The Up-And-Coming Communities

DEVE LPittsburghOPINGSpring 2015 The Up-and-Coming Communities

NAIOP PITTSBURGH ANNUAL AWARDS A CONVERSATION WITH GOVERNOR WOLF YEAR-END MARKET UPDATES HIGHEST AND ® BEST USE... opportunities and constraints strategically transformed

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| Spring 2015

05CON President's PerspectiveTE NTS 28 NAIOP Interviews Incoming Gov. Tom Wolf and Outgoing PRA President DeWitt Peart

Feature 06 Developing Trend Pittsburgh’s Up-and- 39 How different is the “new” office. Coming Communities.

Four communities are working to be the next Eye On the Economy hotspot for development. 45

51 Office Market Update Newmark Grubb Knight Frank

55 Industrial Market Update PA Commercial Real Estate

60 Retail Market Update Colliers International

65 Capital Markets Update

71 Legal / 23 NAIOP Pittsburgh Annual Awards Legislative Outlook Making sense of the revised Mechanics Lien Law.

75 Benchmarks Pittsburgh is looking for more people.

79 Voices Economic development executives from the surrounding counties explain their “to do” list for Gov. Wolf.

81 New from the Counties

33 Developer Profile People / Events Highwoods Properties 90

www.developingpittsburgh.com 3

President’s Perspective

PUBLISHER emember Y2K? Do you recall Tony While I cannot say what the next 15 years will Tall Timber Group Soprano’s introduction to the pop bring I can tell you that 2015 is shaping up to www.talltimbergroup.com landscape? Hanging chads? It does be a great year for NAIOP Pittsburgh. not seem that long ago! EDITOR We already have presented monthly programs Jeff Burd RWho, as they were storing up batteries and on the economy and an update of Pittsburgh’s 412-366-1857 rations in anticipation of the apocalypse, commercial real estate market. Look for [email protected] could have predicted that fifteen years later upcoming programs on energy, advocacy, the Pittsburgh region would be where it is. development in and around sports venues, PRODUCTION Had you heard of Marcellus Shale in 2000? developing in the City of Pittsburgh, working Carson Publishing, Inc. Kevin J. Gordon Was your only reference to a “cracker plant” with institutions of higher education and [email protected] the Nabisco factory in East Liberty? Can you more. imagine that it was only fifteen years ago ART DIRECTOR/GRAPHIC DESIGN when Google outgrew their garage office and Our Annual NAIOP Pittsburgh Banquet is on Carson Publishing, Inc. moved into a new facility in Palo Alto with just March 5, 2015. We expect more than 700 in- Jaimee D. Greenawalt eight employees! Who among us could have dividuals in the commercial real estate industry forecast that hundreds of Googlers would call and economic development who will network CONTRIBUTING PHOTOGRAPHY Pittsburgh home in 2015 and that they would and celebrate this year’s award winners. Carson Publishing, Inc. be working out of that “cracker plant.” Rycon Construction We will have a robust advocacy initiative in NEXT Architecture Not even Punxsutawney Phil could have 2015 that will promote issues of importance Desmone & Associates Architects prognosticated the region that we have to our industry. Federal Tax Reform, transpor- Massery Photography become. One simply has to take a drive to tation, efficient and consistent permitting, The Elmhurst Group Horizon Properties Group Southpointe………or Pittsburgh’s East End…. advantageous regulations and legislation, Bus Burns & Scalo Real Estate Services or Cranberry to see the remarkable change Rapid Transit (BRT) and others. Wilkinsburg Community Development Corp. in our economic landscape. In the Pittsburgh CBD the residential population has doubled 2015 will also see the introduction of at CONTRIBUTING EDITORS since 2000. least two new opportunities for networking Anna Burd and education among NAIOP Pittsburgh Karen Kukish NAIOP Pittsburgh also was in a very different members�. place in 2000. ADVERTISING SALES I need your help to make 2015 a great year. I Karen Kukish Membership was 198. urge you to get involved in NAIOP Pittsburgh 412-837-6971 and help us to bring quality education, [email protected] It was the first year for Night at the Fights. In networking and advocacy to our members. the intervening years NAIOP Pittsburgh has MORE INFORMATION: helped to raise more than $500,000 for area Enjoy this, our sixth edition of Developing DevelopingPittsburgh is published by non-profits. Pittsburgh. Tall Timber Group for NAIOP Pittsburgh 412-928-8303 www.naioppittsburgh.com Bill Hunt was one year away from becoming Sincerely, NAIOP Pittsburgh President and twelve years No part of this magazine may be away from becoming the Chairman of the reproduced without written permission Board of NAIOP Corporate. A position that by the Publisher. All rights reserved. would bring much attention to the Pittsburgh region as he travelled throughout the country. This information is carefully gathered and com- piled in such a manner as to ensure maximum De Peart had just completed two years as accuracy. We cannot, and do not, guarantee NAIOP Pittsburgh President. He would soon either the correctness of all information furnished leave his job in development and assume vari- nor the complete absence of errors and omis- sions. Hence, responsibility for same neither can ous positions within the Allegheny Conference be, nor is, assumed. on Community Development ending in his tenure as Executive Vice President, Economic Keep up with regional construction Development and Public Affairs; President, and real estate events at Pittsburgh Regional Alliance and President, www.buildingpittsburgh.com Greater Pittsburgh Chamber of Commerce. It is fair to say that De has contributed as much as anyone to our region’s transformation and the success of NAIOP Pittsburgh. We wish him well in his new position as President and CEO Brian Walker of the Downtown Austin Alliance. NAIOP Pittsburgh President

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Bakery Square is the linchpin development that brought employment and new residential to transform East Liberty. Photo courtesy Walnut Capital Partners. Pittsburgh’s Up-and-Coming Communities

6 DEVELOPINGPITTSBURGH | Spring 2015 f e a t u r e

Imagine what your reaction would have corridor and sporadic residential infill for been to an out-of-town friend who told at least that long, but on a very limited you they were going out to dinner near scale. A variety of factors combined Penn Circle ten years ago. Or how you to create swelling demand for living, might have advised a business colleague working and playing in these formerly who wondered what your opinion was forgotten or blighted neighborhoods, of buying a storefront or two on Butler mostly within the past five years. Street near the 62nd Street Bridge in 2000? Perhaps the tipping points were Whole Foods or certainly Bakery Square in East The perception of these two neighbor- Liberty and the construction of the new hoods – East Liberty and Lawrenceville – Children’s Hospital in Lawrenceville/ has been radically transformed by invest- Bloomfield. Perhaps it was just time in ment in development and a very different both communities for the redevelopment attitude about urban lifestyle. A variety efforts and public investment to pay of developers had plans for projects – a off. Whatever pushed East Liberty and few even occurred – in East Liberty as far Lawrenceville from pioneering to hot, the back as the mid-1980s. Lawrenceville be- two neighborhoods are places people are gan to get redevelopment of its business waiting in line to inhabit and visit.

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Pittsburgh is home to more than heyday. Andrew Carnegie built his of Americorps, a Federal service its fair share of East Liberty’s. The first steel mill there, and later his program that endeavors to improve collapse of Pittsburgh’s industrial first free library. The city is home to the lives of disadvantaged Americans. base and the gradual shift to the the Edgar Thompson Works of U.S. Working with young people to help suburbs over several generations left Steel, the town’s principal employer, them get high school equivalency many small towns and inner core where 5,000 people once worked. accreditation, Fetterman was at- neighborhoods without an economic The Thompson Works still operates tracted to Braddock and moved there base. Most of them will continue but employs slightly more than ten permanently. He was elected mayor to struggle for some time but many percent of its former workforce. of Braddock in 2005 and began a of these communities are seeing series of programs aimed at attract- the tide begin to turn. For a few of The 90 percent reduction in steel- ing people to Braddock and creating these places, a time in the sun seems workers multiplied out to virtually all a new identity for the community. possible again. other aspects of Braddock’s community. At the 2010 census, roughly Fetterman founded Braddock Redux Braddock 2,500 people lived in Braddock. There to improve Braddock through job op- has been a similar decimation of portunity preparation and initiatives Perhaps the most widely-known of the businesses in town. The average to promote art and sustainability. the communities that are down on house price fell to $6,000. As might He bought the First Presbyterian its luck is Braddock. A geographi- have been predicted, crime followed Church to renovate into a community cally small town perched above the the poverty into Braddock. center. Fetterman purchased other Monongahela between two bends buildings in Braddock to renovate or in the river, Braddock is a prototypi- The plight of Braddock attracted an occupy as havens for resident artists. cal steel town. Roughly ten blocks unlikely advocate in 6’ 8” Harvard- In 2006, Braddock Redux leased the deep and 15 blocks long, Braddock educated John Fetterman. In 2001, 47,000 square foot former Ohringer was home to 20,000 people in its Fetterman came to Braddock as part Department Store to offer free studio space to artists as a litmus test for the viability of Braddock as an artists’ community. The building quickly Community-based efforts to reverse Braddock’s filled up and in 2009 Braddock Redux decline sparked Trek Development to build the purchased the building to ultimately Overlook, a townhouse neighborhood on the renovate it. site of the former Braddock Hospital. Photo ©2014 Ed Massery. It was during the recession that Fetterman became a nationally-known figure. Appearing on the Colbert Report, Fetterman used the forum to share a vision of a future Braddock that attracted the attention of the New York Times and the Guard- ian, as well as Levi Strauss & Co. The latter made a donation to the community and featured Braddock in a 2010 commercial campaign. After re-election in 2009, Fetterman led the fight to convince UPMC to keep Braddock Hospital open. The hospital system did not change its plans but the community’s efforts weren’t fruitless. With the support of then-County Executive Dan Onorato, Braddock won a deal that gained the property and UPMC’s aid to redevelop the hospital site.

