Returning to the office, whether in a hybrid approach or on a full-time basis, is starting to become more prevalent. While many companies are beginning to initiate a return to the office policy, many of them are doing so while taking the opportunity to revisit their footprint which is often resulting in downsizing. This continues to negatively impact the market in general but is particularly affecting the CBD. The second quarter vacancy rate has risen to 15.9% (up from 15.2% last quarter). With firms downsizing and/or continuing to work from home, Landlords are being forced to become more aggressive in order to either retain existing, or secure new Tenants. That said, there have been a few notable lease transactions this quarter including, the law firm Dickie, McCamey & Chilcote which signed a lease for just under 80,000 SF in Four Gateway Center. This is a downsize of roughly 25,000 SF from their current home in Six PPG. However, that good news at Four Gateway Center was off set by the fact that Highmark Healthcare, formerly known as Gateway Health, is relocating out of their 180,000 SF in Four Gateway and moving into 5th Ave. Place which is owned by Highmark. Refocusing on more positive news in the CBD, Goldberg, Persky & White , P.C. elected to renew their full floor lease at 11 Stanwix for just over 21,500 SF. In addition, average asking rental rates have increased from $26.66 to $26.89 over the past quarter. While this appears counter intuitive given the vacancy rate, rents in Class A properties which are now the most sought-after product have continued to increase, partly due to demand and partially due to construction costs.
While the CBD has struggled with vacancy and occupancy in recent times, other submarkets have gained momentum. Most specifically, the greater downtown or fringe markets and the Parkway West have experienced notable deals. At Nova Place, Castle Biosciences recently leased 44,677 SF. Additionally, the YWCA leased 12,356 SF at Birmingham Place where they will occupy the building beginning in 2023. As a whole, the 2nd Qtr of 2022 experienced a positive absorption of 59,964 SF in Greater Downtown which continues to support the emergence of the fringe markets (NorthShore/Strip District/Southside).
The Parkway West submarket also experienced several lease transactions within the qtr, with several of those transactions north of 23,000 SF. Specifically, Transport Investments completed their sublease at Airside Business Park while Montauk Renewable has committed to relocating their offices to Marquis Office Plaza.
In the 2Q of 2022 we witnessed a year-over-year inflation rate of 9.1%, the highest rate since 1981. Tenants are now making real estate decisions while asking themselves if a recession is forthcoming? With all of the doom and gloom over the past 12-24 months, is there a light at the end of the tunnel? We are of the opinion that Pittsburgh as a whole will remain insulated from much of the market downside. One major reason for optimism is that the state’s corporate net income tax will take a sharp decline from 9.99% down to 8.99% at the turn of the calendar year, which is the first of multiple planned reductions. From there, each year it will drop a half percentage point until it reaches 4.99% in 2031. This tax cut will go a long way towards helping to bring in new businesses and retain/grow existing business in Pennsylvania and specifically the Pittsburgh region, further bolstering a historically stable market.
While the CBD has struggled with vacancy and occupancy in recent times, other submarkets have gained momentum. Most specifically, the greater downtown or fringe markets and the Parkway West have experienced notable deals. At Nova Place, Castle Biosciences recently leased 44,677 SF. Additionally, the YWCA leased 12,356 SF at Birmingham Place where they will occupy the building beginning in 2023. As a whole, the 2nd Qtr of 2022 experienced a positive absorption of 59,964 SF in Greater Downtown which continues to support the emergence of the fringe markets (NorthShore/Strip District/Southside).
The Parkway West submarket also experienced several lease transactions within the qtr, with several of those transactions north of 23,000 SF. Specifically, Transport Investments completed their sublease at Airside Business Park while Montauk Renewable has committed to relocating their offices to Marquis Office Plaza.
In the 2Q of 2022 we witnessed a year-over-year inflation rate of 9.1%, the highest rate since 1981. Tenants are now making real estate decisions while asking themselves if a recession is forthcoming? With all of the doom and gloom over the past 12-24 months, is there a light at the end of the tunnel? We are of the opinion that Pittsburgh as a whole will remain insulated from much of the market downside. One major reason for optimism is that the state’s corporate net income tax will take a sharp decline from 9.99% down to 8.99% at the turn of the calendar year, which is the first of multiple planned reductions. From there, each year it will drop a half percentage point until it reaches 4.99% in 2031. This tax cut will go a long way towards helping to bring in new businesses and retain/grow existing business in Pennsylvania and specifically the Pittsburgh region, further bolstering a historically stable market.
