittsburgh. “We look forward to another active albeit challenging year, in that we will have to be especially creative in identifying solutions for our clients.”
Excitement is growing for the possibility of new downtown Pittsburgh development. KDKA-TV’s Jon Delano reports Oxford Development, the owner of the building across from the Macy’s that stretches along Smithfield between Fifth and Forbes, has promised a major announcement that could mean more top-of-the-line Class A office space opening up in downtown Pittsburgh.
“The market, as far as office space particularly Class A, is as tight as it’s been in 20 years,” said Ed Lawrence MBA, Associate at Colliers International | Pittsburgh. It’s very difficult to find large contiguous blocks in downtown.” KDKA-TV’s Jon Delano reports part of the shortage is because some office buildings, like the old State Office Building, are being converted to residential, another sign of downtown growth. “From Market Square to Fifth and Forbes, the perception is changing,” says Lawrence. “It’s amazing the turnaround and renovation that is taking place in that part of town.”
Source: NorthEast Real Estate Business August 2011 Publication
Contributed by John Bilyak, Principal & Director of Industrial Brokerage at Colliers International | Pittsburgh
John Bilyak, Principal & Director of Industrial Brokerage at Colliers International | Pittsburgh, recently contributed to the Northeast Real Estate Business publication, with a feature article that focuses on a snapshot of the Pittsburgh Industrial Market.
“While Pittsburgh has weathered the storm and our vacancy rate is healthy, the real story is that there is a need for additional well-located Class A inventory,” said Bilyak, who is responsible for industrial tenant and owner representation at Colliers International | Pittsburgh.