Overall the Pittsburgh Industrial Real Estate Market continues to remain healthy with vacancy hovering around 5.6% and a minor decrease in asking rents over all of the sub-markets.
According to CoStar” lease volume in the fourth quarter of 2023 fell to the lowest level in more than a decade. Just 442,000 SF of space was leased in 23Q4, which is 64% below the average fourth-quarter total in the five years prior to the pandemic. In Q3 2024, the industrial real estate market in Pittsburgh experienced several notable trends:
1. Vacancy Rates: The overall industrial vacancy rate remained relatively stable, hovering around 5.6% throughout much of 2024. Class A industrial space saw slightly lower vacancies at around 5.3% by mid-year, down from 5.5% in Q2 2024, indicating steady demand for higher-end facilities.
2. Rental Rates: Every sub-market observed a slight decrease in rental rates. This reflects a slowing demand for logistics, warehousing, and manufacturing spaces, even as construction slowed down after record deliveries in 2023.
3. Leasing Activity: There was an uptick in inquiries, tours, and proposals for industrial properties in Q3, marking a continuation of the recovery seen earlier in the year. Transactions are taking longer to conclude with uncertainty regarding the economy and labor markets leading the concerns.
4. Construction: After substantial deliveries in 2023, new construction activity tapered off, with an 85% reduction in under-construction inventory compared to previous highs. This slowdown could impact the availability of new space in the coming quarters, with just 300,000 square feet under development.
5. Sales: Overall, sales of buildings greater than 20,000 square feet were muted with only 5 properties changing hands. Most notably, the University of Pittsburgh Advanced Research Center (UPARC) a 900,000 square-foot campus that is comprised of 53 buildings on 83 acres in the Northeast Pittsburgh Sub-Market which sold for $5,000,000.
Outlook: While demand remains high, industrial construction activity is beginning to taper off compared to previous years. Rising material costs, labor shortages, and higher interest rates have contributed to a slowdown in new developments. Nationwide, large distribution centers are being put back on the market for sublease as retailers like Home Depot are seeing challenges because of slower sales.