Through the second quarter of 2022. the booming Pittsburgh retail market maintained its upward momentum. Discount chains, eateries, car washes, salons and entertainment users have continued to stay active in the market. Outside investors are showing an increasing amount of interest in large regional retail complexes, and the pace of building is not keeping up with the demand growth. The retail market is in a strong position and is set up for continued success.
The restaurant scene continues to grow and add to the excitement in Pittsburgh. Specifically, the “Chicken Wars” are escalating and intensifying. Layne’s Chicken Fingers announced their desire to set up five locations in the Pittsburgh region. Mad Chicken, Chick-fil-A and Raising Caines are also on the lookout for new sites. The DeShantz Group opened up Sally Anns in downtown Pittsburgh. This restaurant is less chicken intensive than Coop De Ville but does offer the prerequisite Chicken and Waffles.
Discount stores are booming, especially in the food and grocery industries. Grocery Outlet is looking in the area for multiple locations. They are searching for sites ranging from 15,000 to 20,000 SF in a variety of geographical areas. Aldi hopes to open more regional locations in a similar manner.
Some large notable leases occurred in Q2. Burlington leased 95,810 SF at Charters Valley Shopping Center. Hobby Lobby signed to lease the former Bed Bath and Beyond building at 7507 McKnight Rd.. Crunch Fitness will be taking over the former 40,000 SF Stein Mart space at McIntyre. A shortage of quality big box space in the market will continue to be an issue for the foreseeable future.
The Strip District area of the Greater Downtown remains popular. Venues with a golf theme have shown strong interest in the submarket. Puttery, a company that offers indoor miniature golf and bars, has revealed plans to lease 19,000 SF in The Vision on Fifteenth. Puttshack announced their desire to lease nearly 24,000 SF at the at the Produce Terminal, not long after OnPar leased space in the same building.
A few fitness centers will also be located inside the Terminal. Floyd Mayweather, a boxing legend, has announced the opening of a boxing gym, and StretchLab has said it would open a stretching studio. Walk Run Lift Studio, the neighboring tenant, will be happy to have them for the synergies they would seem to create. Papa J’s will open a 6,000 SF culinary concept across from The Terminal at 51 21st Street in the location of the former Smallman Galley.
Retail capital markets see continued interest as investors are eager to get into the Pittsburgh market. 810 Clairton Blvd, a retail strip center in South Pittsburgh/ Rte 51 submarket, recently sold. The asset was 100% leased by a medical tenant. The sales price of $15.04M equates to $416.50 per square foot. In New Kensington, Riverview Plaza sold for $3.5M or $26.00 per SF. M&J Willow’s stabilized assets- including The Waterfront in Homestead and Penn Center East Town Center- continue to be available for sale.
Very little new product has been brought to market in the past year. Deliveries during the preceding four quarters add up to around 38,738 SF. However, the market received just 11,000 SF of new space this quarter. Congested supply chains, high building costs and increasing interest rates make development in the near term difficult. A rise in the Coronavirus, notably the Omicron strain, at the close of Q4 2021 and the beginning of Q1 2022 also had a negative impact on the labor force. Entry barriers are significant due to a lack of development locations and costly site development.
The next several quarters are anticipated to be similar to Q2 2022. Rent should rise because of the unusually low vacancy rate and increased costs, and Tenants should anticipate a competitive market that will favor landlords until the demand for high-quality new product is satisfied. Customers will continue to shop and businesses that are viable should prosper despite the fallout from current economic conditions.