Pittsburgh Experienced Moderate Demand for Industrial Properties, while Overall Office Leasing Continued to Slow
Pittsburgh, PA – Cushman & Wakefield, a leading global real estate services firm, today released its fourth quarter 2023 industrial and office statistics for Pittsburgh, showing moderate demand for industrial properties and a decline in overall office leasing activity.
“Fourth quarter leasing activity in Pittsburgh’s industrial market was heavily driven by warehouse space, with more than 300,000 square feet leased,” said Steven Patterson, Research Analyst for the Pittsburgh market. “While industrial leasing activity experienced a slowdown in the fourth quarter, yearly net absorption reached 3.2 million square feet, which is the highest level of net absorption in the market in more than 15 years.”
Pittsburgh’s industrial market experienced 1.5 million square feet (msf) of net absorption over the fourth quarter, which is almost entirely due to the recent delivery of occupied warehouse/distribution space. Leasing activity in the market tapered off in the fourth quarter, with warehouse/development space accounting for the majority of activity, with just over 300,000 sf leased. Throughout 2023, just over 3.0 msf of industrial space was leased, including both renewals and new leases. Manufacturing space drove most of the leasing activity over the year, with a few noteworthy deals signed in the first half of the year.
Over 1.6 msf of industrial space delivered in the fourth quarter, bringing the yearly total delivered space to nearly 3.3 msf. Of all delivered space, warehouse/distribution makes up 3.1 msf, mostly concentrated in the Airport Corridor and Westmoreland County. With the large volume of recent deliveries, the industrial construction development pipeline has softened, with only 595,000 sf remaining currently under construction. The vacancy rate increased 30 basis points quarter-over-quarter, due mostly to the delivery of vacant space. This effect was most pronounced in the Parkway West Corridor, which has seen a 580-basis point increase in the vacancy rate since the third quarter of 2023.
“Despite a decline in overall office leasing over the fourth quarter, Class A, amenitized properties continue to experience demand and there are several upcoming highly anticipated projects that should generate an uptick in leasing activity over the next few quarters,” added Patterson. “As occupiers continue to adapt to evolving workplace dynamics, the office market continues to confront new challenges and rising vacancy rates. Asking rents in Pittsburgh decreased slightly for the second consecutive quarter, as the higher cost of borrowing is making it increasingly difficult for landlords to finance concessions – a trend that many office markets are experiencing nationwide.”
In the fourth quarter of 2023, overall new leasing activity experienced a slowdown, coming in at just under 320,000 sf. This value was mostly carried by a 100,000-sf lease signed by Giant Eagle at the tail end of the year. Pittsburgh’s overall office vacancy rate increased for the eighth consecutive quarter, currently sitting at 16.1%. The Central Business District has a vacancy rate of 19.2%, a near all-time high for the submarket.
Net absorption was negative in the fourth quarter, clocking in just under negative 500,000 sf. Net absorption for 2023 was just under negative 1.3 msf, with the Central Business District and Greater Downtown being the most affected submarkets.
While no new office supply delivered in the fourth quarter, the FNB Financial Center and Diamond Ridge are nearing completion, likely delivering in the first half of 2024. The University of Pittsburgh’s BioForge and Carnegie Mellon University’s Robotics Innovation Center (RIC), both situated in the Oakland submarket, broke ground. Though not traditional office space, these specialty properties will help develop the Life Science and Robotics markets in Pittsburgh, bringing office support jobs to the area.