It’s not hard to make the argument that the hospital’s departure was a turning point in Braddock’s revitalization. The town had as few as two open businesses prior to UPMC’s deci-

8 DEVELOPINGPITTSBURGH | Spring 2015 f e a t u r e Wilkinsburg is ready for investment. sion to shutter the hospital. There was no vibrancy to lose. And while Braddock’s civic leaders worried about the impact of the loss of the hospital, it offered a development opportunity that has been a significant first step forward.

Trek Development won the rights to develop the former hospital site and in 2012 began construction of 24 town- homes in a neighborhood called the Overlook. Last year Trek followed through with construction of a 20,000 square foot commercial building at 501 Brad- dock Avenue, which has already attracted tenants. The project’s architect, Ken Doyno of Rothschild Doyno Collaborative, sees how the opportunity has changed Braddock and its leadership. 38% increase in real estate sales “Five years after the hospital closed Wilkinsburg experienced a last you have a community that feels good year. The Wilkinsburg CDC leverages this positive growth by about itself and is turning itself around,” promoting available properties, connecting developers to he says. Doyno speaks of the crime resources, and supporting investors beyond the sale. and poverty that created the negative atmosphere in Braddock. “The leaders of Braddock are saying we’re not going to Learn more at wilkinsburgcdc.org. go there anymore. We’re going to heal ourselves and we’re going to ask others Feb. 2015.indd 1 2/4/2015 1:18:01 PM to walk with us.”

Providing affordable housing in transitional communities is part of Trek Development’s mission. Trek’s CEO, Bill Gatti, says that the Braddock project was attractive to him because of the convergence of several positive factors.

“There was political leadership from Dan Onorato and Mayor John Fetterman. There was a good site central to the community and there was funding available, with the RACP grant,” Gatti says. “Without all three of those things we would not have been able to accomplish the project.”

Activity at the commercial building has gone about as expected. Allegheny Health Network signed a 15-year lease to take the second floor for an urgent care center. Rep. Paul Costa located his office to the building. There are 3,000 square feet of retail available, although Gatti says that an announcement of a corner tenant – “one that would not be expected for this location” – is immi- nent.

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As compelling as the turnaround spirit is the people of Braddock deserve a chance nearby Westinghouse plants and the fact in Braddock, there remain many ob- for better care or a better place to live, that transportation systems flowed from stacles to a true revitalization. There is the answer is yes. Braddock has hit bot- Pittsburgh through Wilkinsburg. effectively no rentable commercial real tom and is on the way up. We’re happy estate in the business district. The com- to be part of that.” The 1980s were as tough on Wilkinsburg munity is still plagued by the kinds of as on many small communities in South- crime that come with poverty, although Wilkinsburg western PA. Population fell. Shopping residents and police are seeing improve- slowed. The tax base declined dramati- ments. And the public education options Like Braddock, the Borough of Wilkins- cally, which had a debilitating effect on are still limited and too unappealing to burg was home to a surprising number of the school district. As prosperity waned attract families in any scale. people in its best times and its down- and poverty began to spread, the kinds town was a shopping district for many of problems emerged that affect most Braddock’s best hope is in becoming a communities. In the late 1950s, there declining cities. destination again. Thus far, there appears were 37,000 residents in the 2.2 square to be traction for the initiative to attract miles of Wilkinsburg, earning it the Wilkinsburg’s finances caused it to fall artists. The town has lost many of its distinction of being the most densely- under the Commonwealth’s Act 47 over- commercial structures but what remains populated borough in America. Unlike sight until 1990. While the borough has are inexpensive buildings with lots of Braddock, however, Wilkinsburg was avoided falling back into that oversight, opportunity to renovate and the artist not an employment center. Its popula- officials had a difficult time managing its in residence needs much less renovation tion growth was attributable to the two finances until the past few years. than a full-service commercial building. Establishing an identity will make The cumulative impact on the community Braddock a place to live and work. Good has been damaging. Over 800 properties things will inevitably follow that. For or parcels are vacant in the borough. the rest of the decade at least, however, The business district has 154 properties, the town will be in the early stages of of which 47 are vacant. As the taxable revitalization. entities disappeared the burden on those that remained went up. Wilkinsburg “There is a continuum in transitional has the highest millage rate in the communities. East Liberty is a transitional county and second highest in the state of community but it’s further along the con- Pennsylvania. It’s an impediment to new tinuum than Braddock is,” notes Gatti. investment in the commercial district. “If the question is do I think Braddock Pioneers have been able to purchase and reno- The community has a LERTA in place will be the next East Liberty, the answer vate homes. This house on Whitney Street sold but leaders are looking to improve that is not anytime soon. If the question is do for $350,000. assistance with a more aggressive tax abatement program.

At the same time, Wilkinsburg has undeniable assets. Penn Avenue is an enviable route for consumer businesses, as 36,000 cars pass through Wilkinsburg each day. The borough has a stop for the East Busway at two locations, with 1,500 passengers embarking and disembark- ing daily. Some 25,000 commuters pass Wilkinsburg on the Busway.

Today, a renewed sense of cooperation exists between the borough leadership and Wilkinsburg’s civic leaders. A Community Development Corporation is having an impact on the revival of Wilkinsburg, attracting small businesses and assisting homeowners to find and improve homes in Wilkinsburg’s tree- lined neighborhoods. The executive director of the Wilkinsburg CDC is a The Wilkinsburg train station is being positioned for restoration and repurposing as commercial Point Park graduate named Tracey Evans, space adjacent to high-volume commuter counts. Rendering by Sarah Rumbaugh, PLA. who was designing sets for the theaters

10 DEVELOPINGPITTSBURGH | Spring 2015 1975-1984

through the Decades 1985-1994

Celebrating 40 Years of Building Excellence

2005-2015 1995-2004

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partners, allowing for the funding of an executive director and staff. Tracey Evans was hired to lead the CDC in June 2010.

Evans doesn’t sugarcoat the obstacles, citing the tax structure and school district’s troubles as challenges to overcome. But she and community leaders understand that redevelopment requires winning a lot of incremental battles. Civic leaders had to influence the Borough to get its financial house in order. The CDC has grown its resources so that it can research and apply for access to more funds for helping businesses or residents acquire and renovate properties. Rezoning was needed for the business district to allow for commercial uses – like live/work space or residential over storefronts – that weren’t in vogue in decades past.

The hard work in the trenches has begun Wilkinsburg’s business district is beginning to at- to pay off. Over the past four years, 35 tract interest again. properties have been sold and 12 vacant storefronts have been occupied in the The hard work business district. There are green shoots throughout the city when she backed in the trenches of recovery on the residential side too. into community development. Real estate values are going up. The has begun to pay single-family home sale prices are rising. Evans got involved with the community The median home price is up. in 2004 during a dispute over opening off. Over the past pedestrian tunnels to the East Busway four years, 35 Inquiries from businesses are also on and an effort to improve a neighborhood the rise. When asked what is attracting park. Her involvement grew from project properties have the interest, Evans replies, “Location, to project until she was asked to chair an been sold and 12 obviously. We are getting a lot of busi- economic development committee. nesses that are coming from East Liberty vacant storefronts or Lawrenceville, people who are getting “I really wanted to do beautification. I have been forced out as rents go up. We want to knew nothing about economic develop- see more mom-and-pop businesses and ment,” Evans says. The main goal was occupied in the ideally maintain that, not be another to get an economic development grant business district. place where [businesses] stay for a while so that we could have the same things and then move out when rents go up.” everyone else in the city had: banners, There are green litter receptacles and trees. We started shoots of recover y There are two anchor projects in plan- the process of applying for Main Street ning that could put strong commercial grants in 2008 and that’s what the CDC on the residential properties at either end of Wilkinsburg’s came out of.” main drag. One is the former Penn-Lin- side too. Real coln Hotel site. The hotel was an historic Pennsylvania’s own financial woes in estate values are property that was dilapidated and in 2008 prevented additional Main Street need of $16 million in repairs. Pittsburgh grants and Wilkinsburg was denied. The going up. The History & Landmarks Foundation – which CDC nonetheless successfully pursued a single-family home has poured $36 million in investment Neighborhood Partnership Program and into Wilkinsburg over the years – had with the help of gifts from TriState Capi- sale prices are spent some funds shoring up the building tal and PNC Financial Services Group, rising. The median but ultimately decided to demolish it as began to do rudimentary marketing it was unsafe. PHLF will look for partners and assistance for the business district. home price is up. to develop the property. Those efforts attracted the attention and help of other community and corporate

