Office vacancy rates in Pittsburgh are forecasted to rise by the end of the year due to two major developments. The Tower at PNC Plaza will deliver 800,000 square feet of new office space in the summer, and some PNC operations will relocate from leased offices, adding to vacancy. Additionally, BNY Mellon plans to consolidate operations in the region and vacate up to 650,000 square feet at 525 William Penn Place. Overall job growth in Pittsburgh has been positive over the last year but office-using employment sectors have declined, which will lead to muted office demand over the next 12 months.

1. Office real estate implications
Sources: JLL Research, Bureau of Labor Statistics
Job growth/loss by sector (12-month change)
Pittsburgh
-2,700
-1,700
0
0
500
2,000
2,100
2,100
3,000
3,900
-4,000 -2,000 0 2,000 4,000
Financial Activities
Government
Information
Professional & Business Services
Manufacturing
Mining, Logging & Construction
Other Services
Leisure & Hospitality
Trade, Transportation & Utilities
Educational & Health Services
Number of Jobs
Office-using employment sectors have wavered over the last year and these
uneven employment results will translate into muted office demand over the
next 12 months. The combination of muted office demand, over 1.0 million
square feet in construction deliveries and ongoing corporate rightsizings will
produce additional space options for tenants in the market.
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. 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.
Total employment vs. unemployment rate
Pittsburgh
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
2000 2002 2004 2006 2008 2010 2012 2014
Peak: 1,187,884 jobs
3.7%
unemployment rate
total jobs
(15.0)
(10.0)
(5.0)
0.0
5.0
10.0
15.0
2010
2011
2012
2013
2014
2015
Financial Activities Professional & Business Services Information Government
Office employment trends (12-month change)
Pittsburgh
Office employment update
Metro Pittsburgh . April 2015
5.7%Pittsburgh unemployment
0.8%Pittsburgh 12-month job growth
5.5%U.S. unemployment
2.3%U.S. 12-month job growth
• 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 0.8 percentage points
year-over-year to 5.7 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.
• Total U.S. nonfarm employment increased by 126,000 jobs in
March, the lowest level since March 2013 and well below economist
forecasts of 244,000 jobs. Downward revisions were also made to
the January and February figures, totaling 69,000 jobs.
• U.S. unemployment was unchanged at 5.5 percent and wage
growth remained sluggish as average hourly earnings increased
only 2.1 percent year-over-year, far below the Fed’s goal of 3.5
percent or better.

2. JLL Americas Research • Pittsburgh Office Employment Update 2
February 2013 February 2014 February 2015
Total Non-farm
Employment
1,140,800
0.3%
1,135,200
-0.5%
1,144,400
0.8%
Unemployment Rate 7.6% 6.5% 5.7%
Pittsburgh Supersectors February 2013 February 2014 February 2015
Mining, Logging & Construction 57,100 0.5% 56,700 -0.7% 58,700 3.5%
Manufacturing 89,200 0.5% 88,200 -1.1% 88,700 0.6%
Trade, Transportation, & Utilities 211,600 -1.5% 211,000 -0.3% 214,000 1.4%
Information 18,200 0.0% 18,100 -0.5% 18,100 0.0%
Financial Activities 70,900 1.3% 70,700 -0.3% 68,000 -3.8%
Professional & Business Services 172,200 2.7% 171,600 -0.3% 171,600 0.0%
Educational & Health Services 243,400 0.0% 242,200 -0.5% 246,100 1.6%
Leisure & Hospitality 105,200 2.6% 106,100 0.9% 108,200 2.0%
Other Services 50,200 -1.4% 50,300 0.2% 52,400 4.2%
Government 122,800 -1.1% 120,300 -2.0% 118,600 -1.4%
News on the street
Pittsburgh businesses expanding, contracting, etc.
Columbia Gas Ι Natural Gas Distribution: Expanding
Columbia Gas of Pennsylvania recently broke ground on neighboring training and operations centers in Beaver County. According to company spokeswoman, the
operations center will replace an existing facility, which after 30 years, the company has outgrown. Along with the new operations building, the company is building
an employee training center. Both facilities will be outside Monaca, near the Beaver Valley Mall.
Mullen Communications Ι Advertising Agencies: Ceased Operations
Mullen’s Pittsburgh office recently ceased operations. The ad agency lost its largest client, Highmark Health at the end of 2014 and its Boston-based parent
company decided to shutter the office. About 25 employees stayed through the first part of 2015 to help transition clients. The Pittsburgh agency had gone through
many changes in its 29-year history but it had historically tipped heavily toward having a single client dominate its business.
Oxford Development Ι Commercial Real Estate: Development
Oxford is considering increasing the number of floors in its proposed 350 Fifth Avenue skyscraper on Smithfield Street from 20 to 29 in a bid to attract an anchor
tenant that would allow the company to get started on the $200 million project. Steve Guy, Oxford’s CEO, said the company is “reacting to needs” in adding more
floors to the building. “We’re just trying to keep up with the people out there looking for space,” he said.
Stantec Ι Engineering Services: Relocation
A team of Stantec engineers, architects and others recently moved into an office at Southpointe, ground zero for companies working in the Marcellus shale industry.
The Southpointe location will serve as the U.S. oil and gas pipeline office for the Edmonton-based Stantec. The engineering firm is focused on growing its energy
business unit, which specializes in pipeline development, well pad construction and related environmental services.
The Davis Companies Ι Commercial Real Estate: Development
After buying the Union Trust Building for $14 million in March 2014, The Davis Companies expects to invest up to $100 million to restore and modernize the building,
according to a statement. The figure includes the original purchase price. Davis recently selected Mascaro Construction to help renovate the 500,000-square-foot
building, a gothic style structure commissioned by Henry Clay Frick that ranks among downtown's most architecturally significant structures.
Union Real Estate Ι Commercial Real Estate: Capital Markets
The Allegheny Building, an office tower built in the early 20th century, has been put up for sale by its owner, Union Real Estate. Rich Beynon, president of
downtown-based Beynon & Co., is representing the 19-story building at a list price of $7.8 million, or about $53 per square foot. The Class C property totals 150,000
square feet with 8,000-square-foot floors and is approximately 75 percent occupied.
Industry employment stratification
Pittsburgh
Educational &
Health Services,
246,100, 22%
Trade, Transportation
& Utilities,
214,000, 19%
Professional &
Business Services,
171,600 , 15%
Government,
118,600 , 10%
Leisure & Hospitality,
108,200, 9%
Manufacturing,
88,700, 8%
Financial Activities,
68,000 , 6%
Mining, Logging
& Construction,
58,700, 5%
Other Services,
52,400, 5%
Information,
18,100, 2%
Andrew Batson
Senior Research Analyst
Great Lakes Region
tel +1 412 208 1400
Andrew.Batson@am.jll.com
525 William Penn Place
Suite 2500
Pittsburgh, PA 15259
www.jll.com/pittsburgh
© 2015 Jones Lang LaSalle IP, Inc. All rights reserved.
All information contained herein is from sources deemed
reliable; however, no representation or warranty is made
to the accuracy thereof.
Employment statistics
Pittsburgh
Robert Kramp
Senior Vice President – Americas
Midwest & Great Lakes Research Director
tel +1 312 228 2470
Robert.Kramp@am.jll.com
200 East Randolph Street,
47th Floor
Chicago, IL 60601
www.us.joneslanglasalle.com/research