Another whack at redeveloping the Wholey's Cold Storage building (Pittsburgh: lower-class, 2014)

[BrianTH]

This is at least the third project I have heard of over the years:

Strip developer to be fishing for office tenants

But it sounds like this time they are actually in the process of converting the building (note the present tense):

The developer hopes to have the renovations completed by the start of 2014. Sampson is installing windows, facades, elevators, restrooms, lobbies and heating and cooling systems as part of the conversion.

[bradjl2009]

I remember they wanted to make that building condos or apartments a few years ago. What happened to that?

[BrianTH]

Originally Posted by bradjl2009

I remember they wanted to make that building condos or apartments a few years ago. What happened to that?

Apparently it was the same developer changing its mind:

Developer to get going on Wholey landmark - Pittsburgh Business Times

[bradjl2009]

Originally Posted by BrianTH

Apparently it was the same developer changing its mind:

Developer to get going on Wholey landmark - Pittsburgh Business Times

Oh that's interesting. Development of that building would be a good asset for The Strip whether they put in offices or apartments.

[BrianTH]

I wanted to see a residential project, but more office jobs is good too.

[robrobrob]

Originally Posted by BrianTH

I wanted to see a residential project, but more office jobs is good too.

I favor residential too. Another office building is great if it brings in a tenant from the burbs but if it just lures a tenant from Downtown that really isn't an improvement.

[BrianTH]

Originally Posted by robrobrob

Another office building is great if it brings in a tenant from the burbs but if it just lures a tenant from Downtown that really isn't an improvement.

Judging from office vacancy and rent trends Downtown, I'd guess it will be more the former. In fact as I see it, each of these new office projects in the Greater Downtown area potentially frees up some more underutilized lower-class office space for conversion to residential.

[gg]

Originally Posted by bradjl2009

Oh that's interesting. Development of that building would be a good asset for The Strip whether they put in offices or apartments.

I agree. That is an interesting building. It is quite large, but in need of repair. Hope it works out and gets a facelift.

[robrobrob]

Originally Posted by BrianTH

Judging from office vacancy and rent trends Downtown, I'd guess it will be more the former. In fact as I see it, each of these new office projects in the Greater Downtown area potentially frees up some more underutilized lower-class office space for conversion to residential.

PNC built a new building and their biggest tenant is Reed Smith. Most of the new projects are aimed at existing downtown tenants that need more space.

Rents are so high downtown that many corporations don't want to be downtown unless they have to. Odds are if they have to be downtown they already are.

Honestly, I can't think of a company that moved to town from the burbs. Think of all of the high profile moves. Google to East Liberty, American Eagle to the South Side, Westinghouse to Cranberry. Sure, UPMC "moved" to the USX Tower. My guess is that was because they had the cash and needed a way to spend it or wanted the PR that came with a downtown move. The only one that I can think of is Siemens in the Union Trust Building. I am not sure where it came from. Did they come from the burbs?

[BrianTH]

Originally Posted by robrobrob

PNC built a new building and their biggest tenant is Reed Smith. Most of the new projects are aimed at existing downtown tenants that need more space. Rents are so high downtown that many corporations don't want to be downtown unless they have to. Odds are if they have to be downtown they already are.

It is true only certain sorts of firms/offices need to be Downtown. However, the relevant industries are growing in Pittsburgh, and Class A office space in particular has gotten tight Downtown, with rents increasing. Hence I think there is likely plenty of demand for more new, high-class office space in the Greater Downtown area (note office space on the periphery of the Greater Downtown area may be able to price a little lower than in the Golden Triangle itself, which would broaden the market a bit).

So I probably should have clarified initially that I wasn't really thinking in terms of attracting existing tenants from the suburbs. Rather, I am thinking in terms of giving new tenants who would like to be in or near Downtown more options. Those new tenants could be expansions of existing business, new local businesses, businesses based elsewhere opening up offices here, or so on.

Edit:

Here is the 4Q 2011 market report from Grubb & Ellis:

http://www.grubb-ellis.com/SitePages...type=9&id=1228

Some relevant language:

The Pittsburgh Central Business District (CBD), which has been in the spotlight over the past several years, was again a hub of activity in 2011. . . . Tenants were equally as active. The University of Pittsburgh Medical Center (UPMC) absorbed another 267,000 square feet, bringing their total CBD lease commitment in U.S. Steel Tower to nearly 800,000 square feet; Federated Investors confirmed their commitment to the city by extending their 250,000-square-foot lease at 1001 Liberty Avenue. . . . Maintaining a trend that began at the end of 2007, Class A space continued to tighten, resting at a historical CBD low of 6 percent, while vacancies in Class B and C buildings climbed and added to an already plentiful supply of inventory. In response, Class A asking rental rates strengthened and landlords with quality space closed the year with a smile.

That sort of thing is why I think the natural evolution of the Greater Downtown area is to supply more new higher-class office space, while older lower-class office space can be converted to residential, hotels, and so on.

Incidentally, that report also details how various suburban markets (along with the Oakland/East-End) are experiencing low vacancies at the same time as all this is going on Downtown. So Downtown isn't cannibalizing the suburbs or other core markets, but rather is serving its own pool of demand.