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At the west end of town is the former decade. The Hill has seen several of its the construction of a new arena was the railroad station, which sits by the East crime-plagued public housing projects lynch pin for what may finally be the Busway station and is envisioned as a replaced with Hope VI communities that revitalization of the Hill District. great prospect for transit-oriented busi- offer subsidized homes for sale and rent nesses. WCDC has obtained a $225,000 that are architecturally pleasing and The Penguins' move into the CONSOL grant and is seeking another $225,000 located on great sites. Businesses in Energy Center in 2010 sparked a surge in to restore the exterior and demolish the technology or that serve the college or redevelopment on a one-off scale along interior. The project will cost $1.6 million hospital markets have been locating in Fifth Avenue. The move also freed up the to complete. Uptown, attracted by the cheap rent and 28 acres of the former Civic Arena site interesting spaces. The Hill’s juxtaposi- for redevelopment. The Arena, which On January 13, 2015 the Department of tion between the employment centers of inspired dispute from preservationists Community and Economic Development Oakland and Downtown has made it the and some architects about its demolition, and Pennsylvania accepted Wilkinsburg natural expansion point for businesses inspired few positive emotions from the into the Main Street Program. This that want a foot in both places. Hill community. Once the demolition program will provide Wilkinsburg with occurred, the opportunity unfolded to more financial and technical resources. Cut off from Downtown by the Civic reconnect the neighborhood with the Wilkinsburg businesses located within Arena some 60 years ago, the Hill’s busi- Central Business District and to extend the designated downtown area will be ness district was displaced or died. Some the revitalization of Downtown east of eligible to apply for Enterprise Zone Tax 8,000 residents were displaced by the the Crosstown Boulevard. Credits through the Neighborhood As- demolition of the Lower Hill to prepare sistance Program and Wilkinsburg will be the Arena site. As fate would have it, Coincidental to the events surrounding eligible to apply for and receive façade the two arenas was an organic rede- grants and other funding. velopment effort that was unrelated to the Penguins. South Side had been a “We are starting to get inquiries from Coincidental neighborhood for pioneers and seekers developers who have been working in East of inexpensive commercial space in the Liberty or South Side, asking for tours or to the events 1990s but by 2010, it was no longer a plans,” Evans says. “We’re moving away surrounding bargain. Artists and pioneering small from subsidized development to folks that business people began to look across the are looking at [Wilkinsburg] on its own the two arenas Monongahela to the south side of the merits, because it could be the next hot was an organic Hill District, the Uptown neighborhood, place. I think that’s a great sign.” for up-and-coming space. And Oakland’s redevelopment lack of available space created a similar The Hill District effort that was push to the west. Even before a major redevelopment of the Lower Hill could Pittsburgh’s Hill District, including the unrelated to the begin, the Uptown area had become a Fifth/Forbes corridor uptown has been gap of perhaps ten blocks between busi- on an upward trend for much of the past Penguins. nesses serving Oakland and Downtown.

U.S. Steel’s new headquarters building will kick off a decade of redevelopment in the Lower Hill District. Rendering courtesy Clayco Corp.

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In the post-recession years, Duquesne mercial/entertainment; 632,000 square may be, there is an organic inertia that University began buying some of the feet of office and 150 hotel rooms. will continue to offer opportunities for storefront buildings along Fifth and Also included in the development is a the Hill District to take off as a residen- Forbes as well, as it expands to the concrete “cap” that spans the Crosstown tial and commercial district. north off the Bluff. Pittsburgh Gateways Boulevard/I-579, allowing for pedestrian acquired the former Connelley School on access and park space that links the new A bus rapid transit system could link Bedford Avenue and began its conver- Lower Hill directly to Sixth Avenue. Plans Oakland and the eastern neighborhoods sion to the Energy Innovation Center, also call for re-opening Wylie Avenue with Downtown via easy, quick access. an expansion and renovation that will through the center of the development, The transit stops along the route would ultimately cost over $50 million. On connecting with Washington Place and become magnets for retail and clusters February 11, Penn State announced that into Downtown. of housing units. it was leasing 11,000 square feet on the first floor of the 185,000 square foot The project has not been without The completion of the Addison Terrace building to use for community outreach controversy, beginning with the demoli- neighborhood at one of the highest and research activities. Leases from tion of the Civic Arena right on up to points on the Hill will place hundreds Carnegie Mellon, University of Pittsburgh a final negotiation with Hill community of consumers adjacent to the Centre and Duquesne University are anticipated leaders in January. Neighborhood leaders Avenue business district, with its new to follow. are concerned about employment during Shop ‘n Save and storefronts near the construction, gentrification, availability Kirkpatrick Street intersection. There was bubbling activity on a small of affordable housing and a general scale, including several new residential mistrust that something will be done Progress has come painfully slow to the projects like the conversion of Fifth equitably for the Hill District. For their Hill District but there are catalytic factors Avenue High School, and the Hill was part, the Penguins intend for the project accelerating the economic activity on primed for something big when the to fulfill its civic obligations. many fronts. There are still problems Penguins announced the first big deal of – both perceived and real – with neigh- the Arena redevelopment project. “The redevelopment of the former Civic borhood schools and crime. Pittsburgh’s That call came on November 24, 2014, Arena site will be transformational for urban neighborhoods have been increas- when U.S. Steel announced that it had the entire region on many levels. It will ingly attractive, especially to the younger engaged Clayco Corp. to develop and reconnect the Downtown, Uptown and demographic group that is growing in design its new 268,000 square foot Hill District communities that have been number in the region. These younger headquarters building along Centre separated by the Crosstown Expressway professionals are more pioneering and Avenue and Washington Place. The for decades; it will incorporate best have more experience living in diverse project would be the cornerstone of the practices in sustainable development and communities than the prototypical new development, bringing 800 employ- become the first LEED-ND development Pittsburgh resident. What didn’t work in ees – 800 consumers – to the portion of in Pennsylvania; and it will create over years past has a much better prospect for the property closest to Downtown. U.S. 3,000 jobs and generate over $20 million success in the coming decade. The Hill Steel’s building should be the catalyst in tax revenues for the region,” says may not become Pittsburgh’s next hot for the Penguins to kick off the next Travis Williams, COO of the Pittsburgh neighborhood but the community will building, one of the low-rise mixed-use Penguins. become a destination for those seeking buildings that would attract retail and to be close to the action. hospitality users who would benefit from “Beyond that, it will provide the greatest the proximity to a major corporate entity. economic benefit to one community by McKees Rocks Clayco expects to start construction on a private developer in the history of the U.S. Steel’s project in the fall. region by offering job, business, hous- McKees Rocks has arguably the lowest ing and wealth building opportunities profile of the communities engaged in Prior to the start of the U.S. Steel proj- directly to Hill District residents,” Wil- turnaround but it also has more momen- ect, developer McCormick Baron should liams continues. “The cornerstone of this tum towards revitalization. The Ohio begin work on the first of 1,188 units of effort is a tax abatement program for the River community has also experienced housing, most likely a mix of apartments former Civic Arena site that will gener- population decline, although to a lesser and townhouses like those built in the ate over $20 million for the Middle and degree, and has seen its Main Street newer construction in Bedford Heights or Upper Hill District. All of these efforts become riddled with vacancy. Unlike the Oak Hill neighborhoods. will lead to further investment in the Hill other neighborhoods above, however, District community and its residents.” McKees Rocks is larger and has the In addition to the residential component, opportunity to use all of the advantages what the Penguins have proposed and Redevelopment of the Civic Arena site that those communities have in part. taken through the Planning Commission will be a decade-long series of projects. and Zoning Hearing Board at the city is In the interim, there will be another The Rocks has an industrial base that is a mixed-use development with as much downturn, the severity of which cannot stable and growing. Its infrastructure as 248,800 square feet of retail/com- be predicted. As impactful as the project and proximity are also excellent, espe-

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cially now that I-79 has become such a vibrant connection to the emerging industries and the Ohio River connects JACKSON’S POINTE COMMERCE PARK to where the next industrial boom is Butler County, PA likely to occur. After some short-term inconvenience, McKees Rocks will be linked to the City of Pittsburgh by Phase II Retail Pads Available a five-minute drive down a greatly improved West Carson Street. It is in the process of branding McKees Rocks and Stowe Township as an entertainment center that complements the city’s venues. And, after decades, the railroad is returning to McKees Rocks full scale.

The railroad was the driver of prosperity in McKees Rocks. The town was the home of Pennsylvania & Lake Erie Along Route 19, directly off the Evans City exit of I-79 Railroad (P&LE) maintenance repair Less than 30 minutes north of the City of Pittsburgh Less than 10 minutes north of the PA Turnpike access facility and rail yards. Around it were supporting industries like Pressed Steel  Flex-Space Facility  Office Center Car Company, Lockhart Steel, and  Distribution Center  Light Assembly & Processing other companies that supported those businesses. At its peak P&LE employed For more information call the Real Estate Group at 412-422-9900 10,000 and Pressed Steel employed www.buncher.com 6,000 people. Those industries provided the customers for a supply chain, restaurants, contractors and raw materials. McKees Rocks population peaked at 18,000 in 1930.

