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Pittsburgh Office Market Report | Q3 2022

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Continued Signs of Recovery Heading into the 2nd Half of 2022
Colliers’ Pittsburgh office leasing team remains cautiously optimistic about the continued rebounding of the overall office market in our region. Tenants appear to be much more active in the marketplace than in 2021, resulting in a higher number of property tours and delivered lease proposals. There is noticeably more commuter traffic, particularly in the middle of the week and office building parking lots are filling up with greater regularity.

Pittsburgh is on Winner’s List of “Build Back Better” Funding
Some of the key drivers of the region’s office market (Robotics/AI) received a major boost this quarter, as the U.S. Economic Development Administration awarded $62.7 million in federal funding as part of the Build Back Better Regional Challenge.Pittsburgh was one of 21 locations out of 529 applicants around the country to secure funding from the program. Here is the allocation:
Southwestern Pennsylvania Commission ($24.8 million) – to help bolster the workforce for the robotics industry through specialized training and education. Advanced Robotics for Manufacturing Institute -ARM – ($14.2 million) to fuel its plans for operating a robotics manufacturing hub at its Mill 19 location in Hazelwood Green. This will provide additional resources to smaller robotics companies to help facilitate growth within the region. Innovation Works – ($12 million) – to be used toward the construction of an applied robotics startup factory within a 10-minute drive of the CBD. The pillars of the factory will be “formation, launch and growth” which should have a positive impact on the robotics/AI industries for years to come. InnovatePGH ($4.8 million) – to create an initiative entitled “Expanded Pathways to Entrepreneurship”. Catalyst Connection ($4.8 million) – to further enhance the SME Robotics Adoption project, intended to encourage technology adoption for small to medium sized companies. The Build Back Better funding will boost Pittsburgh’s robotics/AI ecosystem and in the process strengthen the overall office market.

ElevateBio Provides Continued Momentum for the Life Science Sector
The Life Sciences industry continues to fuel Pittsburgh’s economy, bolstered by the University of Pittsburgh, as well as resources outside of the region. ElevateBio out of Cambridge, Mass announced a strategic partnership with the RK Mellon Foundation and the University of Pittsburgh, that includes a 30-year agreement and creation of a new Pitt BioForge biomanufacturing facility at Hazelwood Green. The facility is expected to absorb approximately 80,000 SF of the overall 250,000 SF, 3.5-acre site within the Mill District portion of Hazelwood Green, resulting in 172 high paying jobs, according to the Governor’s Action Team. Industry experts site Elevate Bio’s commitment to the region as further proof that Pittsburgh is poised for continued growth and development in life sciences, positively impacting the overall office market.

Trend of Class B Conversion Continues in the CBD
Q3 2022 saw more announcements related to the ongoing trend of converting Class B office product to residential/hospitality. Rugby Reality is contemplating converting the Gulf Tower into residential units that could also include a hotel operator. The building represents the CBD’s 22nd largest tower at 437,000 SF over 44 floors. The news about the potential Gulf Tower conversion is coming on the heels of similar announcements about the transformation of the former GNC HQ building at 300 Sixth Avenue (300,000 SF), Three Gateway Center (400,000 SF) and The Pittsburgher at 428 Forbes Ave (140,352 SF) from office to residential. The conversions will serve to strengthen the overall CBD market in the forthcoming years, as it both removes Class B supply, while adding to the vibrancy of downtown to include much-needed support of retail and restaurant tenants.

Other Bits and Bites in the Office Market
•Notable transactions that occurred in the CBD during Q3 2022 include the 60,000 SF lease signing of Citizens Bank at Four Gateway Center, a roughly 40% reduction from its current footprint at 525 William Penn Place. Additionally, Stantec has signed a 9,279 SF lease at 600 Grant Street, also downsizing from its current 13,500 SF suite at Centre City Tower. These transactions reflect a continued trend of active tenants reducing their footprints, as a result of instituting a hybrid work model.

•Burns & Scalo continues to be active from a development standpoint, breaking ground on Diamond Ridge in Moon. The project consists of three office buildings, totaling 500,000 SF.

•The 5.5 acre lot between the Hot Metal Bridge and Hazelwood Green will be developed as mixed use by Collaborative Real Estate, LLC.

•ARL Logistics has bucked the trend of tenants consolidating into smaller space by expanding from 4,700 SF at Station Square to a new 12,400 SF office at 1300 Penn Avenue, owned by Buncher Company.

•Nuveen has acquired the 200,000 SF Federal North property on Federal Street in the North Side for $82 million. Earlier in the year, Nuveen acquired four AHN’s neighborhood hospitals in Brentwood, Hempfiield, MCandles and Harmar.

•Management Science Associates is vacating 123,000 SF of office space at 6565 Penn Avenue, a 250,000 SF building owned by Chatham University. The location is in the highly sought-after East End corridor and provides for a unique opportunity for tenants, offering 15’ ceilings and multiple truck bays.

•Joining the ranks of other larger companies who have adopted the hybrid practice, Phillips is now marketing 37,000 SF of its 200,000 SF footprint at its regional HQ at Bakery Square.


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Pittsburgh Office Market Report | Q3 2022

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Paul Horan

Principal | Office Brokerage

Pittsburgh

I have been involved in the commercial real estate industry for more than 30 years, with a focus on office agency and tenant representation.  Prior to joining Colliers International | Pittsburgh, I was a Founding Principal at NAI Pittsburgh Commercial, which was the Western Pennsylvania regional representative of NAI Global and I also worked  as the director of brokerage and leasing at Grant Street Associates, Inc./Cushman and Wakefield affiliate  where I was responsible for commercial office leasing and sales in the Greater Pittsburgh area.

At Colliers International I oversee the  office agency and tenant representation divisions in the Pittsburgh office.  My overall experience in both agency and tenant representation has made it possible for me to consistently be involved in major transactions in the Pittsburgh and Western Pennsylvania area.

I have represented clientele such as Westinghouse Electric Company, Commonwealth REIT, Hertz Investment Group, GAI Consultants and Propel Schools.

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Dick Cassetti

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I am the Senior Vice President and Market Leader of the Colliers International office in Pittsburgh, Pennsylvania.  My background in commercial real estate started over 40 years ago and for the past 35 years I have specialized in occupier services, corporate solutions and I haver represented law firms in almost one million square feet of transactions.

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Cody Sharik

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Prior to joining Colliers International | Pittsburgh, I was an account executive for the Pittsburgh Pirates where I learned to refine my  client communication skills that I have brought over to Colliers International | Pittsburgh. 

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