Commercial real estate is the hottest segment of the construction market in 2014. Spec office projects are moving forward in strong submarkets across the city. Highmark’s medical mall has sparked construction of 3 new medical-related office buildings across Route 19. One of the developers, ACRES, is contemplating another new office building further north in the Warrendale area and there are 2 new 42,000 sq. ft. office buildings proposed at the Brooktree Center in Wexford. Burns & Scalo announced the signing of a 30,000 sq. ft. lease for the second building in its Zenith Ridge project at Southpointe. The developer is more than half leased there and plans to start the third 150,000 sq. ft. building next spring. Burns & Scalo has also leased half of its Concord project in the RIDC Park West.
These offices complement the spec construction at Southpointe Town Center by Horizon Properties, Elmurst’s Schenley Gardens in Oakland, Millcraft’s Gardens project downtown and the Three Crossings and 350 Fifth Avenue projects that Oxford is planning. Expect to hear more about the latter in August, along with possible news about the ALMONO site from Oxford and Millcraft.
The demise of the bricks and mortar retail store hasn’t occurred yet in the far northern and southern suburbs. Dynamic Building Co. is starting construction on The Street, a 132,000 sq. ft. retail town center Horizon is developing near the Meadows. Work is underway on the Field & Stream and Hobby Lobby spaces at the Old Mill, another 100,000 sq. ft. plus being developed by TSG Properties and Mosites Construction. In the north, WalMart is dipping its toe back in the water in Pittsburgh with a 150,000 sq. ft. store planned for McKnight Rd. at Blazier Dr. in McCandless and Dominic Gigliotti is proposing another neighborhood retail center in Cranberry, a 93,000 sq. ft. center similar to the retail portion of the Village at Pine. At the same time, Wexford is seeing a boom in small retail, with a Wendy’s, Auto Zone, Chick-fil-A, new branch bank and a handful of new tenants in the Wexford Plaza. And all of this is in addition to another 90,000+ sq; ft. of new construction at McCandless Crossing.
The other leg of the CRE boom in Pittsburgh is the apartment market. The Business Times reported yesterday that Ambling University Development Group would be presenting a plan to Zoning Hearing Board for 389 apartments at the former Allegheny Health Dept. site at 3333 Forbes Ave. in Oakland. That property is the site of a mixed-used hotel/apartment/office project proposed by MWK Development, a partnership of the Massaro Corp., Gary Wilson of LWE and Tasso Katselas.In the 2 weeks prior to that hearing. The ZHB will also hear plans for a new 7-story, 74-unit apartment Uptown from Castlebrook Development and for a 7-story, 32-unit building at 2607 Murray Ave. in Squirrel Hill being developed by AHI Development. During those same 2 weeks, adaptive re-use projects from Solara Ventures and Collier Development in the Strip will be reviewed. In total, the number of units under construction and in the pipeline tops 5,000.
One legitimate concern about commercial real estate in general is the push to build by investors rather than supply and demand. Fed Chair Janet Yellen addressed this in her comments to Congress yesterday about yield-chasing, even though she didn’t refer specifically to CRE. Most of the recent real estate bubbles have had an element of overzealous investing pushing construction near the top of the boom. Multi-family is the poster child for this right now, although other categories will attract investment soon, at least as long as interest rates remain low.
These dynamics aren’t as important in Pittsburgh. There remains an abundance of demand compared to supply in all segments of commercial real estate. While no one can predict the impact of the ethane cracker plant, its construction will likely kick start another surge in demand for commercial and industrial land and space. Bids are coming in this week for some of the first packages on the cracker, by the way, although nothing has been officially announced. That announcement may still come at a time when such news is politically advantageous to a gubernatorial race, but the real work seems to be moving anyway. Even without that catalyst, it’s a good time for commercial development.