The loss of the P&LE facility had a ripple effect on employment and residential property. McKees Rocks suffered declining prospects like many small communities in the first ring outside the City that were anchored to industry. What was different in McKees Rocks was that there were a number of small to mid-size businesses that remained operating in McKees Rocks irrespective of the fortunes of the loss of the main employers. These companies – many of whom serve the construction industry – were in McKees Rocks because of the proximity to Pittsburgh and the relatively inexpensive real estate costs.

Efforts to revitalize McKees Rocks coalesced with the founding of the McKees Rocks Community Development Corporation (CDC) in 2003. The CDC received a real boost when it received a Strengthening Communities Partnership grant of $500,000 per year as part of the state’s Neighborhood Partnership Program. The grant assured funding for six years, beginning in 2004. The grant

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recognized McKees Rocks’ potential for turnaround and the efforts to that date.

The plan for revitalizing McKees Rocks focused on areas of opportunity within the borough and neighboring Stowe Township. The highest-priority area of opportunity was the lower portion of McKees Rocks, which had a lot of inexpensive and underutilized land. This area included the compact downtown and the shopping plaza adjacent to it. The strategy was to invigorate the strip mall with a new owner and new stores.

Trinity Development was the owner that was successful in acquiring the McKees Rocks Plaza with the plan of re-branding it with new anchors. Craig Rippole, Trinity’s president and a McKees Rocks native, says that the prospects for the center were better than expected.

“What’s attractive about McKees Rocks is what was attractive 100 years ago. It’s a great location,” says Rippole. “If you drive through McKees Rocks you

16 DEVELOPINGPITTSBURGH | Spring 2015 f e a t u r e

see lots of pizza shops and food shops space. While the developer was manag- and you wonder how they stay in busi- The plan for ing the environmental assessment and ness; but if you drive around more you cleanup, the property received two major see all these small companies there. The revitalizing shots in the arm. employment base is surprisingly strong. When you think of the fundamentals McKees Rocks In October 2013, freight giant CSX that retail experts look at to evaluate an focused on areas Corp. announced that it was going to area, McKees Rocks met them.” build a $50 million intermodal facility on of opportunity roughly 60 acres of the Stowe Township Trinity Development attracted a new Aldi within the half of the P&LE site. The completed grocery store and Rite Aid and rebranded facility would not be a big employer the center as Chartiers Crossing. The de- borough and – creating perhaps 80-100 permanent veloper also responded to another, more neighboring jobs on site – but the facility would be a extensive project that was proposed in magnet for support businesses. a strategic property down river from the Stowe Township. shopping plaza. The highest- A year later, movie company Island Studios announced that it would be Beyond the residential and shopping priority area of the anchor tenant in the Rocks Indus- district is the former P&LE yard. The opportunity was trial Park. Housed in a converted Island property spans 105 acres between the Avenue warehouse since 2008, Island Chartiers Crossing and the Neville Island the lower portion Studios intends to build a new 80,000 Bridge and lays half in McKees Rocks and square foot building later this year. half in Stowe Township. McKees Rocks of McKees Rocks, CDC looked to attract a developer for which had a lot Taris Vrcek, executive director for what it called Rocks Industrial Park. In McKees Rocks CDC, says they are also June 2011, Trinity Development an- of inexpensive working with a few local manufacturers nounced plans to develop the McKees and underutilized who are experiencing great growth and Rocks portion of the site with about looking to expand as tenants for the 460,000 square feet of Class A industrial land. Rocks Industrial Park. The success of the

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industrial properties is a critical piece of progress for the redevelopment of McKees Rocks, but Vrcek says there has been progress on another front that he hopes will be even more catalytic to his hometown.

The crowning jewel of the CDC’s efforts prior to the advances at the P&LE yards is the new Father Ryan Arts Center in downtown McKees Rocks. The center opened in 2008 and is the de facto community center for the town. It’s also the first piece of a plan to anchor entertainment to McKees Rocks.

Vrcek and community leaders see an opportunity to create venues for live music and sight lines, just the experience of The Roxian Theater is being renovated as a and drama that will make a niche for the being in an historic theater,” explains venue for up-and-coming national acts. arts in McKees Rocks. In 2013, Aaron Vrcek. “We have been working with a Stubna re-opened the Parkway Theater after renovating the venue. Stubna shows independent films, kids movies, potential private partner and looking and has an apprenticeship program to make an announcement in the first working with the local high school. The The Roxian quarter of 2015. That private partner Parkway is an anchor for the Broadway is also an equity partner and will be downtown district, which attracted the opened in bringing to the table the majority of the 1905 Eatery, a restaurant that opened 1929 and was funding for the project. last year. converted to a “What we’re hearing from artists is that The key piece of this arts/entertainment banquet facility they want to be in that kind of intimate strategy is the restoration of the Roxian historic setting that is authentic,” Vrcek Theater. The Roxian opened in 1929 in 1980 but the continues. “We’re offering something and was converted to a banquet facil- balcony, stage and different here and we think that’s going ity in 1980 but the balcony, stage and to appeal to artists.” theater structure remained intact. The theater structure plan is to reopen it as a 1,500-seat live remained intact. “We’re building a venue size niche that music venue. Architects Westlake Reed is specific and unique in Pittsburgh. Leskosky are working on plans for the $6 The plan is to Right now there’s a gap between Mr. million restoration. reopen it as a Smalls at 600 seats and Stage AE at 3,000,” explains Jeb Feldman, manager “The Roxian fills a void in Pittsburgh 1,500-seat live of economic development for the CDC. for that mid-sized concert venue and “There are a lot of bands that kind of an environment where you have grand music venue. fit in that range as their careers and theater experience with the acoustics following are growing. In terms of this

www.developingpittsburgh.com 19 f e a t u r e

The Father Ryan Arts Center was the kickoff of re-making McKees Rocks as an arts and entertainment hub.

being a music venue, we consider it a developing the music scene,” says Vrcek. a special one that’s unique and has its regional draw and fitting into the overall “This smaller music venue just opened own attributes.” Pittsburgh music market.” up last year that we helped put together called Dead Horse Music Cantina, which Pairing an arts and entertainment vibe One of the difficulties in redevelopment is about a 200-person venue. The with a new industrial economic base is a of “first ring” communities is finding a Parkway Theater has live music on Friday recipe for success that most communities differentiating factor that will attract nights. So can we be Pittsburgh’s Beale would relish having. McKees Rocks prox- both residents and businesses. The Street, that music center downtown imity to Pittsburgh’s lifestyle amenities is suburbs that grew after World War II that drives a lot of that experience? among the best in the region. The com- made each inner ring closer to Pittsburgh You’re starting to see that kind of arts munity lies along rail infrastructure that somewhat obsolete, but there is a same- and entertainment vibe building for the makes it an ideal candidate for extension ness to the suburbs that is no longer as downtown and creating an identity for of a regional transit system. There are a appealing. McKees Rocks is looking to the downtown.” lot of factors that are lining up in favor capitalize on its characteristic advantages of McKees Rocks for the next decade. to create an identity that will be a draw “No community benefits from becoming The key missing ingredient seems to be for families and residents looking to be just like another community so it’s about awareness of the possibilities. someplace different. highlighting and enhancing the uniqueness of the place.” Feldman agrees. “I “The biggest hindrance to Pittsburgh’s “Each neighborhood has its own look think it’s really important and key for us growth is a lack of shovel-ready sites,” and feel. That’s what makes them special in our redevelopment efforts to make notes Rippole. “McKees Rocks has land and unique. Each has its own advan- sure that we are enhancing the archi- that is flat and ready to develop. People tages. I think with Hollowood Music tectural uniqueness of the place, saving just haven’t put it on the radar yet.” being here, with the Father Ryan Arts the older buildings and not becoming DP Center opening, with the Roxian, we’re another neighborhood in Pittsburgh but

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NAIOP AWARDS

Best Build-to-Suit

Ansys Corporate Headquarters, Zenith Ridge 100 Zenith Drive, Southpointe The project is new construction of five stories and 186,000 square feet. The site-cast tilt-up building was completed in fall 2014. DEVELOPER: Burns & Scalo Real Estate Services CONTRACTOR: Clayco Construction Corp. ARCHITECT: Forum Studio TENANT’S ARCHITECT: NEXT Architecture

Best Renovation

912 Fort Duquesne Boulevard, Pittsburgh The project is a renovation of a ten-story, 132,366 square foot Class A office building, which was renovated in 2013 and 2014. DEVELOPER: The Elmhurst Group CONTRACTOR: LYN Development ARCHITECT: Strada Architecture LLC

Best Mixed Use

Southpointe Town Center Southpointe II The multi-building mixed use development includes 112,669 leasable square feet of office over retail space. The project was completed in August 2014. DEVELOPER: Horizon Properties CONTRACTOR: Rycon Construction ARCHITECT: Cooper Carry & Associates

www.developingpittsburgh.com 23 NAIOP AWARDS

Best New Park

Pittsburgh International Business Park Cherrington Parkway Extension, Moon Township Begun in 2012, Pittsburgh International Business Park will have six flex office buildings totaling 360,000 square feet. As of February 2015, three buildings of 159,000 square feet have been completed and a fourth, 53,000 square foot building is under construction. DEVELOPER: Continental/Chaska LLC CONTRACTOR: Continental Building Systems Inc. ARCHITECT (Buildings 100-110-210) WTW Architects ARCHITECT (Building 300) NEXT Architecture

