These Pittsburgh neighborhoods saw the fastest office rent growth in the US – Technical.ly

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Nov. 2, 2021 4:37 pm
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A rendering of Liberty East, a new tech office building under construction.
(Courtesy image)
That’s per real estate services firm CBRE’s just-published Tech-30 2021 assessment, in which new data illustrates how the tech industry has affected office markets throughout the pandemic.
Topping the list of office rent growth in tech submarkets — neighborhoods or business districts within larger cities where the tech industry is concentrated — was the Oakland and East End area of Pittsburgh. Those neighborhoods, which house institutions such as Carnegie Mellon University and the University of Pittsburgh as well as business hubs like Bakery Square, saw office rent grow by 34.6% from the second quarter in 2019 to the second quarter of 2021.
Part of the reason for that is the quality of offices being built here, CBRE Vice Chairman Jeremy Kronman told Technical.ly.
“You have very high end, high quality buildings being delivered,” he added, referencing the Liberty East project as well as new buildings in Bakery Square, among other renovations. “The tenants taking them aren’t competing in Pittsburgh, they’re competing globally for talent. And the pandemic has accelerated the trend of you need to go where the talent is.”
Given CMU and Pitt’s status as top academic institutions for robotics, artificial intelligence, medical technology and more, Kronman says it only makes sense that these companies want to build offices in close proximity to students and new graduates from those universities. But while that might help explain the concentration of offices being built in Oakland and the East End, there’s more to the general trend of higher rent prices: As employers grapple with returns to in-person work amid the ongoing pandemic, many are looking for new ways to entice employees who are on the fence about coming back. Rather than risk losing talent in a labor market with record-high quit rates, businesses are bringing more amenities and creature comforts to offices than ever before.
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Pittsburgh is seeing the effects of that more than anywhere else. Even the Lake Union neighborhood in Seattle — the submarket with the second highest increase in office rent — had a growth rate significantly below Pittsburgh’s, at 24.1%. Kronman credits that to a game of catch-up that Pittsburgh’s been playing in tech over the last decade.
“We have a disproportionate number in the university sector of brand-new, state-of-the-art buildings,” he said. “And so we are disproportionately increasing.”
Where cities like Boston, Seattle and San Francisco saw explosive growth over the last several years, Pittsburgh’s tech prowess has taken a little longer to ripen. But the city might be on the precipice of that same level of job and company growth, according to the report.
Pittsburgh ranked 12th out of the 30 markets for high-tech software and services job growth, with a 10.1% growth rate for the current 2019 and 2020 period in the report. Only a few years ago, in the 2017 and 2018 period, that growth rate was a mere 1.6%, ranking 26th out of the 30 markets. In fact, Pittsburgh’s most recent job growth rate surpassed heavyweights like Silicon Valley, Boston, Philadelphia, Washington DC and more.
That kind of shift may seem alarming to those who leverage Pittsburgh’s notorious affordability and low cost of living to entice young professionals and new graduates to put down roots here. But Kronman pointed out that the report shows Pittsburgh still has one of the lowest rental prices per square foot despite these increases.
The average asking rent for offices in the city is $23.45 per square foot per year, while the same measure for the Oakland and East End region is $36.09. The top tech submarket in Silicon Valley has an average office rent of $113.28 per square foot per year, with Boston’s at $89.65 and Philadelphia’s at $44.01. So while Pittsburgh’s rent might not be as competitive with similarly sized markets like Charlotte or Indianapolis, it’s still far more economical than larger tech hubs.
“That’s one of Pittsburgh’s secrets,” said Kronman. “You get access to the talent and an absolutely wonderful cost of living and terrific state-of-the-art space to house these employees.”
So does that mean Pittsburgh could soon outgrow its emerging tech hub label? Kronman thinks that shift in perception might be in eyesight.
“Those [similarly sized] markets don’t have a Carnegie Mellon University,” he said, pointing to the fact the Boston has the Massachusetts Institute of Technology and the Bay Area has Stanford University. “That’s the crown jewel here — what Pitt turns out in medical tech, and CMU turns out in AI and software.” This new data, he continued, combined with that academic prowess and the success of the companies already here, can only spell success for Pittsburgh.
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