Negative absorption shows signs of slowing as Pittsburgh office leasing activity remains steady, indicating further office market recovery.

1. © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Pittsburgh
Last year, new leasing activity reached 1.1 million s.f. signaling a strong
return of leasing activity, but with absorption ending at -907,856 s.f., tenant
givebacks and sublease additions significantly outpaced leasing demand.
However, in Q4 2021, total net absorption was only -229,285 s.f., followed by
another -107,038 s.f. in the Q1 2022. The improving absorption figures
indicate vacancies may be slowing.
A growing number of local companies have announced return-to-office
initiatives. Reed Smith announced in February 2022 that they would return
in March, along with BNY Mellon and Buchanan Ingersoll & Rooney. The
common theme with most return-to-office announcements is that flexibility
will be given to employees to continue working remotely part-time. The
continuation of hybrid work solutions has been the primary cause for the
short-term spike in vacancy, but it has also led to higher demand in Class A
urban buildings as companies trade up for higher quality space. Over the
previous five quarters, new leasing in the suburbs totaled 483,523 s.f. while
the urban submarkets experienced 926,536 s.f. with 72.7% occurring in Class
A or Trophy buildings.
Outlook
As the region pushes forward through the pandemic and towards the next
normal, the separation of demand between Class A and Class B inventory in
Pittsburgh widens. The cost of construction has pushed new construction
asking rental rates higher, while existing older inventory competes to
capture new leasing, resulting in downward pressure on asking rates and
higher concessions. However, tenants focused on new construction have
been willing to pay higher rents and will continue to pay higher rents in the
pursuit of future-proofing their human capital. The dichotomy between the
classes has created combative rent growth and that dynamic is anticipated
to broaden. Class B leases in the CBD contain starting rents in the low $20’s
full-service gross while new construction in the urban core has asking rates
in the mid-$40’s net of electric. With three-quarters of the leasing volume
occurring in Class A and Trophy buildings, price is evidently not the main
motivating factor among Pittsburgh tenants.
Turning a corner? Negative absorption slows
while leasing activity strengthens
• Average direct asking rent regains positive momentum as newer
developments put upward pressure on pricing.
• Return-to-work announcements increase in the first quarter, with
several law firms and financial institutions returning employees to the
office in March.
• As companies began returning to the office more broadly, urban
office properties have commanded the lion’s share of demand with
65.7% of new leasing occurring within the urban core since the start of
2021.
Fundamentals Forecast
YTD net absorption -107,038 s.f. ▼
Under construction 1,149,649 s.f. ▼
Total vacancy 23.1% ▶
Sublease vacancy 1,782,063 s.f. ▶
Direct asking rent $26.45 p.s.f. ▲
Sublease asking rent $18.81 p.s.f. ▶
Concessions Rising ▲
-1
0
1
2018 2019 2020 2021 2022
Millions
Supply and demand (s.f.) Net absorption
Deliveries
0%
10%
20%
30%
2008 2010 2012 2014 2016 2018 2020 2022
Total vacancy (%)
$10
$20
$30
2008 2010 2012 2014 2016 2018 2020 2022
Average asking rent ($ p.s.f.)
Direct Sublease
For more information, contact: Tobiah Bilski | tobiah.bilski@am.jll.com
Office Insight | Q1 2022

2. © 2022 Jones Lang LaSalle IP, Inc. All rights reserved.
Pittsburgh
For more information, contact: Tobiah Bilski | Tobiah.Bilski@am.jll.com
Office Statistics | Q1 2022
Class
Inventory
(s.f.)
Total net
absorption
(s.f.)
YTD total net
absorption
(s.f.)
YTD total net
absorption (%
of stock)
Direct
vacancy (%)
Total
vacancy (%)
Average
direct asking
rent ($ p.s.f.)
YTD
Completions
(s.f.)
Under
Development
(s.f.)
