Economists predict that Pittsburgh will exceed its previous employment peak of 1.16 million within the year. Certainly, the Marcellus Shale and related industries have made the largest contribution to this growth — drilling activity could create more than 200,000 jobs by 2020.
The industrial market received perhaps its biggest boost year-to-date from Royal Dutch Shell and Acquion Energy Corp. Shell, which signed a land-option agreement with Horse-head Corp. for its current zinc operations site in Beaver County, intends to build a world-size ethane cracker capable of cracking 80,000 barrels a day. The company will invest more than $1 billion into the regional economy and produce countless employment opportunities in both construction and production. Horsehead plans to relocate its operation to North Carolina in 2013.
Aquion, the maker of aqueous electrolyte sodium ion batteries used to store renewable energy, has committed to leasing an initial 250,000 square feet at the former Sony plant in Westmoreland County. The 2.4 million-square-foot facility will enable the company to triple its employees and nearly double its occupancy within the next 5 years.
LEASING ACTIVITY JUMPS 500 PERCENT
Industrial leasing activity in the first quarter of 2012 increased nearly 500 percent year over year from 2011. In addition to Aquion’s lease, Hostess, HosePower and Vision Works/
Sampco have leased nearly 75 percent of 460 Nixon Road, a 587,227-square-foot warehouse building recently vacated when Bay Valley Foods relocated. Several other leases have contributed to the significant increase in activity as well: All-American Metals & Recycling leased 51,000 square feet at the former Ryerson Steel facility in the Parkway West; Weatherford Drilling leased 53,000 square feet at Leets-dale Industrial Park in the Northwest submarket and Bri-Chem leased 38,000 square feet, also at Leetsdale Industrial Park. Asking rental rates have increased 14 percent year over year to an average of $7.57 per square foot, triple net.
OVERALL VACANCY TIGHTENS
The manufacturing and warehouse sectors continued to post a decrease in vacancy brought about by positive absorption exceeding 1 million square feet in the first quarter. Manufacturing vacancy is consistent with the overall market at 7.3 percent for the quarter, while warehouse vacancy dropped to 6.8 percent. Although a low vacancy rate is attractive to investors and helps to increase rental rates, it is beginning to hinder economic development in the Pittsburgh region.
A lack of quality warehouse product with existing availabilities of greater than 100,000 square feet has created problems for vendors in the Marcellus Shale supply chain who are looking for immediate occupancy and room for growth. The relaxation of commercial lenders within recent months has sparked new speculative construction within the region, particularly in the airport corridor, where many of the energy companies are seeking expansion opportunities. Greenville Commercial Properties plans to start construction on a 100,000-square-foot industrial building at a former railroad site in the West Pittsburgh market. Complete plans include the development of the 52-acre site into more than 450,000 square feet of industrial space. And, The Buncher Company started work on a 70,000-square-foot speculative warehouse building in Jackson Township.
FORECAST
Vacancy and asking rental rates are expected to stabilize throughout the remainder of 2012 as new speculative product is released to the market. Leasing and investment activity should surpass 2011 totals, perhaps even doubling them by year-end, and third-party logistics activity is expected to continue increasing throughout the tri-state area.
— John Lisowski, industrial brokerage and leasing manager and member of the Cushman & Wakefield Global Supply Chain Solutions Group