Over the coming year, rent increases are forecasted to continue within the Class A product type while asking rents for Class B assets are forecasted to hold firm as vacancy increases and negotiating leverage shifts.
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JLL Pittsburgh Office Insight - Q1 2015
1. Office-using employment sectors waver
Uneven employment results among the office-using employment sectors will
translate into muted office demand over the next 12 months. According to the
most recent estimates from the BLS, total non-farm employment in Pittsburgh
stood at ~1.1 million payrolls, representing an annualized increase of 9,200 jobs
or 81 basis points. Meanwhile, unemployment decreased 0.7 percentage points
year-over-year to 5.9 percent. Office-using employment sectors contracted over
the last year, recording an annualized net loss of 4,400 jobs across the metro.
The largest job losses occurred in the financial activities sector, where total
employment declined by 2,700 jobs year-over-year.
Office employment trends (12-month change)
Source: JLL Research
Deliveries and rightsizings to increase vacancy downtown
While Pittsburgh’s downtown Class A vacancy rate has been among the lowest
in the U.S. for the last several years, its Class B vacancy rate, currently at 25.0
percent, is among the highest in the country. Irrespective of class, vacancy
downtown is forecasted to rise before the end of the year. The increase will be
the result of two major factors. First, the 800,000-square-foot Tower at PNC
Plaza will deliver in the summer and PNC will relocate some operations from
leased offices, and second, BNY Mellon intends to consolidate its operations in
the region and vacant up to 650,000 square feet at 525 William Penn Place.
CBD vacancies
Source: JLL Research
Landlords are pushing rents irrespective of class or geography
Office landlords in Pittsburgh have been effectively increasing rents over the
several years. The average full service gross asking rent for the metro was
recorded at $21.91 per square foot at the end of the first quarter, an increase of
3.4 percent year-over-year. When compared to peer cities of Cleveland,
Columbus, Philadelphia and Baltimore, rents have increased the most in
Pittsburgh. Over the coming year, rent increases are forecasted to continue
within the Class A product type while asking rents for Class B assets are
forecasted to hold firm as vacancy increases and negotiating leverage shifts.
Average asking rents
Source: JLL Research
14.7%
Total vacancy
194,471
Q1 2015 net absorption (s.f.)
3.4%
12-month rent growth
641,000
Total under construction (s.f.)
37%
Total preleased
Office Insight
Pittsburgh | Q1 2015
Tenants are soon to find more options downtown
(10.0)
0.0
10.0
2011 2012 2013 2014 Q1 2015
Financial Activities Professional & Business Services Information Government
0%
15%
30%
2011 2012 2013 2014 Q1 2015
Class A Class B
$18.00
$21.00
$24.00
2011 2012 2013 2014 Q1 2015
Class A Class B