With the inauguration of President Trump fresh in our minds, it would be appropriate to discuss the impact of a new presidency on the retail real estate world. Will new tariffs impact retailers like Best Buy and Walmart, or could new manufacturing emerge that might lower costs? Instead of discussing these weighty issues, and because Colliers International | Pittsburgh has its priorities straight, we would prefer to talk about beer. Specifically the burgeoning microbrewery explosion we have seen in our region.
Combined with a hot restaurant scene, Pittsburgh’s food options have never been better.
The excitement in Pittsburgh’s food scene is headlined by the strong growth in regional micro-breweries. Just this past month Mindful Brewing opened their new location on Route 88 in Castle Shannon. At the same time Southern Tier Brewing Company opened on the North Shore and Helltown Brewing announced it is expanding to Bloomfield. By some count, no fewer than seventeen breweries are planned or expected to open in the region in 2017. While many might wonder if this could be too much of a good thing, Kyle Mientkiewicz of Grist House Craft Brewery, one of Pittsburgh’s first and most popular craft breweries disagrees. “In the grand scheme of things I don’t think the market is
saturated yet,” he said, “but if you do enter the market you better have a good product”. Grist House’s success has shown other entrepreneurs that people will seek out good
Local craft breweries are only a part of Pittsburgh’s strong restaurant scene. National and regional restaurant chains are expanding rapidly within the market and competing for real estate options. Restaurants active in the market include Firebirds, Bomba, Hello Bistro, Plaza Azteca, Choolah, Mission BBQ, Emiliano’s, and many others. By some counts there may be dozens of restaurant concepts competing for the same prime locations. The result is a lack of opportunities for smaller local restaurants and increasing rental rates. Restaurants that used to lease space for $15 or $18 per square foot are now forced to deal with market rents that range between $25 and $40 per square foot. Rising occupancy and labor costs create a conundrum for many restauranteurs. Joe Billhimer, a franchisee of multiple restaurant concepts said, “The implications of higher rents, coupled with increasing difficulty in finding quality workers and their ability to get to your location absent mass transportation services, has added another factor into deciding the right location for a restaurant to be prosperous. It has become very important to look at your location and the availability of workers.“
Some pundits believe that, nationally, there is an oversupply of restaurant uses and that there will be a market correction. In a recent poll by the National Restaurant Association, only 17% of restaurateurs believed that the market for restaurants will improve over the next year, while 29% see conditions worsening. Of course, we know that polls don’t always correlate with reality, so have a beer, leave the politics aside and enjoy the plethora a food options that Pittsburgh provides.
To read the full Q1 2017 Pittsburgh Retail Newsletter, click here.
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.