Pittsburgh Office Space: Vacancy Up Slightly, Rates Up As Well

Pittsburgh Office Space Report

1st Quarter 2014

The Pittsburgh office market saw an uptick in overall vacancy; rising from 8% at the end of 2013 to 8.3% at the end of the first quarter of 2014.  The weakness was seen primarily in the Class “A” space which had been a strong performer over the past two years.  The class “A” market recorded a net absorption rate of negative (206,026) SF according to Costar©*.  Interestingly the Class “B” market enjoyed a 61,450 SF increase in net absorption during the same period.  Much of the increase in the Class “A” vacancy rate can be attributed to large blocks of space put on the market by Westinghouse in Cranberry, Heinz in the CBD and Del Monte on the Northshore to name a few.  Additionally 235,000 SF of new construction came on line during the first quarter, including the 130,000 speculative project located at 3000 GSK Drive in the Parkway West developed by Dom DiCicco.  This building is zero percent occupied and was originally targeting a single user.  We now understand that the developer will consider full floor users as they respond to what appears to be softening market conditions for Class “A” space in the suburbs.  The Class “A” market in the CBD also soften slightly with a negative absorption of (139,720) SF.  With nearly 2.5 million square feet currently under construction throughout the region lead by PNC’s 800,000 SF pre-leased project in the CBD the Class “A” market may continue to soften over the next 12-24 months.

Rental rates increased 2% across the overall market averaging $19.24 PSF, up from an average of $18.87 at the end of the 4th quarter of 2013.  This is a lagging indicator and it will be interesting to see if this trend holds through the remainder of 2014.  Class “A” rates stood at $24.23 PSF up from $23.51 PSF at the end of 2013.  Class “B” rates stood at $18.22 compared to $17.87 during the same period.

Notable lease signings during the first quarter included Google’s 68,000 square foot expansion in East Liberty and AHN’s 42,000 SF lease in West Pittsburgh.  ZOLL leased 28,000 SF in the former JC Penney building in Harmarville, a transaction that I was proud to broker.  Sales in the first quarter included the troubled Union Trust Building, a 546,000 SF landmark for $14,000,000 or $25.63 PSF, the 177,000 Art Institute building on the Blvd. of the Allies for $10,000,000 under a sale lease-back arrangement and 101 Bellevue Road in McCandless for $3,150,000 or $98.00 PSF.  I was proud to represent the buyer for the 101 Bellevue Road transaction as well.

*All market statistics have been sourced from CoStar Group, Inc.© under license to Avison Young Pittsburgh.

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 © 2014, David Auel.  All rights reserved. No part of this blog may be reproduced in any form or by any electronic means without written permission from the publisher except by a reviewer, who may quote brief passages in a review.

 

 

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