Over the last few years, tight conditions in Pittsburgh’s multifamily market have allowed operators to aggressively push rents among all class levels. This year, a surge in multifamily completions will put elevated pressure on vacancies, but more jobs and new households will keep across the board operations in positive motion, supporting another year of rent growth. Developers are expected to build more than 1,600 multifamily units in 2014, the largest expansion of supply in over ten years. Most new multifamily projects in Pittsburgh are located north and south of the central business district where construction costs are lower. For example, in Cranberry Township in the north many units are strategically situated around the newly announced $72 million UPMC Lemieux Sports Complex. In southern Pittsburgh, added drilling activity in the Marcellus Shale and energy-related company expansions encouraged demand for rentals, spurring construction of several multifamily and residential communities. A minor overstock of brand-new rentals and single-family homes will move vacancy up somewhat in select submarkets, slowing down the previous year’s persevering rent growth. An improving economy in Pittsburgh and further rent gains will sustain strong buyer demand throughout 2014. Employers will add 24,600 jobs in 2014 to expand employment in Pittsburgh …
Pennsylvania
In Pittsburgh’s industrial market, the fourth quarter of 2013 finished in much the same way it began and maintained throughout the year; solid if unspectacular growth. The vacancy rate fell from 7.9 percent in the third quarter to 7.7 percent in the fourth quarter and dropped three basis points in total over the course of the year. The lack of quality Class A warehouse space continues to be a factor with vacancy levels dropping to an astounding 2.97 percent. The greater Pittsburgh’s industrial market is approximately 172 million square feet spread out over the six-county region that includes Allegheny, Butler, Beaver, Westmoreland, Washington, and Armstrong counties. The Class A portion is approximately 17.5 million square feet. With a vacancy rate of 2.97 percent, we only have a total availability across our total market of 519,750 square feet of Class A product. This is below equilibrium for a healthy market. Furthermore, the definition of Class A product in the Pittsburgh region would not necessarily hold up in markets with more speculative developments such as Columbus or Lehigh Valley. Although Pittsburgh has hit the radar of the national real estate community for the opportunity on the investment side, we are still very …
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 …
At the end of 2013, the Federal Reserve Bank of Philadelphia reported that year-to-date building permits rose by 17 percent in Pennsylvania, 36 percent in New Jersey, and 21 percent in Delaware as compared to the same 11 month period in 2012. Much of that increase was due to multifamily development. While not yet back to pre-recession levels, multifamily permitting has steadily increased since the third quarter of 2010 in the Philadelphia metro area. As of August, there were a total of 3,485 units approved for the previous 12 months, high enough to rank 25th in the nation for multifamily permit authorizations. In 2013, there were 1,183 multifamily units delivered in eight new development projects. Currently, there are nearly 4,800 units in 27 separate projects in various stages of construction and some 70 projects in the planning stages for a total of 12,740 additional units in the pipeline. Then there are proposed new developments that have been announced, but are not yet in the permitting process. These represent an additional 3,280 potential units scattered throughout the tri-state area in 15 projects. It is unlikely that all of these proposed projects will be constructed, but it is indicative of the optimism …
Performance prospects for the Philadelphia apartment sector remain positive. At mid-year, vacancy was in the low five percent range despite only modest job growth in the first two quarters. Since then, a steady flow of residents moving into apartments has enabled owners to reduce or maintain vacancy and improve asset values. By the end of the year, rental property completions will have risen after several years of limited construction. The current upswing in development will minimally affect market-wide vacancy and rents, and the impact of the new units will be contained to local areas. In Center City, for example, minor vacancy swings and more frequent concession use will occur as new projects are leased up. Generally, strong conditions in the market are encouraging developers and building will progress at a steady pace in the next two years. Nonetheless, the new construction cycle hardly looks forbidding, as the units permitted over the past year would expand multifamily stock only 1.1 percent if all those projects were built. Year to date, 879 new rental units have been placed in service in Philadelphia and it looks like developers will complete 2,600 apartments in 2013, which is up 1,238 units over last year, but …
