By Todd Miller

“The technology sector is driving commercial real estate in Pittsburgh in ways that real estate people may not yet understand,” said Jim Ambrose, Director of Business Development for Lawrenceville-based Desmone Architects. “Younger workers composing the majority of the tech sector’s workforce prefer quality over quantity, so buildings should be attractive, green and convenient to bike paths, public transportation and cultural amenities.”

Ambrose also observed that the tech sector’s growth has elevated Pittsburgh from a third-tier to a second-tier city among real estate developers and investors. “Local developers, as well as those from New York, Boston, North Carolina, Texas and elsewhere, are banking on Pittsburgh as a long-term play,” said Ambrose.

According to data compiled by the Pittsburgh office of JLL, a Chicago-based commercial real estate services firm, the first half of 2019 showed that tech companies leased 40% of the office space being used in the Central Business District (downtown), the Fringe (Pittsburgh Technology Center on Second Avenue, Strip District) and Oakland/East End, and that vacancy rates around the universities have declined sharply over the past four years, from 10% to less than 5%. The report also states that leasing activity, especially from tech companies, continues to concentrate in and around the urban core because of the talent found living in the neighborhoods close to Carnegie Mellon University and the University of Pittsburgh, where intellectual property – the region’s “new steel” – is being created.

“The low vacancy rate in the Oakland/East End submarket, combined with steady tenant demand, has made that area of the city ripe for new development,” said Tobiah Bilski, a Research Manager with JLL. “There is 550,000 square feet of new office inventory currently under development in Oakland and the East End that will help relieve the pressure from demand.”

Workplaces are blurring the lines of business and lifestyle to attract the best talent, according Ruby Scalo, Marketing Manager and Leasing Specialist with Burns Scalo. Rendering credit: NEXT Architecture.

Pittsburgh’s desirability among companies that want to attract young, skilled talent is exemplified by the recent moves of Philips Respironics and Wabtec from properties they owned in the eastern suburbs to leased locations in the city. Both companies relocated to remain competitive in the fight for millennials (workers in their 20s and 30s) with technical skills.

Whether in the city or suburbs, tech sector employers are spending money to upgrade their workplaces to retain and attract talent. “The evolution of office space is not limited to any one market in the industry, and tech sector employers are spending money to upgrade their workplaces to retain and attract talent,” said Ruby Scalo, Marketing Manager and Leasing Specialist with Burns Scalo Brokerage, which controls a portfolio of more than 4 million square feet in the Greater Pittsburgh area. “Commercial owners and tenants alike expect much more from their commercial properties than they did in the past, so newer buildings are winning, and older buildings are losing across the board.”

Burns Scalo Real Estate’s latest development, The Riviera, a luxury riverfront office building in the Pittsburgh Technology Center on Second Avenue, across from Hotel Indigo, is setting a high standard. The Riviera spares no expense and features a fully equipped fitness center, a full-service café and a trendy first floor collaborative space that opens onto an expansive riverfront patio which provides outdoor eating, meeting and event space. The building will open in Fall 2019 and is designed for businesses that want employees to love their work environment.

“It’s all about how people feel inside the space that matters,” said Scalo. “Commercial real estate is a tool that employers are using to attract and retain the best employees they can. Our industry has moved into a lifestyle service business. Amenities are not entitlements, but they are a necessity in our convenience-driven society.”

Todd Reidbord, Principal and President of Walnut Capital, based in Shadyside, believes that his company’s commercial and residential properties in Bakery Square, Oakland, East Liberty and other areas of the East End will continue to benefit from what he calls “the new urbanism.”

The interior of Carnegie Robotics was designed to meet the special needs of robotics companies to include large, open bays. Image courtesy of Desmone.

“People want to be close to their workplaces and to amenities,” said Reidbord. “A lot of the growth in the East End is due to the University of Pittsburgh upping its game with the new chancellor [Patrick Gallagher]. Under his leadership, the University has attracted significant research dollars, including Pitt’s planned investment of
$2 billion in new facilities in Oakland over the next 10 years.”

Reidbord also noted that CMU and corporate partnerships involving universities are also responsible for driving what he terms “steady growth” precipitated by companies such as Philips (cited earlier) and Facebook that value proximity to talent and facilities in, or spun out of, institutions of higher learning.

Beyond the city of Pittsburgh and within Allegheny County, the Allegheny County Airport Authority has been active, preparing Clinton Commerce Park, Cherrington Commerce Center, Industry Drive and Airside Business Park for private development.

“The Airport Authority’s site preparation activities dovetail with our strategies for cargo and air service development, as well as the terminal modernization program,” said David Storer, the Authority’s Director of Business Development. “Companies like being located close to the airport so their management teams can easily visit customers.”

Those four complexes are built on more than 4,000 acres of developable land. They help to generate about 148,000 jobs, $29 billion in annual revenue and nearly $100 million in state and local taxes derived from Pittsburgh International Airport’s economic impact on the 10-county southwestern Pennsylvania region. Companies that have established a presence near Pittsburgh International Airport include Dick’s Sporting Goods, Michael Baker and ThermoFisher Scientific.

According to Storer, “Two additional business parks are under development, including one located off McClaren Road, and an Innovation Campus west of the airport in Findlay Township. Those projects account for the creation of more than 1,000 jobs.”

The Innovation Campus, for which construction will begin in mid-2020, will include a mixture of commercial, retail and light industrial properties. Said Storer, “If a large tenant commits to the development by the end of this year, the construction schedule will be accelerated.”

Pittsburgh’s transformation from a center of heavy manufacturing to a technology hub has created a vibrant commercial real estate market that has developers from near and far doing all they can to keep up with rising demand.