Next Skyscraper? (Pittsburgh, Duquesne, Oxford: real estate, apartments, condos)

[shogun221]

To be honest, I don't see another skyscraper going up anytime soon.

Before Three PNC opened in 2010, Pittsburgh hadn't seen a new skyscraper in 22 years. PNC is the only company to build them here recently, and they'll likely be out of that game once their new HQ is completed.

If PNC isn't building skyscrapers, who will? Pittsburgh is neither gaining population, nor is it starving for available office space. Smaller companies and start-ups aren't going to be drivers of skyscraper construction, and the larger, more established companies aren't growing here. The only new players in the area are the energy companies involved with Marcellus Shale. If the price of natural gas increases in a sustained way and drilling becomes more established, we could see these companies maintain some sort of presence downtown. Whether this will result in a skyscraper is anyone's guess...

[Jrn14]

I'm confused isn't the new pnc building going to be 40 stories? Does that not qualify as a skyscraper?

[BrianTH]

Originally Posted by Jrn14

I'm confused isn't the new pnc building going to be 40 stories? Does that not qualify as a skyscraper?

The OP is asking about "next" after the PNC Tower.

[BrianTH]

Originally Posted by shogun221

If PNC isn't building skyscrapers, who will? Pittsburgh is neither gaining population, nor is it starving for available office space. Smaller companies and start-ups aren't going to be drivers of skyscraper construction, and the larger, more established companies aren't growing here.

There definitely is a need for more Class A office space Downtown. I linked this before but it remains helpful--it is the 4Q 2011 market report from Grubb & Ellis:

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

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 said, a landmark skyscraper is unlikely to be built on spec, and may require a tenant wishing to make a statement. Given that EQT already has its name on a Downtown tower, I don't think the energy industry is an implausible candidate, but it does remain to be seen.

[WILWRadio]

I think the days of building an office tower purely on the speculation that tenants will be found is over in most areas of the country. Unless the market demands a new building and the management company can pre lease a large portion of the building (at least 25%) to justify construction, it will be quite a while before downtown Pittsburgh has another major project under development.

It does seem like that so many companies want to expand in the suburbs now because these office parks have better access to free parking and often times easier access to highways for distribution of products.

[AaronPGH]

If it were to happen, I'd place my bet on a major portion of it being the convention center hotel. Add a mixed-use component to that and you are easily at 30+ stories.

[UKyank]

Originally Posted by BrianTH

There definitely is a need for more Class A office space Downtown. I linked this before but it remains helpful--it is the 4Q 2011 market report from Grubb & Ellis:.

What would your guess be for class A office space becoming scarce while B & C more plentiful?

[BrianTH]

Originally Posted by AaronPGH

If it were to happen, I'd place my bet on a major portion of it being the convention center hotel. Add a mixed-use component to that and you are easily at 30+ stories.

Smart bet! Now that you mention it, it seems like a no-brainer to add an office element to that project.

[BrianTH]

Originally Posted by UKyank

What would your guess be for class A office space becoming scarce while B & C more plentiful?

Here's my guess:

As I understand it, asking rents for lower-class office space have gone up along with Class A rents, and are still priced at a premium in comparison to the same class of office space elsewhere. The sorts of firms that are willing to pay that premium to be Downtown are increasingly ones which can afford to pay for Class A space, so existing Class A space is relatively scarce in relation to potential demand, and the interest in lower-class space at the new price points is relatively weak in relation to existing supply.

In other words, the prospective Downtown office tenant mix is moving upscale, and the existing mix of office space isn't a good match for that new emerging mix of prospective office tenants.

As I have mentioned before, assuming all that is correct, we should expect investments in more Class A space, and that is indeed happening. Meanwhile, there is also a shortage of residential units Downtown, so it would make sense to see some of the lower-class office buildings converted to residential--which is ALSO happening. Eventually this process should result in a mix of office space that better matches the new mix of prospective tenants, plus a bunch more much-needed residential units.

Edit: By the way, all that also means Downtown is becoming even more of a property tax bonanza than before: you've got increasing rents which means increasing market values, new investment which obviously increases total value, a related shift to a higher-value mix of uses which has a similar effect, and even some formerly tax-exempt properties being converted to taxable properties. All that is already going to help fund a tax break for most of the residential owners in the City, and another timely reassessment would likely do even more of that.

[MathmanMathman]

Originally Posted by WILWRadio

It does seem like that so many companies want to expand in the suburbs now because these office parks have better access to free parking and often times easier access to highways for distribution of products.

Plus it offers a reverse rush-hour commute. Atlanta has been putting up a lot of skyscrapers away from downtown to the point that we are developing edge cities.