They are some of Pittsburgh's most distinctive and decorated buildings, with names like Oliver, Union Trust, Gulf and Koppers. But so far they have been left behind in Downtown's office resurgence.

While premiere office space is all but accounted for, many of Downtown's so-called Class B buildings have been struggling to find tenants or to keep the ones they have.

For example, the 102-year-old Henry W. Oliver Building, designed by famed Chicago architect Daniel Burnham, is nearly three quarters vacant, according to the Newmark Grubb Knight Frank real estate firm.

On Seventh Avenue, the Koppers Building, an Art Deco-style skyscraper encased in limestone, is almost a quarter empty. And a couple of blocks away, on Grant Street, the ornate Union Trust Building, a Flemish Gothic structure built by industrialist Henry Clay Frick, is more than a third empty and could be sold at a sheriff's sale in August.

In all, the vacancy rate for Class B buildings Downtown is 29.1 percent, according to Newmark Grubb, formerly Grubb and Ellis. That's higher than it is in Baltimore, Cincinnati, Cleveland, Boston, Chicago, New York or San Francisco. Rates in those cities range from New York's 8.2 percent to Cleveland's 23.1 percent.

By comparison, the vacancy rate for the top-notch Class A space in the Golden Triangle is less than 7 percent.

The Class B market is doing poorly in part because of some notable corporate moves to higher-graded space in the past few years.

For example, the K&L Gates law firm moved out of the Oliver Building in 2010 to the newer One Oliver Plaza, now known as the K&L Gates Center. That created a large bloc of vacant space at the Oliver Building, one that new owner McKnight Realty Partners is still trying to fill.

Likewise, the nine-story, 161,600-square-foot James H. Reed Building on Sixth Avenue has been empty since the Reed Smith law firm left it for new Three PNC Plaza on Fifth Avenue in 2009.

Peter Sukernek, vice president and general manager of Howard Hanna Commercial Real Estate Services, said the Class B market woes started during the recession, at a time when vacancy rates for the top-tier Class A space were much higher than they are now.

In order to bring in more tenants, many of the Class A building owners discounted the space, making it more attractive -- and affordable -- for those companies interested in upgrading to better surroundings.

"It was a buyer's market," Mr. Sukernek said.

Those upgrades, coupled with the decision by UPMC to move its headquarters elsewhere Downtown into U.S. Steel Tower, helped to drive down the Class A vacancy rate Downtown to one of its lowest levels in decades.

Class B buildings typically are older with smaller floor plans, more dated heating and air conditioning systems, and fewer amenities, such as integral parking, than Class A buildings.

The good news is that Mr. Sukernek and others believe the Class B market could be on the cusp of a comeback.

A paucity of Class A space in and of itself will force companies interested in being Downtown to look for alternatives, they said. And the top space is no longer a bargain. As the Class A market has tightened, rental rates have been increasing.

That could drive some office tenants that moved up when Class A rates were cheaper back down to Class B digs when their leases expire.

"I would think that over the next couple of years the B buildings would have an opportunity to do much better to reduce their vacancy rate dramatically. No. 1, they have more space. No. 2, they're going to be less expensive than the A buildings," Mr. Sukernek said.

Some believe that the Class B market is actually much healthier than the Newmark Grubb statistics show. They say the vacancy rate is artificially inflated by the empty James H. Reed Building and the three-quarters empty Oliver Building.

Both buildings are targeted for new projects. McKnight Realty plans to turn the upper floors of the Oliver Building into a hotel. San Francisco-based Kimpton Hotels & Restaurants also has looked at the James H. Reed Building as the site for a possible hotel.

In addition, another distressed Class B building, the Regional Enterprise Tower, is getting a makeover. PMC Property Group is turning the upper half of the former Alcoa Building, which has a 37.9 percent vacancy rate, into apartments.

"Class B office space is in a transition right now because we've got properties that are slated for conversion to residential and hotel," said Jason Stewart, executive vice president of the Jones Lang LaSalle real estate firm.

In contrast to Newmark Grubb, CBRE Inc. has the Class B vacancy rate at 14.7 percent, down substantially from the 17.8 percent it listed in the fourth quarter of 2010. "It's trending down over six quarters, which is a very healthy sign," said Jack Norris, CBRE managing director.

Part of the reason for the discrepancy between the Newmark Grubb and CBRE statistics is how buildings are classified and whether proposed reuses are taken into account.

CBRE, for instance, classifies the Union Trust Building as a Class A property, while Newmark Grubb lists it as a Class B. CBRE also "would take into account known facts," such as an intended reuse, in determining a building's vacancy rate, Mr. Norris said.

Mr. Stewart said PNC Financial Services Group's purchase of the vacant Lord & Taylor building may be a sign that the Class B market is poised to rebound. While Newmark Grubb lists the former Mellon Bank as retail, PNC plans to convert it into office space for at least 800 employees.

As it courts a hotel, McKnight Realty has landed the Metz Lewis Brodman Must O'Keefe law firm to fill more than 21,000 square feet of space over two floors in the Oliver Building. The firm plans to move its offices in December, helping to cut the vacancy rate.

Aaron Stauber, president of Rugby Realty, owner of Gulf Tower, disputed Newmark Grubb's statistic that the building is 45.8 percent vacant. He said it is more like 30 percent and that his firm is "in the process of re-tenanting up" the 44-story skyscraper, once Downtown's tallest building. The high vacancy is "a temporary blip because we lost some big tenants."

Mr. Stauber said his other Class B properties Downtown, particularly in the Cultural District, were doing quite well, with occupancies close to 100 percent.

First Published: June 26, 2012, 8:00 a.m.
Updated: June 26, 2012, 8:19 p.m.