Best Renovation – Industrial

Transformation of the Heppenstall Building for Carnegie Robotics 4501 Hatfield Street, Pittsburgh The project was a renovation of 50,560 square feet of a former mill, completed in September 2014. The $2.5 million renovation included new HVAC, under-floor hot water radiant heating, new electrical service, structural steel, reconstructed concrete and epoxy-coated floor, storefront, and new roof. DEVELOPER: Regional Industrial Development Corp. CONTRACTOR: Franjo Construction ARCHITECT: Desmone Architects

24 DEVELOPINGPITTSBURGH | Spring 2015 NAIOP AWARDS

Supporter of Development picture. All you have is a rendering, “Since I've been involved in the city, which means it may not be built. Sam was always on top of the story. Sam Spatter Steel in the air is a story,' ” Scalo He was very trustworthy, and he said. “I never forgot that, and I always knew what was going on,” Samuel L. Spatter was a pro's pro to always talked to him when he called. Piatt said. “He lived a great life, and his co-workers, a journalist whose He will be missed; he was a great I considered him a great friend. It advice was sought by developers and man and legend in the real estate was always a good conversation with real estate agents alike, and perhaps business for a long time. He was a Sam; he loved Pittsburgh.” most importantly, a loving, dedicated man of the people and enjoyed what husband, father and grandfather. he did. It's great that he worked Mr. Spatter earned a bachelor's right to the end. That's a testament degree in journalism from the It was fitting that Sam passed away to Sam.” University of Pittsburgh. He was an on his way to work one week after officer in the Army Reserve, retiring celebrating his 87th as a colonel. birthday, and finished writing his last story His first newspaper — about the develop- position was with the ment at the former former Valley Daily Schenley High School News in Tarentum in — two days earlier. 1952. He worked in Equitable Gas Co.'s “Sam was the con- public relations depart- summate profession- ment and in the city al,” said Managing of Pittsburgh Planning Editor Jim Cuddy Jr. Department as public “We benefited greatly information officer from his experience before joining The and knowledge of Pittsburgh Press in Pittsburgh. We will 1966. miss him.” Mr. Spatter became His impact on the the paper's real estate real estate industry editor four years later, in Pittsburgh went a position he held until beyond the news- the newspaper ceased papers for which he publication in 1992. He wrote. Mr. Spatter is began writing for the remembered fondly by Tribune-Review in 1994. those that he covered He was the longtime as well. real estate writer for the Tribune-Review and “I've been in this a recipient of a Lifetime business for 30 years, Achievement Award and when I was a from the Realtors Asso- 21-year-old developer, ciation of Metropolitan and I was trying to Sam Spatter visits with former President Bill Clinton. Pittsburgh, get coverage for a project, Sam took the time Mr. Spatter is survived by his to talk to me,” said Jim wife of 27 years, Sara Spatter. Scalo, of Burns & Scalo Real Estate, Lucas Piatt, chief operating officer of He is also survived by three children, recalling the days Mr. Spatter was Millcraft Industries Inc. of Washing- Susan Lyn Breitenbach, Susan Booth real estate editor for The Pittsburgh ton County and Pittsburgh, echoed and Megan Finkelstein; a sister, Ellen Press. Scalo’s comments about his more Lowenberg; and seven grandchildren. recent experiences with Spatter. “Sam told me, ‘When you have steel in the air, I'll come out and take a

www.developingpittsburgh.com 25 NAIOP AWARDS

Developer of the Year Square 2.0 in 2013. The project health-care delivery system, but continues its sustainable and inno- improved customers’ quality of life Walnut Capital Partners vative redevelopment strategies and and decreased medical costs. transforms another highly visible Gregg M. Perelman brings more vacant property. At full build-out, Only a year after selling the com- than 25 years of high-energy entre- the project will triple the amount of pany in 1996, Perelman turned his preneurism and visionary leadership office space to more than 600,000 entrepreneurial zeal and customer- as founder and CEO of Walnut square feet, add more than 500 focused philosophy to the real Capital, one residential units and bring the total estate market. A “hands-on” CEO, of Pittsburgh’s he remains largest and instrumental in fastest grow- implementing ing real estate Walnut Capi- management tal’s aggressive and develop- acquisition ment compa- and develop- nies. Under ment strategy, his leadership, which includes Walnut Capital collaborative continues to partnerships carve its role with public and in Pittsburgh’s private stake- revitalization. holders like In addition to Carnegie Mel- investing over lon. Whether it $500 million in is new hotels, new construc- innovative tion and his- office space or toric renovation high-end resi- at properties dences, Walnut in high impact Capital’s many neighborhoods, developments Walnut has Walnut Capital’s $300 million Bakery Square development has had a transformational such as Beacon brought to life a impact on the East Liberty neighborhood. Commons, the dozen shopping historic renova- centers and transformed blighted of onsite high-end job creation to tion of the Highland Building, and landscapes into economic engines more than 3,500 full-time, quality their Strip District hotel project – most notably the $300 million jobs, 800 construction jobs and provides essential quality space for nationally recognized Bakery Square 1,000 spin off jobs. the growing Pittsburgh economy. mixed-use developments. Gregg’s deft business development Walnut’s developments are widely As a severe economic recession was and management expertise can recognized as a key factor that is beginning in 2009, Walnut Capi- be traced to the 1980s when he helping to contribute to Pittsburgh’s tal broke ground on their largest turned his father’s drug store into long-waited “brain gain.” More project to date, Bakery Square. The the nation’s leading provider of than half the residents at its Bakery LEED-certified historic rehabilitation outcome-oriented pharmaceutical Living project moved to Pittsburgh of the former Nabisco Bakery proved care, with revenues exceeding $250 from other cities. The Bakery Square a resounding success attracting million. Offering pharmaceutical developments have been noted prominent business tenants such as care, social services and insurance in national publications such as Google, and hip urban retailers like management to patients suffering the USA Today and the New York Anthropologie and West Elm. With from life-threatening diseases such Times. In 2014, President Obama its 217,000 square feet of office as HIV/AIDS and cancer, Stadtland- picked Bakery Square as the site to space 100 percent leased, Walnut ers’ customer-focused business announce a new national high-tech Capital broke ground on Bakery model not only created a new manufacturing initiative.

26 DEVELOPINGPITTSBURGH | Spring 2015 NAIOP Pittsburgh Officers Brian Walker, President Millcraft Investments Inc. David Weisberg, Vice President BNY Mellon Gerald Bunda, Secretary Imperial Land Corporation Christine Vann, Treasurer BDO Daniel Puntil, Past President Grandbridge Real Estate Capital LLC Domenic Dozzi, Corporate Board Jendoco Real Estate Louis Oliva, Advisory Board Liaison Newmark Grubb Knight Frank

Board of Directors At Large Wm. Randell Forister Allegheny County Airport Authority W. Scott Caplan Clayco Jason Stewart Jones Lang LaSalle Maureen Ford Alcoa Don Smith Jr. Regional Industrial Development Corporation Linda Fisher TriState Capital Tyler Noland PenTrust Real Estate Advisory Services Inc.

Learn more about NAIOP, the Commercial Real Estate Development Lou Stempkowski PNC Real Estate Banking NAIOP in the western Association, is the leading organization for developers, Jamie White Pennsylvania tri-state region owners and related professionals in office, industrial LLI Engineering at naioppittsburgh.com and mixed-use real estate. NAIOP provides Michael Sharp, DL Representative or 412-928-8303. unparalleled industry networking and education, and Continental Office Environments advocates for effective legislation on behalf of our Patricia Farrell, Legal Counsel members. NAIOP advances responsible, sustainable Meyer Unkovic & Scott LLP development that creates jobs and benefits the Advisory Board communities in which our members work and live. Steve Thomas Chapman Properties Peter Sukernek Hanna Langholz Wilson Ellis Paul Griffith Integra Realty Resources Inc. David Massaro Massaro Properties For more information on how you can develop connections with commercial real estate through NAIOP, Thomas Murphy visit us online at www.naiop.org or call 800-456-4144. Jendoco Real Estate Barry Ford Continental Real Estate Companies Richard Donley Cranberry Business Park Associates LP NAIOP Interviews

