The Pittsburgh retail market remained tight throughout the third quarter of 2011, maintaining a vacancy rate at just over 5 percent. Absorption within the market edged close to 200,000 square feet, with new big box and specialty retailers entering the region.
The influx of grocery and discount chains continued with the opening of Trader Joe’s in Pittsburgh’s South Route 19 submarket. The 12,000-square-foot specialty market is the company’s second location in the area. In addition, Fresh Market confirmed its entrance in the Pittsburgh region just down the street from Trader Joe’s. The high-end specialty grocer has purchased a former Roth Carpet site and plans to demolish the existing building in preparation for a new 18,000-square-foot store. Construction is scheduled to commence in the spring of 2012. Big box retailers ALDI, Bottom Dollar, Walmart and BJ’s Wholesale Club are scouting the area for additional locations as well.
Bottom Dollar Foods has taken occupancy of more than 60,000 square feet year-to-date and has approximately 40,000 square feet in two new locations scheduled to open in early 2012. The discount food chain prefers to anchor strip centers or neighborhood shopping centers within the area’s suburban submarkets.
Though development activity has been largely focused on the suburban markets to the north and south of Pittsburgh, the central business district has seen a dramatic evolution in its main retail corridor. The Fifth-Forbes Corridor once was anchored by major department stores, including Kaufmann’s (now Macy’s), Lazarus and Saks Fifth Avenue. Within the past few months, Macy’s announced that it was right-sizing and restacking its Pittsburgh flagship and Saks Fifth Avenue announced that it would close its only Pittsburgh-area store at lease expiration in the fall of 2012.
However, these changes have produced creative redevelopment opportunities through partnerships with local investors and economic development agencies. The Lazarus Building, renamed the Millcraft Building, has been redeveloped for office use with rooftop residential units and street-level retail. Among its current tenants are The Capital Grille and McCormick and Schmick’s. The construction of Three PNC Plaza at the western end of Fifth Avenue prompted the redevelopment of adjacent Market Square.
The $5 million renovation of Market Square was completed in the fall of 2010 and since then the Square has welcomed 12 restaurants and two retailers with an additional six restaurants scheduled to open in 2012. Among the newcomers are Vallozzi’s, Il Pizziaolo, Las Velas, NOLA, Winghart’s Burgers and Whiskey, Sinobi2Go Sushi and Diamond Market Bar & Grill. Market Square is uniquely situated among several of Pittsburgh’s most prominent office towers, including PPG Place, Fifth Avenue Place and Three PNC Plaza.
In September, PNC Corp. revealed plans for PNC Tower, the financial institution’s fourth high-rise office building to be built in the CBD. This 800,000-square-foot building will border Wood Street between Fifth and Forbes and will offer street-level retail, further transforming the downtown area.
Notable construction deliveries within the third quarter include the 154,000-square-foot Target in East Liberty and the second phase of Settler’s Ridge, a 90,229-square-foot retail building that currently is 60 percent occupied. In addition, L.A. Fitness took occupancy of a 45,000-square-foot build-to-suit property at McCandless Crossing in the North Route 19 submarket.
Walnut Capital Group announced plans to expand its Bakery Square development with the purchase of the former Reizenstein School located adjacent to the Bakery Square campus. The $119 million project called Bakery Square 2.0 will consist of single-family and townhomes with 400,000 square feet of office and retail space.
Development is progressing throughout the region’s submarkets with groundbreaking at Newbury Market in Pittsburgh’s South Interstate 79 occurring last quarter. The development landed two of the region’s largest retailers: Giant Eagle and 84 Lumber. The supermarket chain plans to open a 96,000-square-foot store while the lumber company plans to close a nearby location and reopen within the development. In addition, construction of a 120,000-square-foot office building and 125-room Courtyard by Marriott are underway.
As the look and feel of the Pittsburgh retail market continues to evolve, moving away from traditional mall development in favor of main street and neighborhood mixed-use developments, it is expected to continue to flourish as the region’s economy improves.
— Jared S. Imperatore, retail leasing manager with Cushman & Wakefield | Grant Street Associates, Inc. in Pittsburgh.