Downtown Pittsburgh building boom shows no signs of letting up
May 12, 2013 12:00 PM
The new Tower at PNC Plaza building under construction on Wood Street, Downtown. The new tower will be one of the largest green buildings in the country.
By Mark Belko Pittsburgh Post-Gazette
The development boom in the city center is showing no signs of abating.
Whether it's in urban living, where three-quarters of the residents are relative newcomers, or light-rail transit usage, which saw an increase last year thanks to the new North Shore Connector, or reports of yet another hotel in the works, Downtown's fortunes continue to be on the rise.
At least that appears to be the case based on a new Pittsburgh Downtown Partnership report measuring economic activity in and around the Golden Triangle last year. The "State of Downtown Pittsburgh 2013" details a number of encouraging trends, from the widely reported bump in residential and office space demand to an increase in the number of building permits issued for improvements last year.
Overall, the partnership counted 60 projects totaling more than $2.2 billion that have been announced or are under construction in the city's core and fringes, including the 33-story, $400 million Tower at PNC Plaza on Wood Street, which is scheduled to open in the summer of 2015.
"All indicators we're looking at show continued growth," said Jeremy Waldrup, the PDP's president and CEO. "I would not say that Downtown has peaked."
The partnership plans to formally release the report Monday in conjunction with a sold-out mayoral forum specifically tied to Downtown issues. It marks the second straight year the PDP has produced the report to "track, benchmark and report on data specific" to the Golden Triangle.
Data is generated over the course of the year from dozens of sources, including government, developers, real estate firms, civic organizations and sports teams.
The report is designed, in part, to serve as a resource for investors, developers, community leaders and others by highlighting development efforts under way in the city's center and its fringes.
In its simplest form, the report is a compilation of all development activity that has taken place Downtown, on the north and south shores, in the lower Hill District, Uptown and the Strip District up to 31st Street since January 2006.
Since then, an estimated $5.2 billion in projects have been completed, are in the pipeline or are under construction. That's up about $400 million from the end of 2011.
"We're really pleased with the progress," Mr. Waldrup said.
Perhaps nowhere has the growth been greater than on the residential side, which saw more expansion last year. The report found that another 537 units opened up. Occupancy rates increased to 95.9 percent, up from 93.6 percent at the end of 2011.
Since 1960, the number of units in Downtown and its fringes has grown from 884 to 4,280, with nearly 2,400 more in the pipeline, mostly in the Golden Triangle.
While U.S. Census statistics show the residential population in or near Downtown jumped by 21.3 percent to 7,796 people between 2000 and 2010, the partnership estimated another 909 people have moved in over the last two years.
In addition, the report found that 76 percent of the people who live in or near Downtown have been here four years or less. The vast majority of residents -- 77 percent -- rent. On the condo side, 63 units sold last year for an average price of $217 a square foot, up from $208 a square foot in 2011.
About the only blemish -- at least from a developer's point of view -- in an otherwise rosy residential picture is that the average rent for apartments dropped to $1.64 a square foot in last year's fourth quarter after peaking at $1.70 a square foot in the second quarter. For a 1,000-square-foot apartment, that equates to a rent of $1,640 a month.
The partnership attributed the rental rate drop to year-end price reductions, noting that adjustments in just one or two buildings can affect the overall rate.
Mr. Waldrup did not see the decrease as a red flag but added that the PDP will continue to monitor the numbers. At this point, "We're comfortable where lease rates are," he said.
As the Downtown residential market expanded, the office market remained tight.
The top-of-the-line Class A occupancy rate stood at 92.9 percent at the end of 2012, making it the strongest in the country, according to the CBRE real estate firm. Demand for such space has soared since the end of 2008, when the occupancy rate stood at 86. 1 percent.
On the development side, the number of building permits jumped by 11.2 percent from 169 in 2011 to 188 in 2012, the fourth straight year they have increased.
The report also disclosed that developer McKnight Realty Partners plans to anchor the Henry W. Oliver Building on Smithfield Street with an Embassy Suites Hotel. The hotel, with about 230 rooms, would occupy the upper 12 floors of the 25-story structure. Work is expected to start this year, according to the report.
William Rudolph, a McKnight principal, said last week his firm "was moving in" the direction of the hotel but still did not have it "totally confirmed."
"That is certainly the word on the street," he said.
The hotel would add to a number of new developments in the works in or near Downtown -- from the PNC tower to the $95 million Gardens at Market Square hotel-and-office project to a three-story office and retail complex on the North Shore near Stage AE. Oxford Development Co. also is considering construction of a 33-story, $238 million office high-rise on Smithfield.
The Downtown Partnership report stated that work on another major initiative -- the relocation of Point Park University's Pittsburgh Playhouse from Oakland to Downtown -- could start in 2014 once design work wraps up this year.
Among other findings in the report:
• Light-rail transit ridership rose by nearly 18 percent in the nine months following the March 2012 debut of the North Shore Connector. Overall bus, rail and incline ridership increased 3 percent last year, according to the report.
Mr. Waldrup said viable mass transit continues to be a priority for the partnership, noting that 54 percent of those who work Downtown arrive by bus or rail.
• While several recent shootings Downtown have created a stir, overall crime declined in 2012. The total number of criminal offenses dropped 18 percent compared with 2011. Three of 24 types of crime increased -- aggravated assault, robbery and theft.
• Although the hotel occupancy rate in the Pittsburgh market slipped by 0.4 percent to 68 percent last year, it remained ahead of peer cities, including Denver, Philadelphia, Baltimore, Columbus, Detroit, Cleveland, Indianapolis and Cincinnati. The average for the peer group was 62 percent.
If you have specific questions for Pittsburgh's mayoral candidates about Downtown issues, please share them on the Post-Gazette's Facebook page at www.facebook.com/pittsburghpostgazette. Some of the questions may be asked at a Pittsburgh Partnership mayoral forum on Monday.