With the rise of remote work during the pandemic, headlines across the country have sounded the death knell for downtown business districts. And central business districts, including downtown Pittsburgh, have been hit hard by the pandemic, with offices emptying out and small businesses closing that normally serve downtown workers.
But many downtowns have rebounded, and so has Pittsburgh’s largest business district.
Jeremy Waldrup, CEO of Downtown Pittsburgh Partnership (PDP), said there were 50 development projects worth more than $2.5 billion underway for the downtown core and surrounding areas. The difference for these projects compared to before the pandemic means a subtle, but noticeable shift in the Golden Triangle’s development priorities.
According to data compiled by PDP, residential projects are multiplying and the occupancy rate of residential accommodation remains high. In addition, the city center has recovered about 85% of its visitors compared to pre-pandemic levels, with trend lines showing a possible full recovery.
Meanwhile, office occupancy rates grew much more slowly and, after rising slightly throughout 2021, began to decline again late last year when the omicron variant hit Pittsburgh. Only 36% of employees have returned to work downtown, compared to pre-pandemic levels.
So while officials and developers are optimistic about the future of downtown, the type of buildings and projects that Pittsburgh residents might see will likely be different from downtown in the past.
Waldrup said conversion of many older buildings in the city center is likely. Many older structures are office buildings, and their layout and amenities are no longer as appealing to modern businesses. These low-comfort office buildings represent more than 40% of the downtown office market. Waldrup expects more of these will continue to be converted into market-priced and high-end housing, and possibly for sectors like higher education.
“Pittsburgh was fifth in the nation among inner cities in terms of office real estate,” Waldrup said. “The need to further diversify the uses of spaces in the city center and to increase the number of housing units is logical.
PDP data shows that approximately 1,000 new residential units are expected to come online through the conversion of underutilized properties.
The continued growth of downtown housing projects follows a residential explosion in the neighborhood. According to census The figures, the Central Business District added 1,848 residents between 2010 and 2020, the most additional residents of any neighborhood in Pittsburgh. Figures for 2020 show that the city center is home to 5,477 residents, making it one of the most populated residential areas in the city.
After this residential growth, there is the growth of restaurants and small businesses. Caitlin Fadgen of PDP said Downtown welcomed 20 new businesses, even during the difficulties of the pandemic.
“And all these new restaurants are just supporting a growing residential market. It’s really hard to get a dinner reservation, you have to be ready as soon as they open their reservation books,” Fadgen said, noting downtown’s popularity as an entertainment district. The Market Square had over 373,000 visitors and the Cultural Quarter had over 364,000 visitors in December 2021, around 89% and 85% of pre-pandemic levels, respectively.
Target is set to open a store in the former Kaufmann building this year, which Waldrup plans to include a small grocery store to supply downtown residents.
But one area Waldrup said downtown lacks is affordable, subsidized housing. Waldrup said only about 7% of downtown units are considered affordable. According to a study 2019 from the National Community Reinvestment Coalition, the downtown core has gentrified significantly since 2010, with the average home price there tripling from $80,000 to $240,000 and average incomes doubling.
“We would like to see more affordability brought to the downtown core. Converting office buildings into affordable housing won’t come cheap, so we need the federal government to step up and provide funding,” Waldrup said, adding that downtown is a good candidate for affordable housing because residents there have excellent access to public transport and many can live without a car.
Billions of dollars for affordable housing have been included in Democrats’ efforts to pass the Build Back Better Bill, but the legislation has stalled.
Local development office Millcraft Investments proposed a massive $475 million development — complete with housing, retail, marina and Ferris wheel — just outside of downtown in Pittsburgh’s North Side Castle District. Lucas Piatt, CEO of Millcraft Investments, said the rapid rebound in leisure activities in and around the city center is fueling change in the region.
“Everyone knows the pandemic has changed the way we do things and is steering the markets in different ways. We still see a hot real estate market,” Piatt said. “Culturally, we’re seeing a leisure surge that’s helping the hospitality and hospitality industries come back, where we’re seeing an increase in average daily rates.”
The future of residential growth
Residential growth is not limited to the Golden Triangle. Populations in nearby neighborhoods have also exploded. The Strip District has grown nearly 200% since 2010, and Allegheny Center on the North Side has grown 52%. A new 260-unit housing structure has just been announced near PNC Park on the North Shore, just across from downtown.
Waldrup said residential growth in neighborhoods should only help maintain downtown as a strong employment hub, not weaken it, as walk-to-work rates are expected to increase. Before the pandemic, Downtown was home to about 150,000 jobs, Pennsylvania’s second-largest business district.
“Ultimately, close neighbors strengthen the core,” Waldrup said. “We see it as healthy competition, and it creates a stronger, bigger downtown.”
But this office space is going to be different from the traditional office space. With the rise of remote work and its popularity among many employees, Waldrup said companies are looking for trophy-class office space, the highest quality offices that include multiple amenities. The focus has shifted from a large office space with few amenities to a smaller office space with several benefits. Currently, downtown office space is 15% trophy class and 36% class A, another upscale class. Waldrup expects these office spaces to increase.
“Tenants looking for trophy-class space are on the rise, and with that, we’ve seen some businesses shrink their spaces,” Waldrup said. “They are looking for offices with common areas and large living rooms, and even adjoining gyms. The movement is at the high end.
Piatt agrees and said downtown office occupancy rates will not remain permanently low and will stabilize over the next few years. He expects more downtown offices to have major amenities to attract workers who may tire of the home office.
“Over the next year, we really need to focus on developing beautiful environments and invest heavily in storefront experiences and interior building experiences in areas such as health and wellness, food and beverages. drinks and entertainment for people in the downtown central business district. “, said Piatt.