and 21st Century communications of solutions to create jobs that pay Coming and and trade infrastructure; attract- and improve our communities. ing investments in research and Going: Gov. Tom development of new products; and DP: What plans do you have for expanding Pennsylvania’s role as a streamlining or improving the Wolf and De Peart transportation nexus between sup- review process by the Dept. pliers, manufacturers, and major of Transportation and Dept. of n January U.S. and world markets. With our Environmental Protection for 20, Tom focus on these goals and more, I new commercial development (i. Wolf of know we can grow the economy e. inconsistency among offices, York was and build a stronger Pennsylvania length of time for approval)? sworn in for all residents. as 47th Wolf: Recently, I launched the governor Oof the Commonwealth of DP: After traveling Western Governor’s Office of Transforma- Pennsylvania. The governor took PA during the campaign what tion, Innovation, Management and time from the busy first weeks of specific assets did you see that Efficiency. This office will be tasked his new administration to answer will attract business? with finding solutions to streamlin- a half-dozen questions from ing processes to better deliver DevelopingPittsburgh and NAIOP Wolf: Western Pennsylvania has services, streamline overly compli- Pittsburgh. been able to leverage its incredible cated processes and innovate the infrastructure, economic way state government does busi- DP: What are your and educational assets ness. Looking at how we facilitate priorities for the to create a 21st century new developments will certainly be first 100 days of economy. It has some part of our efforts. your administra- of the best universities tion? in the world, a valuable DP: Are you a proponent of port and proximity to adding to the infrastructure Governor Wolf: My the Midwest. As a result improvement program that was focus is on three of these assets, the instituted by the 2013 transpor- main tenets: jobs region has seen tremen- tation Act 89? that pay, schools dous growth in sectors that teach and like technology, health Wolf: Right now, we are focused on a government care, and many start-up implementing Act 89 and making that works. I will industries. I hope we sure the process is as efficient and work diligently to can use this economic cost effective as possible. This is address the Com- development model and why I have kept Barry Schoch as monwealth’s $2.3 Pennsylvania Governor replicate it across the a senior advisor. Transportation billion deficit, spur Tom Wolf Commonwealth. and infrastructure are vital for economic growth our economy to grow, so I will and produce government savings DP: What are your plans for the continue to work with Acting Sec. through innovative new programs, Commonwealth’s RACP program Leslie Richards to identify and and restore the public’s trust in and what role do you feel the address areas for improvements. government. state government has in facili- But, we must move beyond just tating private development vs. fixing the roads and bridges, and DP: What are some of the strate- public development? begin to position Pennsylvania as gies you feel will attract busi- the “Keystone” for moving goods nesses and good jobs to PA? Wolf: The Redevelopment Assis- to major markets in the northeast tance Capital Program can be very and Midwest. One of Pennsylvania’s Wolf: State government must play helpful to cities, but grants alone greatest assets is its geographic a strategic role in “setting the aren’t the whole solution to urban location, and we must utilize this table” for private sector invest- and suburban problems. I will work to build a 21st century transporta- ments and economic growth, by with Secretary Davin to evaluate tion and infrastructure system. making key investments in educa- every avenue available to the Com- tion and workforce development, monwealth and find the best mix

28 DEVELOPINGPITTSBURGH | Spring 2015 On January 30, board of directors and in 2002, I think this idea of part- Dewitt Peart left the intent is to make the nerships is probably the biggest his multi-faceted quality of place in Austin achievement, working together as a role as president better. They have different region to get things accomplished. of the Pittsburgh challenges than we have I look back and say that was really Regional Alliance in Pittsburgh. They have when it all started to get traction. and Greater experienced tremendous Pittsburgh population growth. Austin The Mehrabian report in 1994 and Chamber of was the second fastest- the Working Together Consortium Commerce, as growing city ranked by laid out the plan [for] how this well as executive Forbes in 2014, but had region could regenerate itself, but vice president been fastest-growing the the idea of the Pittsburgh Regional economic previous four years. Alliance, working as a region to development market itself, it took a while to get and govern- They’ve got issues with that established. I think in the early ment affairs for De Peart transit and need a better 2000s we started to demonstrate the Allegheny transit system and that’s that we could get that done. In Conference, to part of what I’ll be working my mind, it was the development join the Downtown Austin Alliance on. They have downtown parks but community that took a vocal role in as CEO. Peart joined the Allegheny not what we’d consider an urban making that happen. The develop- Conference on Community Devel- park. And with all the population ment community tends to be on the opment in 2004, after two years as growth there are problems with front line of what’s happening. a contract employee in partnership affordable housing. with NAIOP Pittsburgh working on The role that the public sector government affairs. I’ve done this ten years and I’m a plays in development, bringing the firm believer that you need to bring right infrastructure to the right Peart’s career at the Conference fresh ideas and fresh blood into places was the key. That dialogue followed 22 years in private the equation every so often. We started, beginning to meet with development working for Space just celebrated the 20th year at the [Southwestern Pennsylvania Com- Center, a large industrial developer PRA. When I think that the PRA has mission] and having the conversa- in Minneapolis, and more recently been here 20 years and I’ve been tions and getting the whole region for Value Properties in Ambridge. doing this for half of its existence I acting together. Going back to A native Pittsburgher, Peart sat can’t believe it. David Shapira was those missing ramps, I remember down with DevelopingPittsburgh instrumental in getting it started talking to Butler County about publisher Jeff Burd to talk about and now his daughter, Laura Karet, why it was advantageous for Butler his new opportunity and his time is chair of the PRA, so we’ve kind County. When you look at when working with the commercial real of come full circle. Westinghouse made their decision, estate community in Western PA. one of the criteria was access to Burd: What are you happiest the airport and without those Burd: So why are you leaving about your tenure at the PRA? missing ramps you couldn’t do it. us? What is the new position in It all started with people regionally Austin? Peart: My involvement with the working together and the develop- Conference going back to 2000 ment community, I think, played a Peart: (Laughing) It’s a good and 2001 was really NAIOP and the key role in getting that ignited. opportunity for me. It’s a CEO conference in partnership working position so I get to run the show, on a couple of initiatives. That Burd: When did you get so to speak. The job is different activity – back then we called it the involved with the NAIOP Pitts- from what I’ve been doing here. Regional Development Consortium burgh chapter? [Austin Downtown Alliance] is a – was a partnership looking at public improvement district focused things like transportation and the Peart: I joined the chapter in 1994 on the downtown Austin area, I-79 missing ramps. When I think when it was pretty new. I’m not making downtown Austin more back, when we started talking sure exactly when it started but vibrant. The building owners, the about it in late 2001 and started when I joined there were maybe investors and developers are the working on the implementation 40 members. Ron Tarquinio got

www.developingpittsburgh.com 29 me involved and they made me of place. Pittsburgh was one of you need. And it was a national an officer right away, secretary, the first places to do that. Even competition. Looking back, that and I was president of the chapter throughout all the years, the staff may be a classic economic develop- in 1998 and 1999. It made a big here was smart enough to see that ment deal that most people won’t difference for me in looking at they really needed to engage the connect all the dots. economic development. If I had private sector. Sure, the CEO’s of never gotten involved with NAIOP these major corporations could Burd: What do you think is the I would never really have thought sit in the room but the developers key for the continuation of about economic development the were on the front line. They knew Pittsburgh’s transformation over way I do today. That sort of got my what the issues were, that the lack the next decade? juices flowing about how important of infrastructure, the lack of sites it is for the private sector and the was inhibiting our growth. It’s to Peart: I think we need consensus public sector to work together. Pittsburgh’s credit to have that around a regional transportation strong civic leadership. It is the plan with steps for implementation [Developers in] NAIOP made the model. that looks at what is needed to business case for working together keep Southwestern PA competi- with government. I think it dem- Burd: What’s the favorite deal tive leading us into the rest of the onstrates why the private sector you’ve been involved in? What’s century. and public sector need to work the home run? together. You don’t need to be at Burd: Any regrets? odds. Figure out what the issues Peart: Is there a home run? That’s are and there’s always a way to a good question. It wouldn’t Peart: Personally I have no regrets. solve problems. What happened necessarily be the biggest one. I’ve It is an emotional time to pull up here in Pittsburgh is an example never really thought about which is and leave but it’s time. There are of that. I know at the national my favorite because I think in the other people out there who need level when NAIOP chapters are aggregate it all feels good. When to have a chance to get involved talking about what’s happening in you look at how we’ve done com- and make a difference. This place, their cities, what has happened in paratively with other regions, how the people that work here in the Pittsburgh is always an example of we’re ranked in the top ten for so conference, outside these walls that cooperation. many years for deals, that’s what not many people see it. I know really feels good. We’re compet- the leadership does but there are I initially got involved because I ing region to region. It’s not per great things that go on here in was thinking of my career and the capita; it’s straight up competition. terms of civic improvement that educational benefits to it, which I This new GE project that was most regions around the country, heavily believe in. It is focused on announced, the additive manu- around the world haven’t been able developers and having worked for facturing, that might be a good to figure it out and we actually a developer it made all the sense example of one that I’ll think back do it. Is it pretty? Very rarely but in the world. But then quickly at on when I’m 75 or whatever and it doesn’t have to be. We all have the first meetings we’re starting to say everything that we as a region the right intentions in mind and talk about how important it is for did worked to make that happen. the thing that we can do is at least the region to market itself, to plan If you think about location, within work together side by side. regionally, to market regionally. I proximity to an interstate highway, DP remember going to meetings where if we had never gotten I-376 Ron Tarquinio was basically preach- designated it wouldn’t have been ing that we needed to get our act an interstate. The Findlay Connec- together as a region and I started tor got built so there was access to think to myself that he was to it. We worked with Business in absolutely right. Our Sites, the stimulus plan that brought water and sewer to that Pittsburgh was one of the first site. We helped Imperial Land and regions that really organized itself. Findlay Township get the sewers to There are a lot of regions that have the site. “America Makes”, the ad- modeled themselves after what ditive manufacturing Federal grant, we did here. There was a need to located the facility in Youngstown keep regenerating or improving but it’s a tech belt regional ini- ourselves. When you think about tiative, a $60 million grant for 70 years ago, the leaders of the additive manufacturing. All those Allegheny Conference and Mayor pieces put together created the Lawrence talking about quality success: a pad ready site, with of life, cities and regions didn’t infrastructure on an interstate, talk about quality of life. If you’re with a workforce, with the training going to attract talent and keep and universities willing to partner talent you have to have quality together, all of the ingredients that

30 DEVELOPINGPITTSBURGH | Spring 2015 Construction

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32 DEVELOPINGPITTSBURGH | Spring 2015 Developer Profile

The proposed 158,000 square-foot office building at South Side Works. Rendering by DLA+ Architecture & Interior Design.

