Pittsburgh Office Investment Forecast
Pittsburgh Metro Area, 2018 Outlook
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Educated Workforce a Powerful Factor Drawing Jobs to Pittsburgh; Performance Maintains

High-tech growth commands tenant demand in Pittsburgh’s innovation district. A highly educated workforce supported by numerous colleges and universities in the area will fuel technology and healthcare industry growth in the Steel City this year. Expansions in these sectors have cultivated an innovation district in the Oakland neighborhood, bringing in new office, retail and residential space. Proximity to the University of Pittsburgh and Carnegie Mellon supply area companies with skilled labor, bolstering a high-tech startup scene and benefiting office space demand. The healthy pace of net absorption in Oakland has kept vacancy tight and among the lowest rates across submarkets metro wide. To meet the need for quality space, nearly half of this year’s completions will be located within the neighborhood. New supply will be well received as the majority of additions are pre-leased, further benefiting vacancy improvement in Oakland. Notable deliveries include the 150,000-square-foot building on Technology Drive that is fully leased.

Healthcare expansions buoy demand for medical office assets. Lower entry costs and sizable returns compared with other Northeastern metros attract buyers to Pittsburgh. Properties in downtown and Westmoreland County remain a popular target; average first-year returns there typically fall 50 basis points below the market average. Limited Class A inventory within Westmoreland County may provide buyers with value-add opportunities amid vacancy rates in the 12 percent area for Class B/C properties. Tight vacancy in the Oakland locale will garner investors’ attention though limited listings will require some individuals to expand their buying parameters. Pittsburgh’s strong medical sector may spur bidding for medical office buildings this year as UMPC and Allegheny Health Network expand. Roughly eight new facilities are planned, generating space demand for doctors and physicians.