Pittsburgh is home to the areas with the fastest growing office rents in the United States and Canada.
It’s by real estate service company CBRE just published Tech-30 2021 assessment, in which new data illustrates how the tech industry has affected office markets throughout the pandemic.
Topping the list of office rent growth in tech submarkets – the neighborhoods or business districts of large cities where the tech industry is concentrated – was the Oakland and East End region of Pittsburgh. These neighborhoods, which are home to institutions such as Carnegie Mellon University and the University of Pittsburgh as well as business centers like Bakery Square, saw office rent increase by 34.6% from the second quarter of 2019 to the second quarter of 2021.
Part of the reason for this is the quality of the offices built here, CBRE Vice President Jeremy Kronman Recount Technically.
âYou have very high-end, high-quality buildings being delivered,â he added, referring to the Liberty East project as well as the new buildings in Bakery Square, among other renovations. âThe tenants who take them are not competing in Pittsburgh, they are competing globally for talent. And the pandemic has accelerated the tendency to want to go where the talent is. “
Given CMU and Pitt’s status as top academic institutions for robotics, artificial intelligence, medical technology and more, Kronman says it makes sense that these companies want to build offices near students and new graduates from these universities. But while this may help explain the concentration of offices under construction in Oakland and the East End, the general upward trend in rent prices is more prominent: as employers grapple with the return to work in no one in the midst of the ongoing pandemic, many are looking for new ways to entice hesitant employees to return. Rather than risk losing talent in a job market with record resignation rates, businesses are bringing more convenience and comfort to offices than ever before.
“We have a disproportionate number in the university sector of brand new, state-of-the-art buildings. And so we are growing disproportionately.”
Pittsburgh sees the effects more than anywhere else. Even Seattle’s Lake Union neighborhood – the submarket with the second-highest increase in office rent – saw a growth rate significantly lower than Pittsburgh, at 24.1 percent. Kronman attributes this to a catch-up game that Pittsburgh has played in tech for the past decade.
âWe have a disproportionate number in the university sector of brand new, state-of-the-art buildings,â he said. “And so we are increasing disproportionately.”
Where cities like Boston, Seattle, and San Francisco have seen explosive growth in recent years, Pittsburgh’s technological prowess has taken a bit longer to mature. But the city could be on the precipice of the same level of job and business growth, according to the report.
Pittsburgh ranked 12th out of 30 markets for high-tech software and services job growth, with a growth rate of 10.1% for the current 2019 and 2020 period in the report. Only a few years ago, over the period 2017 and 2018, this growth rate was only 1.6%, ranking 26th out of 30 markets. In fact, Pittsburgh’s most recent job growth rate has overtaken heavyweights like Silicon Valley, Boston, Philadelphia, Washington DC and more.
This kind of change may seem alarming to those who are taking advantage of Pittsburgh’s notorious affordability and low cost of living to inspire young professionals and recent graduates to relocate here. But Kronman pointed out that the report shows Pittsburgh still has one of the lowest rental prices per square foot despite these increases.
The average asking rent for office space in the city is $ 23.45 per square foot per year, while the same measurement for the Oakland and East End area is $ 36.09. Silicon Valley’s premier tech submarket has an average rent of $ 113.28 per square foot per year, Boston’s at $ 89.65, and Philadelphia’s at $ 44.01. So while Pittsburgh’s rent may not be as competitive with similarly sized markets like Charlotte or Indianapolis, it is still much more economical than large tech hubs.
âIt’s one of Pittsburgh’s secrets,â Kronman said. âYou have access to talent and an absolutely wonderful cost of living and a state-of-the-art space to house these employees. “
Does that mean Pittsburgh could soon outgrow its emerging tech hub label? Kronman thinks the change in perception could be in sight.
“Those [similarly sized] markets don’t have Carnegie Mellon University, âhe said, pointing out that Boston has the Massachusetts Institute of Technology and the Bay Area has Stanford University. “It’s the crown jewel here – what Pitt turns out in medical technology, and CMU turns out in AI and software.” This new data, he continued, combined with this academic prowess and the success of the companies already present, can only be synonymous with success for Pittsburgh.
Sophie Burkholder is a 2021-2022 corps member of Report for America, an initiative of the Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Heinz Endowments.