Pittsburgh has faced a steep uphill battle to reinvent itself and create a stronger economy ever since its steel industry began collapsing in the 1980s. The city still has plenty of reminders of its steel industry roots ranging from its beloved NFL Steelers to the headquarters for U.S. Steel – one of five Fortune 500 firms based in the city. Yet these days, Pittsburgh is known more for its “meds and eds” – healthcare and education – and a thriving tech scene that has attracted the likes of Uber, Apple and Google.
In fact, Pittsburgh was named as one of the top four tech hubs to watch in 2018 by Venturebeat.com. The online publication cited key research institutions such as Carnegie Mellon University, University of Pittsburgh and Duquesne University as playing a key role in that ranking. Those local universities are turning out top talent along with a steady stream of patents and spin-off companies.
Healthcare is a major driver in the local economy and expansion plans from two of the biggest healthcare providers are expected to bring even more jobs to the metro. Last fall, Highmark Health and Allegheny Health Network unveiled $700 million in construction and expansion plans over for the next five years, including a 160-bed hospital AHN will build in Wexford and four smaller neighborhood hospitals. UMPC also has said that it plans to invest $2 billion to build three specialty hospitals near its existing hospitals in the Pittsburgh metro, including new facilities in Uptown, Oakland and Shadyside.
Although Pittsburgh has lagged behind some of its peers in terms of job and population growth, much of the growth that is now occurring is concentrated in Greater Downtown, which includes key neighborhoods such as the Golden Triangle CBD, South Shore, North Shore, Uptown and Strip District. Greater Downtown Pittsburgh has completed $4.6 billion in commercial, residential and infrastructure projects over the past decade with another $3.9 billion in active or announced projects, according to the Pittsburgh Downtown Partnership (PDP).
Urban Living Fuels Residential Demand
The population of Greater Pittsburgh has remained relatively flat over the past decade. However, Pittsburgh’s colleges and universities are contributing to strong renter demand for apartments. There are an estimated 100,000 students enrolled in higher education within 10 miles of Downtown including 26,000 enrolled in Greater Downtown, and more people are moving back to the urban core. Greater Downtown’s population has grown by nearly 3,000 residents since 2010 and Downtown Pittsburgh has seen a 43% spike in its residential base, according to the PDP. Greater Downtown Pittsburgh is now home to 113,000 workers and 15,000 residents, while also attracting about 13.4 million visitors each year.
That growing urban population is attracting both developers and investors. Thirteen new residential projects will break ground this year and deliver a total of 1,335 apartment and condo units over the next three years, according to the PDP. Some of the notable projects include:
- Trammell Crow’s High Street Residential operating unit broke ground late last year on Glasshouse at Station Square East. The 5-story project sits adjacent to the Station Square mixed-use project, a $100 million redevelopment that is converting historic railroad buildings into office, retail and hospitality uses. Glasshouse will feature 319 Class A apartment units.
- Core Realty completed Kaufmann’s Grand on Fifth project earlier this summer. The redevelopment of a former Macy’s store features more than 300 luxury apartments in Downtown Pittsburgh, and the firm is now working to convert former office space at One Chatham Center into 174 new apartment units.
Reonomy’s multifamily sales volume shows that transactions have been subdued compared to other secondary markets. After reaching $263.8 million in 2017, multifamily sales declined to $191.4 million in 2017 and are off to a slow start in 2018 with sales of $26.8 million through first quarter, according to Reonomy. The average size of recent transactions at about $160K suggests a market where activity is dominated by smaller property sales. The sales volume also could be due to a limited supply of for-sale inventory. Some institutional investors have found a way to enter the market by partnering with developers. For example, Northwestern Mutual is working with High Street Residential on the Glasshouse at Station Square East.
Aging office properties ripe for conversion
Office sales also have been modest compared to other metros. According to Reonomy data, transactions volume reached $411 million in 2016 and dropped to $252.5 million last year.
Although the Greater Downtown office market expects to see some large blocks of vacant space returning to the market due to expiring leases, subleases and downsizing, vacancies remain at relatively stable levels with estimates at between 8 and 11% depending on the source. The Greater Downtown office market has benefited from very little new construction, as well nearly 3 million square feet of space that has been removed from the market as several Class B and C buildings have been converted to residential, hotel and restaurant uses, according to the PDP.
For example, the former Art Institute of Pittsburgh at 420 Boulevard of the Allies is being converted from classrooms into a state-of-the-art office complex. M&J Wilkow is completing renovations to the 154,000 square foot building that includes amenities such as a roof-top deck, an 80-person conference center, and a fitness center.
One new office development underway is the 100,000 sf District Fifteen building at 15th and Smallman Streets in the Riverfront Landing development. The project is a joint venture by RDC Inc and Orangestar Property Advisors.
The city is continuing to transform key areas within the city, such as its railyards and riverfront. The billions invested in new development and redevelopment projects in Greater Downtown that have been completed, are underway or proposed speaks to the progress made and the opportunities still ahead in both commercial and residential markets.
Reonomy offers real-time access to detailed property data that business owners, investors and commercial real estate professionals need in today’s competitive marketplace. Try Reonomy National for free today.