During the first quarter of 2012, job figures in the Pittsburgh metro area reached 1.14 million, the second highest watermark in Pittsburgh’s history. These figures coupled with improved financing options have prompted nearly $5 billion of current and planned investments in the downtown area. Among the latest projects scheduled for the central business district (CBD) are: • The Tower at PNC Plaza, an 800,000-square-foot office headquarters building being constructed at the intersection of Fifth Avenue and Wood Street; • The Gardens at Market Square, a 175-room hotel and 100,000-square-foot speculative office project by Millcraft Industries, that will be anchored by construction management firm dck Worldwide; • The Buncher Company’s 120,000-square-foot office building in the Strip District; • Sampson Morris Group’s redevelopment of the former Wholey’s warehouse into 223,000 square feet of Class A office space with lower-level integrated parking; and • the redevelopment of the 28-acre Civic Arena site. The plans for the former home of the Pittsburgh Penguins call for 1,200 housing units, 600,000 square feet of office space and 250,000 square feet of commercial space, all with LEED certification. In addition to constructing The Tower at PNC Plaza, the bank also purchased the former Lord & Taylor building …
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. …
The landscape of the supermarket business in Philadelphia is changing at a dramatic rate. Larger store formats, such as Wegmans, Target and Walmart are having serious impact on smaller supermarket chains. Two other very tough competitors, Giant of Carlisle, Pennsylvania, and ShopRite, are also reshaping the market share of food dollars spent in the Philadelphia area. Recently Safeway purchased the Genuardi’s chain and sold off almost all the stores. Super Fresh and Pathmark closed many formerly high-producing stores with this new wave of competition. ACME Market, the former market share leader, has seen comp sales decrease dramatically. The newest entry to the market, Bottom Dollar, a discount grocer, hit Philadelphia with an onslaught of 20 new stores and is still growing. Divaris Development’s Village at Valley Forge, in Valley Forge, Pennsylvania, is one of the newer developments that has been on the boards for a while. The Wegmans there is getting ready to open, although additional retail has not been built at this time. Not far away, in Malvern, Uptown Worthington Center by O’Neill Properties is on track leasing a new lifestyle center, going after quality tenants to take advantage of the strong demographics of the Main Line and Chester …
The Philadelphia regional industrial market extends outward as the Pennsylvania Distribution Corridor, encompassing the Lehigh Valley, Harrisburg, Wilkes-Barre, and Scranton. This corridor is generally seeing an increase in activity in most categories, especially logistics. That is particularly the case for the largest industrial transactions — those of half-million square feet or more. For example, recent major leases have included Unilever’s 1.3 million-square-foot warehouse/distribution lease completed by Cushman & Wakefield in Newville, just south of Carlisle. Additionally, Crayola Crayons recently announced that it will be going into a new 800,000-square-foot facility to be constructed in the Bethlehem Commerce Center. A corresponding trend, fueled by the demand for big-box warehousing/distribution space, is construction of speculative developments of significant size. Five projects are already under construction: Liberty Property Trust is developing a 1.2 million-square-foot building within the Bethlehem Commerce Center in Bethlehem and a 972,000-square-foot facility in Carlisle; Trammell Crow and USAA formed a joint venture to develop a 700,000-square-foot facility in Mountain Creek Distribution Center in Carlisle; Griffin Lane is developing the 228,000-square-foot Lehigh Valley Tradeport in Lower Nazareth Township; and Exeter Property Group is building a 280,000-square-foot building in Palmer. There is more to come in the near-term. At least two …
Retail activity in Greater Pittsburgh will likely gain positive momentum through the remainder of 2012, with moderate growth expected in 2013. Grocery stores, local restaurants, fast casual national chain restaurants, medical retail, and upgraded locations for existing national tenants have led the way for recent retail activity in Pittsburgh. The general atmosphere at the annual ICSC RECon convention in Las Vegas was upbeat and optimistic regarding the retail sector recovery nationally. I believe that the ICSC convention is a strong indicator that retail growth is headed in an upward direction. The Pittsburgh retail markets are broken into four quadrants: North (Cranberry/Wexford), South (South Hills Village/Mt. Lebanon), East (Monroeville/Murrysville) and West (Robinson). The Cranberry/Wexford market continues to be the most active, with sales being driven by the new 500,000-square-foot McCandless Crossing Development. Tenants there include Lowe’s, LA Fitness, Hilton, Fidelity Bank and Cinemark. The Northern quadrant along the Route 228 corridor continues to develop with new projects, such as the relocation of Dick’s Sporting Goods to a new larger facility and the completion of the Cambria Suites project. Additional activity on the Route 228 corridor includes a new free-standing La-Z-Boy furniture store, GetGo gas and convenience store, and two additional outparcels …