See the latest industrial statistics and trends in the Pittsburgh market.
The strength of the Pittsburgh region continues as it adapts to modern industrial users. Manufacturing, specifically for the growing life science and tech industries, is requiring modernized facilities in highly sought-after locations. Furthermore, omnichannel retail is creating a demand for warehouse and distribution space that is unprecedented. Hurdles have impeded delivery of new space, but the development community has shown resilience and construction forges on. Competition for a finite amount of space remains hot as demand is outpacing supply.
Tech flex product, predominantly in the urban fringe neighborhoods, continues to gain traction. This type of product is popular with robotics and AI firms who desire to be near the talent pool being spun out of local universities. The most notable tech flex project currently under construction is in South Oakland where the Elmhurst Innovation Center is nearing completion. This type of modern product offers high ceilings and open span area for firms to utilize the space in a variety of ways, including light manufacturing, warehousing, laboratory, or office space.
After seeing substantial completions in Q4 2021, no new properties delivered in Q1 2022. Several culprits include rising construction costs, slowed supply chain and spiking Coronavirus cases. Therefore, a logjam of product is nearing delivery. Of the more than 2 million square feet (SF) under construction, more than half (1.1 million SF) is in the Parkway West Submarket. The availability of land and proximity to transportation arteries are primary reasons for this anomaly. However, the largest project under construction is at the Westgate Commerce Center in Beaver County. This 400,000 SF distribution facility is being built on a speculative basis. Another notable facility coming out of the ground is at the Hempfield Commerce Center in Westmoreland County. This building, which is the first of several, measures 150,000 SF and is being marketed for warehouse and distribution use. The project is significant because demand has given developer, Al. Neyer, the comfort level to initiate construction on the master planned project on a site delivered by Westmoreland County IDC.
Surprisingly, Amazon decided to back away from plans to construct a 2.9 million SF distribution facility at the former George Westinghouse Research Park in the Churchill neighborhood of the Parkway East submarket. While the primary factor for this decision is unknown, there has been considerable pushback from the community since initial discussions began. Amazon still plans to construct a 140,000 SF last-mile distribution center on the 46-acre former Eastland Mall site, also in the Parkway East. Furthermore, they are eyeing a site in New Stanton, Westmoreland County to construct a 1 million SF distribution facility, much like the project recently completed at Chapman-Westport in the Parkway West.
Westmoreland County is suddenly a hot bed of activity. In Q1, this submarket experienced the greatest positive absorption in the region, as 241,379 SF was absorbed, and vacancy dropped from 6.5% to 5.6%. Consequently, average asking rates increased from $5.77 to $6.38 per SF. Much like the Parkway West, the availability of land, proximity to major interstates and a skilled labor pool make this submarket appealing. In addition to the aforementioned Amazon project, several large distributors are actively expanding in the county. Long time occupant and staple of the South Side neighborhood of the Greater Downtown, Frank B. Fuhrer Wholesale Co., is planning on expanding into Westmoreland County. After outgrowing their present location, the beverage distributor recently purchased a site in Delmont where they will construct a 300,000 SF facility. They reportedly plan to retain about half of their current footprint on the South Side. Along the same lines, food distributor Reinhart Foodservice, a longstanding occupant in the Westmoreland County submarket, disclosed plans to add to their 170,000 SF facility. Due to the nation’s increased food demand and the growing restaurant industry, Reinhart will construct a 155,000 SF addition, of which a large portion will be utilized for cold storage. Also, City Brewery signed a lease for nearly 260,000 SF at RIDC Westmoreland Innovation Center in New Stanton. The alcoholic beverage manufacturer will utilize the site for warehousing purposes and cited that its vicinity to their operations in Latrobe make it a logical location.
Nationally, records were shattered in 2021. An all-time high positive net absorption of 580 million SF was reached last year, this is twice the previous record of 289 million SF set in 2016. By the end of 2021, a record-setting 371 million SF were delivered and close to 520 million SF were under construction. Chicago delivered the most product, as nearly 31 million SF came on the market. Dallas-Fort Worth remains the market with the greatest amount of space under construction with more than 59 million SF in the works. Overall average rents grew by a whopping 8.4% over the previous year, topping out at $6.82 per SF and vacancy dropped by 140 basis points, bottoming at 4.0%. The growing appetite of e-commerce and the resulting need for warehouse and distribution space are largely driving this demand.
Moving forward into Q2 and beyond, there are significant reasons for optimism. Regional unemployment improved in Q1, decreasing from 5.12% to 4.61% and is expected to continue its downward trend. E-commerce will keep applying pressure to the supply chain, increasing the necessity for product. Additionally, societal adaptation continues as people work to push through the hurdles imposed by the Coronavirus. These factors are all evident in Pittsburgh and the surrounding areas providing confidence that the Western Pennsylvania market will move forward with the strength, resilience and stability that has become a trademark for the region.