Highwoods was founded in Raleigh, They hired a guy by the name of Ron Highwoods North Carolina in 1978 by a group of Gibson, who was with Koger Proper- local businessmen who had a vision ties. Koger was a company that had Properties of regional success. According to office parks throughout the South.” Highwoods’ Chief Operating Officer ittsburgh’s new- (COO) Mike Harris, the original part- Gibson led the company into found prosper- ners were successful but not neces- development in a fairly traditional ity has attracted sarily experienced in commercial real manner, building a small spec office, the attention estate. landing a build-to-suit client, build- of investors ing more spec offices as the leasing and real estate “Some of them had dabbled in real activity accelerated. Raleigh was ex- companiesP from around the globe. estate or other industries but they periencing rapid growth in the 1980s Raleigh-based Highwoods Proper- clearly saw a vision of Raleigh grow- and Highwoods took advantage ties is one of those companies. ing,” Harris explains. “They acquired of the economy and grew as well. Unlike others who have invested in the 100-plus acres at the corner of “They had success for around 12 Pittsburgh properties and projects, Capital Boulevard and what is today years until the late 80s and early 90s Highwoods saw potential for a long- the Beltline, I-40, for an office park. when the world went kind of dark term relationship and invested in Remember this was 1978, post- on real estate,” recalls Harris. “We Pittsburgh people as well. recession; it was interesting times. had a very deep, deep recession in

www.developingpittsburgh.com 33 real estate like we hadn’t had team put Ed Fritsch in the in many years. To their credit, CEO position, with Mike Highwoods never defaulted on Harris elevated to COO. a loan and stayed afloat.” Fritsch, Harris and the new management team put Commercial real estate’s woes together a strategic plan during that period were the for the future that focused result of tax-incented overbuild- on people, portfolio, coming and a major credit crisis, munication and balance somewhat like that experienced sheet. The strategic plan in 2008. The savings-and-loan was rolled out on January crisis was at the heart of 1, 2005. Ten years later the the problems. Deregulated plan is still in place. savings-and-loan companies had extended credit well beyond the Among the highest priori- experience of the industry. When ties was the sale of non- Mike Harris the Reagan-era tax incentives Highwoods CEO Ed Fritsch core assets. Beginning in were eliminated in March 1986, 2005, Highwoods began the the resulting domino effect of defaults task of analyzing the many properties hit S & L’s hardest and one-third of that had come along with its acquisi- the institutions closed between 1989 “Wall Street found a tions and weeded out those that and 1993. This credit crisis damaged didn’t fit with their core portfolio. the financing for real estate during way to recapitalize Using the proceeds of those sales to the recovery. But by the early 1990s, commercial real pay down debt, Highwoods cleaned the major investment banks developed up its portfolio over the following a way to revive the once popular real estate and came back three years. Those turned out to be estate investment trust (REIT). with the REIT format years when commercial real estate was appreciating rapidly and cash was “Wall Street found a way to recapital- with the public,” chasing deals. Mike Harris candidly ize commercial real estate and came admits that their good timing was back with the REIT format with the says Harris. “So somewhat out of necessity. public,” says Harris. “So Highwoods Highwoods decided decided to go for it and went “We were in something of a survival public. This was in June of 1994 and to go for it and went mode. It was a great time to be a Highwoods did an IPO. It was a $250 public. This was in seller,” Harris says. “But we had to million IPO. What that $250 million have the discipline at the same time did was allowed them to acquire as- June of 1994 and to not be a buyer because it would sets, including the Highwoods campus Highwoods did an have been easy at that time to get where we sit today.” caught up in the frenzy and overpay IPO. It was a $250 for assets. Our goal was to clean up Throughout the remainder of the million IPO. What our balance sheet. We had to take decade, Highwoods grew through a the proceeds, pay down debt, and strategy of mergers and acquisitions. that $250 million primarily develop better assets.” Some Harris says that the company looked did was allowed of the asset sales moved them out of at businesses with good assets but markets but Harris says even that was also good people. The company them to acquire for the better. “We like to be a big expanded throughout the South, dog on a small porch but in some of from Richmond to the north, South assets, including the those markets we weren’t really on Florida in the southeast and Kansas Highwoods campus the right porch.” City to the west. By his recollection, Highwoods went through six or seven where we sit today.” The timing of Highwoods “indiges- major acquisitions and development tion” and self-discipline about deals, “we call it the great pie eat- cleaning up its balance sheet couldn’t ing contest,” jokes Harris, until the have been better. While it may have “We had a pretty good case of dot com bubble burst. The end of seemed to many that Highwoods indigestion from overbuying and that extended period of economic missed out on the booming years in realized we need to step back and expansion again dried up financing. mid-decade, the accelerating asset put together a strategic plan for how Highwoods found itself with a poor prices accelerated the company’s we are going to handle this,” recalls balance sheet. The recession that return to health. In 2008, when Harris. followed the dot com bubble and then the financial crisis triggered a deep the September 11, 2001 attacks ef- recession and steep decline in real At this same time Ron Gibson retired fectively brought the second phase of estate values, Highwoods had dry and the company reorganized in 2003. Highwoods Properties growth. powder and a clearer definition of the The transition of the management

34 DEVELOPINGPITTSBURGH | Spring 2015 The purchase of the iconic PPG Place was Highwoods’ entrée into the Pittsburgh market in 2011.

company’s direction and focus; in fact, and used to bank with some of the was interested in selling the asset so Highwoods was one of the few REIT’s companies that were in Pittsburgh we threw our name into the hat and that did not cut its dividend during in the early 1970s, when Pittsburgh worked pretty hard with the brokers. the next few years. wasn’t such a great place. I was a bit We got very close to the people rep- of a naysayer at first but I saw what a resenting the Hillmans and they did a The company began looking at new great job the city had done to trans- lot of due diligence on us too. They markets to enter and one of them was form itself from that time to what it is made it very clear that they wanted Pittsburgh. As the management team today.” that asset to go to someone who was assessed their position they felt that going to be a good steward of it, not going into a gateway market – New The management team loved the peo- just for our shareholders but for the York or Los Angeles – was out of their ple and the interest that Pittsburgh’s city of Pittsburgh. comfort zone, so they were looking at leaders had in Highwoods’ entering secondary market cities. the market. They like the diversity of “We were not the high bidder as I the economy, its foundation on educa- understand it, but I think they felt “During this time I have to tell you tion, research and medicine. Harris we wouldn’t be passive owners but that Pittsburgh wasn’t really on our says the beginnings of the Marcellus would put our corporate flag on it map but, believe it or not, we have Shale exploration were apparent, but and invest in it for the long term,” a lot of people in this company from that the natural gas industry was to he continues. “We have a term for Pennsylvania, Western Pennsylvania, them at the time icing on the cake. it. We call it ‘Highwood-tizing’ it. I who have Pittsburgh roots and they The question then became how High- don’t know how you spell that but it started whispering in our ears that woods would enter the market. describes what we do to an asset once we ought to think about it,” says we buy it, how we very meticulously Harris. “We just loaded up and visited “We wanted to come into a new invest in it. Some of it you’ll never see Pittsburgh for about three days and market by making a splash. We really and others are very obvious aesthetic started looking around, taking the felt that when we looked around at changes.” typical tour of the city. Every time we the iconic assets, what really stood had up there we came back pleasantly out was PPG Place,” recalls Harris. “It After being skeptical about Pittsburgh surprised. I’m a banker from way back so happened that the Hillman family to begin with, Highwoods’ team