Northern I-79 / Cranberry Totals 4,449,807 -56,193 -56,193 -1.3% 17.1% 24.4% $24.73 0 0
East Totals 3,256,850 3,230 3,230 0.1% 30.1% 30.5% $20.18 0 0
North Totals 2,884,813 16,004 16,004 0.6% 16.1% 16.7% $19.98 0 100,000
South Totals 2,451,420 -9,525 -9,525 -0.4% 13.3% 13.3% $20.58 0 0
Southpointe Totals 3,532,244 23,292 23,292 0.7% 17.2% 27.1% $21.95 0 0
West Totals 7,549,182 -21,746 -21,746 -0.3% 24.7% 26.1% $21.76 0 0
Suburban Totals 24,124,316 -44,938 -44,938 -0.2% 20.7% 24.1% $21.69 0 100,000
CBD Totals 19,117,727 -28,220 -28,220 -0.1% 18.4% 21.2% $27.86 0 458,000
Fringe Totals 8,824,279 -47,416 -47,416 -0.5% 18.2% 22.7% $29.21 0 232,000
Oakland / East End Totals 3,477,188 13,536 13,536 1.0% 26.0% 26.6% $37.50 0 359,649
Urban Totals 31,419,194 -62,100 -62,100 -0.1% 19.2% 22.3% $29.94 0 1,049,649
Pittsburgh Totals 55,543,510 -107,038 -107,038 -0.2% 19.8% 23.1% $26.45 0 1,149,649
Northern I-79 / Cranberry A 3,726,249 -32,087 -32,087 -0.9% 16.3% 24.9% $25.24 0 0
East A 1,539,784 -7,216 -7,216 -0.5% 40.7% 41.0% $21.19 0 0
North A 855,815 7,755 7,755 0.9% 16.9% 16.9% $23.85 0 100,000
South A 220,000 0 0 0.0% 11.3% 11.3% $20.00 0 0
Southpointe A 2,449,891 -11,339 -11,339 -0.5% 13.7% 27.3% $22.74 0 0
West A 4,162,490 -13,666 -13,666 -0.3% 19.6% 21.3% $23.59 0 0
Suburban A 12,954,229 -56,553 -56,553 -0.4% 19.7% 25.4% $23.28 0 100,000
CBD A 13,512,018 -34,808 -34,808 -0.3% 14.5% 17.9% $31.73 0 458,000
Fringe A 2,944,083 -40,413 -40,413 -1.4% 14.2% 20.3% $37.41 0 232,000
Oakland / East End A 2,015,559 0 0 0.0% 35.2% 35.9% $39.62 0 359,649
Urban A 18,471,660 -75,221 -75,221 -0.4% 16.7% 20.3% $34.73 0 1,049,649
Pittsburgh A 31,425,889 -131,774 -131,774 -0.4% 17.9% 22.4% $30.20 0 1,149,649
Northern I-79 / Cranberry B 723,558 -24,106 -24,106 -3.3% 21.4% 21.9% $22.58 0 0
East B 1,717,066 10,446 10,446 0.6% 20.6% 21.1% $18.36 0 0
North B 2,028,998 8,249 8,249 0.4% 15.7% 16.6% $18.24 0 0
South B 2,231,420 -9,525 -9,525 -0.4% 13.5% 13.5% $20.63 0 0
Southpointe B 1,082,353 34,631 34,631 3.2% 25.3% 26.8% $21.01 0 0
West B 3,386,692 -8,080 -8,080 -0.2% 31.0% 32.0% $20.32 0 0
Suburban B 11,170,087 11,615 11,615 0.1% 21.9% 22.7% $20.01 0 0
CBD B 5,605,709 6,588 6,588 0.1% 27.7% 29.3% $22.18 0 0
Fringe B 5,880,196 -7,003 -7,003 -0.1% 20.3% 24.0% $24.83 0 0
Oakland / East End B 1,461,629 13,536 13,536 2.4% 13.2% 13.8% $25.78 0 0
Urban B 12,947,534 13,121 13,121 0.3% 22.7% 25.1% $23.50 0 0
Pittsburgh B 24,117,621 24,736 24,736 0.2% 22.3% 24.0% $21.91 0 0