According to the Allegheny Conference on Economic Development, in 2013 there were more people working in Pittsburgh than ever before. The region has seen five consecutive years of continuous expansion and a current capital investment of $3.2 billion. Pittsburgh ranks among the top 15 metropolitan areas for five-year private sector job growth according to On Numbers Economic Index. Possibly more impressive than the jobs themselves, the earnings growth in the region over the same five-year period was 24.3 percent — the highest increase in the U.S.
Pittsburgh’s unemployment rate fell to 6 percent in February, with the seven-county region posting an increase of 2,400 jobs in the same period. Among the companies expanding in Pittsburgh is Cigna Health. The company, which currently employs more than 1,400 in the region, plans to grow by 10 percent in 2014, adding approximately 150 new management, training and customer service positions to its regional post in Pittsburgh’s Parkway West submarket.
This is great news for retailers in the area, which is also known as the Airport Corridor and which has been a mecca for retail for several decades. In recent years, retailers have struggled to survive here, as the submarket suffered from over-development and the decline of the airline industry. However, the energy and healthcare industries have brought new life and new development to the area during the past 36 months and the market has begun to respond with hotel construction and a new assortment of retailers aimed at serving the growing office and residential populations.
By the Numbers
Pittsburgh’s retail market saw little change in 2013, ending the year with a vacancy of just over 4 percent, down 0.9 percentage points from the same period 2012. Leasing activity dropped 19 percent to 1.9 million square feet, but net absorption increased 47.5 percent over 2012, finishing the year at 1.2 million square feet of absorption. Overall asking rental rates remained in the $16 to $40 triple net range throughout the year, ending the fourth quarter 2013 at $19.94 per square foot. Asking rents at most new developments are upwards of $35 per square foot, triple net, while existing available space is closer to $25 per square foot, triple net, in neighborhood and mixed-use developments.
Development Projects
The retail story in the Pittsburgh region continues to focus on redevelopment efforts to make outdated, indoor shopping malls into mixed-use neighborhood centers and on the construction of new projects creating true live, work, play environments. North of the city in Cranberry Township, which is part of the Butler County submarket, the Cranberry Crossroads mixed-use development continued to progress. Among the latest retail tenants to open are Anthony’s Coal-Fired Pizza, Sears and La-Z-Boy Furniture. Only 2,500 square feet of space remains available in the existing 30,000-square-foot building.
Another project is the new Springfield Commons development currently under construction in Grove City adjacent to the Premium Outlets. Springfield Commons is designed to be a complement to the outlets offering big box and specialty retailers along with favorite casual dining venues.
A variety of new projects are taking shape south of the city in Washington County. Southpointe Town Center is nearing completion with the first handful of retailers, including All-Star Sports Bar & Grille, opening their doors this spring. The Street at Racetrack Road is a mixed-use concept offering 80,000 square feet of first-floor retail and outparcels for lease by developer Horizon Properties. The project will also offer multifamily living within walking distance of The Meadows Racetrack and Casino and the Tanger Outlets. Just a few minutes from there, Meadows Landing, a 21-acre mixed-use project, has kicked off with the construction of a new ambulatory care center for the Washington Health System.
Retailer Activity
Like most of the country’s major markets, leasing activity in Pittsburgh is driven by food service. Fast-casual concepts such as Chipotle and Zoup! are expanding in the market along with full-service dining options like Bonefish Grill and Eddie Merlot’s.
Additional activity has developed within the grocery sector. The region’s dominant full-service grocer, Giant Eagle, has been experimenting with new store concepts in an effort to remain competitive with the discount and convenience brands that recently have expanded in the market, including Bottom Dollar, Aldi and Speedway.
Giant Eagle’s counter has been an expanded GetGo concept offering large fueling stations with grab-and-go food and convenience products, and its latest effort, Market District Express, a quick shopping and dining concept that caters more to the suburban foodies. This concept offers fast-casual dining and drinks with a Starbucks and limited-service market offering fresh produce and a deli alongside prepared foods perfect for quick dinners at home in a much smaller footprint than its full-service sister store.
In Pittsburgh’s CBD, the retail focus has shifted to hospitality conversion and expansion. The former Federal Reserve Building and the James Reed Building are being developed into a Drury Inn & Suites and a Kimpton Hotel, respectively. In addition, the upper 11 floors of the iconic Henry W. Oliver Building are being converted to an Embassy Suites hotel.
Existing and new restaurateurs are taking advantage of the Pittsburgh Downtown Partnership’s Paris to Pittsburgh grant program that enables retailers to spruce up the exteriors of their spaces and offer outdoor dining and entertainment.
With substantial growth predicted in national consumer spending and retail sales, the Pittsburgh market should follow suit. Expanding retailers are beginning to notice the region’s economic stability and renewed population growth and new concepts are expected to enter the market in 2015.
— By Jared Imperatore, Vice President of Retail Services, Cushman & Wakefield | Grant Street Associates. This article originally appeared in the May 2014 issue of Northeast Real Estate Business magazine.