Following a strong performance in the first quarter of 2016, Pittsburgh’s office market ended the second quarter with similar strength, boasting a vacancy rate of just 7.7%. The average rental rate, over all classes, finished at a solid $20.40 per square foot.
Overall, Pittsburgh’s Central Business District (CBD) posted a declining vacancy rate of 8.3%, down over 0.5% from this time last quarter. The average asking rental rate per square foot for all classes in the CBD remained steady from previous quarters reaching $23.66 per square foot. The average asking rental rate for Class “A” buildings in the CBD was just over $26.65 per square foot with Class ”B” reaching an average of $20.60 per square foot. We can expect overall rental rates in the CBD to increase due to the two large renovations underway to include: the 529,000 square foot Liberty Center and the 1,011,000 square foot One Oxford Centre. The buildings are currently quoting $33.00 and $34.00, respectively.
Similarly, Pittsburgh’s suburban office market remained strong. The end of the second quarter showed a 7.4% vacancy rate compared to the first quarter’s vacancy rate of 7.9%. The average rental rate for Class “A” buildings in the suburban office markets reached $23.43 per square foot with Class “B” attaining rates of $19.36 per square foot. Both classes demonstrated an increase from the previous quarter. Suburban submarkets, such as the Parkway West, have retained large amounts of Class “A” inventory providing sizeable users with options in the market.
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Office Market May be Nearing Peak
At the conclusion of 2015, Pittsburgh’s office market is beginning to show
signs of peaking. Overall office vacancy rates for the 4th quarter increased
slightly over 3rd quarter results from 8.1% vacant to 8.3% vacant at year
end. Rental rates for office space in all submarkets and classes decreased
slightly in the 4th quarter to $20.51/sf, from $20.55/sf in the 3rd quarter, or
a 0.02% decrease.
Pittsburgh’s CBD had a few notable transactions in 2015. PNC moved
into its new Platinum LEED Certified 800,000 SF office tower located at
300 Fifth Avenue in the 4th quarter. PPG Industries, Inc. maintained its
headquarter presence at One PPG Place, renewing approximately 300,000
SF there. In November 2015, US Steel Corporation announced it would not
be moving forward with a planned “300,000 SF Build-to-Suit” at the site of
the former Civic Arena, instead, electing to extend its lease commitment at
600 Grant Street for one more year through the summer of 2018. Millcraft’s
Tower Two-Sixty, a mixed use development including office, retail and a
hotel adjacent to the vibrant Market Square, signed three office leases and is
closing in on 80% occupancy prior to the planned Spring 2016 completion
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Partnership with Colliers International takes Project Nationwide
Oxford Development Company today announced a partnership with Colliers International to expand the marketing of 350 Fifth Avenue.
“Oxford has been working with potential clients in the Pittsburgh market for the lease up of 350 Fifth Avenue,” said Steven J. Guy, President and CEO. “We felt that it was time to expand our reach into several other key markets, and to do so successfully we looked to Colliers International.”
Colliers International will market the new 29-story high-rise to potential tenants in the technology, finance, and government sectors in national markets such as Northern California, Austin, Boston, New York, and Washington D.C., utilizing their global platform.
“We are thrilled to be engaged with a great team on such an exciting and transformative project in Pittsburgh’s Central Business District,” said Gregg Broujos, Managing Director for Colliers International. “350 Fifth Avenue will become a catalyst in the revitalization of the Smithfield Street corridor.”
The first quarter of 2015 ended with an overall vacancy rate of 8.1% with net absorption totaling a positive 127,251 square feet for the quarter. Sublease space increased during this period ending with 307,784 square feet available. Rental rates finished up $19.84 representing a decrease of 4% adjusted for all classes of available space.
The Class A office market recorded net absorption of a positive 130,773 SF. The Class B office market recorded net absorption of a positive 38,875 SF. The Class C office market recorded net absorption of a negative (42,397) SF. Net absorption for Pittsburgh’s Central Business District was positive 19,408 SF.
Major Lease Transactions: Chevron Corporation executed a lease for 120,000 SF at Cherrington Corporate Center, Building 700 and CA Technologies executed a lease for 22,143 SF at Foster Plaza 9 in the Parkway West Market. Gateway Health Plan executed a lease for 20,298 SF at the Chamber of Commerce Building in the Central Business District.