ThreeRiversREI
01-19-2007, 01:45 AM
Pittsburgh's Commercial Market Exhibits Signs of Strength
By Maura Webber Sadovi
From The Wall Street Journal Online (http://www.realestatejournal.com/columnists_com/blueprint/20070118-blueprint.html?refresh=on)
Pittsburgh's commercial real-estate market is beginning to show some measured improvement, though -- unlike last year's Steelers football team -- it is unlikely to see a championship season anytime soon.
Given the region's below-average job growth and shrinking population, it isn't surprising that many investors are still passing on the older former industrial region, despite its much-touted museums and affordable housing. Average apartment and retail-property sale prices trended higher, but already-low office and industrial prices fell further last year from 2005, and total Pittsburgh transactions of $5 million or more in the four property types for much of last year totaled just $459.6 million, about one-fifth of the level seen in such cities as Baltimore, according to Real Capital Analytics, a New York-based real-estate research firm.
Yet the strengthening financial-services, health-care, construction and hospitality sectors have offset manufacturing losses and helped give the region what is expected to have been a second year of positive job growth in 2006, according to Stuart Hoffman, chief economist for PNC Financial Services Group Inc. The modest upswing is acting as a stabilizing force in the real-estate leasing market.
"We're gaining traction," says Mr. Hoffman, though he notes the region still faces the headwinds of population loss. The number of residents in the southwestern Pennsylvania region fell 0.3% to 2.4 million in the third quarter of 2006 from a year earlier as some left for other areas of the country like Washington and New York with more job opportunities, according to Moody's Economy.com. It doesn't help matters that the Pittsburgh Penguins of the National Hockey League could potentially join the exodus as it is shopping around for a new arena. The loss would be a psychological blow for avid fans and could also damp restaurant sales and tourism revenues, says Ryan Sweet, an associate economist at Economy.com.
Still, boosters point to several recent positive developments. Office landlords who have faced a bearish tenants' market are beginning to see a slight shift as average rents rose steadily since the third quarter of 2005, according to Property & Portfolio Research Inc., a Boston-based real-estate research firm.
PNC, one of the region's largest employers, is building downtown Pittsburgh's first new high-rise in 20 years. The mixed-use 23-story Three PNC Plaza is seen as particularly crucial to some natives because it will rise on land in the heart of the city previously occupied by small stores and vacant buildings. A slots license also was awarded last month that will pave the way for a casino to be developed near Heinz Field. Meanwhile Westinghouse Electric Co. has narrowed its search to two sites in the region as it prepares to accommodate as many as 2,000 new workers over the next 10 years as a result of the growing nuclear-power industry.
Lack of frothy enthusiasm for Pittsburgh by outside investors has also offered a mixed blessing by keeping supply and demand in check. "Pittsburgh is not a speculator's market," says Sally Gordon, a senior vice president at Moody's Investors Service.
For example, going forward modest demand for apartments is expected to exceed the supply of newly built units. The healthy balance in the multifamily market was central to Pittsburgh earning a slightly above-average ranking in the fourth-quarter Moody's Investors Service report on the overall health of commercial real estate in 59 metropolitan areas nationwide. Though not ideal, the score is much improved from the second quarter of 2004 when Pittsburgh's overall commercial real-estate market ranked the fourth weakest.
By Maura Webber Sadovi
From The Wall Street Journal Online (http://www.realestatejournal.com/columnists_com/blueprint/20070118-blueprint.html?refresh=on)
Pittsburgh's commercial real-estate market is beginning to show some measured improvement, though -- unlike last year's Steelers football team -- it is unlikely to see a championship season anytime soon.
Given the region's below-average job growth and shrinking population, it isn't surprising that many investors are still passing on the older former industrial region, despite its much-touted museums and affordable housing. Average apartment and retail-property sale prices trended higher, but already-low office and industrial prices fell further last year from 2005, and total Pittsburgh transactions of $5 million or more in the four property types for much of last year totaled just $459.6 million, about one-fifth of the level seen in such cities as Baltimore, according to Real Capital Analytics, a New York-based real-estate research firm.
Yet the strengthening financial-services, health-care, construction and hospitality sectors have offset manufacturing losses and helped give the region what is expected to have been a second year of positive job growth in 2006, according to Stuart Hoffman, chief economist for PNC Financial Services Group Inc. The modest upswing is acting as a stabilizing force in the real-estate leasing market.
"We're gaining traction," says Mr. Hoffman, though he notes the region still faces the headwinds of population loss. The number of residents in the southwestern Pennsylvania region fell 0.3% to 2.4 million in the third quarter of 2006 from a year earlier as some left for other areas of the country like Washington and New York with more job opportunities, according to Moody's Economy.com. It doesn't help matters that the Pittsburgh Penguins of the National Hockey League could potentially join the exodus as it is shopping around for a new arena. The loss would be a psychological blow for avid fans and could also damp restaurant sales and tourism revenues, says Ryan Sweet, an associate economist at Economy.com.
Still, boosters point to several recent positive developments. Office landlords who have faced a bearish tenants' market are beginning to see a slight shift as average rents rose steadily since the third quarter of 2005, according to Property & Portfolio Research Inc., a Boston-based real-estate research firm.
PNC, one of the region's largest employers, is building downtown Pittsburgh's first new high-rise in 20 years. The mixed-use 23-story Three PNC Plaza is seen as particularly crucial to some natives because it will rise on land in the heart of the city previously occupied by small stores and vacant buildings. A slots license also was awarded last month that will pave the way for a casino to be developed near Heinz Field. Meanwhile Westinghouse Electric Co. has narrowed its search to two sites in the region as it prepares to accommodate as many as 2,000 new workers over the next 10 years as a result of the growing nuclear-power industry.
Lack of frothy enthusiasm for Pittsburgh by outside investors has also offered a mixed blessing by keeping supply and demand in check. "Pittsburgh is not a speculator's market," says Sally Gordon, a senior vice president at Moody's Investors Service.
For example, going forward modest demand for apartments is expected to exceed the supply of newly built units. The healthy balance in the multifamily market was central to Pittsburgh earning a slightly above-average ranking in the fourth-quarter Moody's Investors Service report on the overall health of commercial real estate in 59 metropolitan areas nationwide. Though not ideal, the score is much improved from the second quarter of 2004 when Pittsburgh's overall commercial real-estate market ranked the fourth weakest.