Colin McNickle: Pittsburgh office vacancy rate continues to struggle

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Languid. That’s the best word to describe Pittsburgh’s continued high vacancy rate for office space in its central business district (CBD), an analysis by the Allegheny Institute for Public Policy concludes.

“Data from the fourth quarter of 2021 shows little improvement in the city’s office market as the pandemic continues to spread,” said Frank Gamrat, executive director of the Pittsburgh think tank.

Make no mistake, vacancy rates were nothing to brag about before the coronavirus pandemic hit two years ago. But the mitigating measures taken to combat covid-19 have likely only entrenched the unease that populates premium and other office spaces in the Golden Triangle.

Office space is divided into two classes, A and B. Class A is considered premium space. All other office space is classified as Class B.

“In 2013, the Class A office vacancy rate in Pittsburgh’s central business district had its best ever performance at just 5.2%, the second-lowest rate of 53 major cities in the company. national real estate Jones Lang LaSalle. office outlook survey (JLL.com),” says Gamrat.

But by the end of 2019, Pittsburgh’s Class A vacancy rate had risen to 15.9%. The rate rose further – to 18.1% – in each of the first two quarters of 2021. By the fourth quarter of last year, vacancies had improved only slightly, to 17.6%.

“Keep in mind that vacancy is a measure of space that is not currently rented, not necessarily that the space is simply unoccupied,” Gamrat reminds.

Simply put, the pandemic has crushed the local economy. And job losses in the Pittsburgh area nearly two years ago have yet to reach pre-pandemic levels, let alone the lost growth that should have occurred.

“It certainly had an impact on the downtown office market, because jobs were definitely lost,” says Gamrat. “But the pandemic has also brought about the work-from-home culture that seems here to stay.

“It is very likely that companies have sought to reduce office clutter, particularly rental costs, as the number of people physically present in offices has decreased,” says the researcher.

And it looks like it’s pretty much the same story for nine other cities. Again, all data comes from Jones Lang LaSalle:

At the end of 2021, Pittsburgh’s CBD vacancy rate (17.6%) for Class A buildings ranks better than Columbus (17.8%); Los Angeles (19.9%); Seattle (20%); Austin (20.8%); Denver (21.9%) and Dallas (34.1%).

Also note that Pittsburgh is one of only four markets without any Class A acreage under development in their CBD in 2021, the others being Seattle, Los Angeles and Dallas.

“Although a new office building is being built, with taxpayers’ money, on the site of the old Civic Arena,” Gamrat said. “This will undoubtedly put more pressure on CBD vacancy rates.”

Jobs have yet to return to pre-pandemic levels, let alone pre-pandemic and loss of growth. And even as businesses in Pittsburgh’s central business district slowly welcome employees back to the workplace, the work-from-home culture, at least for part of the week, might be here to stay.

“This office market recovery in the Pittsburgh CBD may be slower than usual due to this new work-from-home culture,” Gamrat concludes.

“But more importantly, Pittsburgh’s ability to attract new businesses or businesses to its borders has long been hampered by heavy regulations, high taxes and loyalty to unions – restrictions that existed and persisted before the pandemic hit. .”

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