www.developingpittsburgh.com 35 found itself in the position of becom- As Highwoods spelled out their plans which is just north of Downtown.” ing cheerleaders to sell their investors and expectations for a division vice That ‘best business district’ definition on PPG Place and the city. They put president, Wisniewski was sold on the for Highwoods takes in parts of the on a full-court press presentation in opportunity. city that aren’t between the rivers. December of 2011 and succeeded in Harris points to the North Shore tran- making all the investors who were “They set up their offices to run sit access and the proximity of com- present in Pittsburgh as enthusiastic the division as your own business. I mercial businesses just across the river as they were. think it’s very effective to have the from Downtown as the kinds of ac- landlord in town,” he explains. “It’s cessibility that many other cities don’t One of the first orders of business very customer-driven. We don’t refer have. He says the company is bullish after the sale was to put together a to our customers as tenants. Both on Pittsburgh because of its economy team in Pittsburgh that would help properties Highwoods acquired were and opportunities for development so Highwoods lease up the 1.6 million well-maintained and operated and close to the center of the city. square foot PPG Place, which stood they expect to continue to maintain at 81 percent occupied, and to build them at a high level. As a landlord, Highwoods wanted to develop its presence in the region. Terry Ken- Highwoods is very broker-friendly. We something ground up next and South nedy was hired as asset manager, a have the ability to pay a broker within Side Works offered all of the things Pittsburgh native who was happy to 24 hours of a transaction.” Harris talks about in terms of the move back to the city. Highwoods BBD atmosphere. The property gave then set its sights on finding the Wisniewski’s charge as a division head it a chance to develop infill where market’s division leader. In the process was to be a rainmaker, to find other shopping, working and living were of interviewing and negotiating with deals for the company. The strategy already established within a walkable brokers, Highwoods dealt with Andy was to find another Class A asset in community. Wisnieswki’s team began Wisniewski (with CBRE Downtown that would working with the Soffer Organization at the time) several allow Highwoods to and the Urban Redevelopment Au- times and felt there leverage their property thority to look at developing some of was a fit with Andy. management team in the remaining property along the river place. That next asset that was designated for office use. “Andy’s a Highwoods turned out to be EQT After more than a year of negotia- kind of guy, with his Plaza, a 616,000 square tions, the four-building Highwoods at background, 20-plus foot, 32-story office South Side Works was announced in years of experience in building that was over October 2014. real estate. He knew 92 percent leased. The Pittsburgh and had put acquisition closed in The 400,000 square foot mixed-use down roots there,” December 2012, bring- project will be built just to the west of Harris says. “We ing Highwoods' assets the Hofbrauhaus and will kick off with were able to convince to 2.2 million square a 158,000 square foot office building. him to move over to feet in its first year in The start of the project will depend Highwoods and now the marketplace. on the success of pre-leasing but Mike had the basis for a Andy Wisniewski Harris is optimistic about the chances successful office in Harris says that the two of landing an anchor and building out Pittsburgh.” acquisitions hardly whet- the property. ted their appetite and his question to Wisniewski was not in the job Wisniewski is always what the next “We think the stage is set for growth market when he began dealing with deal will be. Although Highwoods is down there, when you look at folks Highwoods at PPG Place. His career categorized as a suburban office REIT, like Google making a big play in at CBRE traced back 24 years to the the management team now looks at Pittsburgh. You also can’t underplay Galbreath days and he says he was at the company as a CBD-infill business, the importance of Carnegie Mellon a point in his career where he wasn’t principally looking for infill buildings and University of Pittsburgh, the interested in a career change. His in the CBD or what Harris calls BBD, institutions of higher learning. It’s not initial contact with Highwoods was a or ‘best business district.’ dissimilar to what we have here in sales call. North Carolina. That’s a big catalyst “It doesn’t necessarily have to be in for growth in these markets,” Harris “We made a pitch to them to repre- Downtown. It can be a mid-town type says. sent PPG Place,” Wisniewski says. “I location but it needs to be close to was impressed by the quality of the Downtown, someplace that is walk- “There has been a lot of interest in organization and of the people. They able,” Harris notes. “We really think the location and a lot of interest in approached me about joining the the world is going to a more [walking] Highwoods’ ability to perform,” notes company and I was intrigued about than a driving-type situation. BBD’s Wisniewski. “Having the ability [as a joining them. It was important to me aren’t always in the Central Business REIT] to act without financing allows that they were a long-term hold kind District. In Pittsburgh it happens to be us to react very quickly. That’s a big of owner after being 24 years at the Downtown but in a place like Atlanta, advantage.” same place.” for example, the BBD is in Buckhead, DP

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strategy. Secure mass Spaces designed for collaboration adjoin multi- storage of data and station work desks and areas where workers can digital security created “hotel” when in the office. Photo by Denmarsh the space that cloud Photography. Use courtesy Desmone Architects. computing and mobile computing now occupy in the business world. That has changed how people work but also some fundamental physical requirements, like for document storage and filing systems.

This post-recession era has coincided with a major demographic shift, as America’s large Baby Boomer workforce has begun to retire and a new, even larger generation has begun to mature into the workforce. The lifestyle expectations of the American worker in the wake of the reces- curve is steepening. Much like when sionary stress are changing. People How Different personal computing and telephony are less willing to spend as much was changing rapidly in the 1980s time away from home and with the is the and 1990s, the current changes may emerging technologies, work can be “New” Office? be reversed in the future. But until done away from the office, even for that time, office owners and devel- professions like the law. opers would do well to expect office n a somewhat requirements to be different. unlucky change Regardless of whatever demographic in fortune, the or technology trends exist, the “We’re seeing bigger floor plates ultimate driver behind the changing cyclical recovery and more open plan to have more of the commercial office environment is the business flexibility,” observes Jim Scalo, CEO case. For Gerry McLaughlin, execu- office market has of Burns & Scalo Real Estate Ser- coincided with several significant tive managing director of Newmark I vices. “I was sitting with a 100,000 Grubb Knight Frank’s Pittsburgh trends in office utilization that are square-foot user [recently] doing office, the trend is not new. changing how much space is being some programming and I said that used. Just as a better jobs market is whatever we do will be wrong. I told “I think it’s always a business deci- driving business expansion, the way him that his company was growing space is being used is limiting the sion. Everybody is trying to reduce so fast that we had to build flexibil- costs wherever they can,” he says. demand for the space that busi- ity into whatever we came up with.” nesses need. “In Pittsburgh, rental rates continue to go up. One way to control that Businesses that have survived and Changes in how people want to is to be more efficient in how you thrived post-recession have had to use the space to reduce the cost work and what they expect from do so in a more competitive environ- life, along with even more advances per square foot. It’s been a steady ment, regardless of the industry. transition. It used to be that offices in technology, have significantly The deployment of new technology altered what an office looks like had 300 or 350 square feet per has been an important part of any person. Law firms were even more and how much space each worker successful company’s competitive needs. This isn’t a new trend but the than that. Now we’re seeing users in

www.developingpittsburgh.com 39 Collaborative work spaces at Ansys’s new headquarters. Photo by Mike Leonardi of

Candidly Yours Photography. Use courtesy NEXT Architecture.

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While cost control may be squeez- ing space, austerity isn’t necessarily pervasive. “We’re seeing heavier Real Estate I Construction I Manufacturing finishes. People want their space to P. 412-227-2500 • F. 412-227-2050 be nice,” says Scalo. “Amenities in www.BlumlingGusky.com suburban offices are as important outside as inside. We’re putting in outdoor grills, walking trails and areas to play. It’s about lifestyle as much as workspace.”

Burns & Scalo is in the process of building or completing four buildings totaling more than 525,000 square feet, of which 360,000 square feet is speculative. CH2M is a tenant in one of those buildings and its architectural group – IDC Architects – is working on a number of large office plans like Scalo describes. Project success. It’s what our clients do. “There is always a certain driver [for open floor plan], which is budget. It’s what we do. One of the things about open plan is that you can put more people in less space. We went from 40,000 square feet to 30,000 in this space,” notes Jeff Murray, director of architecture at IDC. “Another piece is mobile technology allows people to work more

40 DEVELOPINGPITTSBURGH | Spring 2015 TWO TITLES ONE INDUSTRY

flexibly, so space can work better than in the 1980s when the ideas were first introduced. Third, I think that collaboration and teamwork are critical to a company’s success so we create more space where interaction can occur.”

Gerry McLaughlin cited the example of some of Heinz’s newer space, which takes the open floor plan past cubicles and “hotel-ing” of offices, a practice where workers use workspaces as needed, like you would a hotel room. NO EVENTS. JUST INFORMATION “Heinz’s open plan has eight people together in work tables across from INVEST YOUR ADVERTISING DOLLARS each other. There’s little or no file space; there’s space for a computer,” WHERE YOUR CUSTOMERS ARE INVESTING THEIR TIME. he says. “It’s very innovative. When I first heard of it I thought it could Call Karen Kukish to put your business in the right places. be a bit weird but it’s actually quite 412/837-6971 nice.” McLaughlin admitted that as a Baby Boomer he might not find the [email protected] arrangement comfortable and wasn’t sure he would adapt to that workplace but notes, “The younger people working there are used to that kind of workplace.”

Jeffrey Ackerman, CBRE’s managing director in Pittsburgh, witnessed firsthand that same acceptance of a non-traditional environment in his 600 Grant Street office and finds he likes it as well. CBRE has been rolling out

www.developingpittsburgh.com 41 pens and other items be removed from the work station at the end of the day. Files have been fully digitized and file cabinets have been removed. Ackerman finds the end result to be as liberating as it is different.

“I don’t know where I’m going to sit each day. I sit where I’m needed,” he says. There are also advantages to managing the office in this new environment. “I know when there’s a problem now much sooner. And it’s easier to keep track of everyone. You can’t hide in your office.”

Although the younger workers may be more adaptable to a more open environment, one truth that seems to be emerging is that the trends in office utilization aren’t an open plan environment throughout being driven by Millennials. A its global footprint over the past year. survey done by CBRE in summer Because of the growth of the Pitts- Although the young- of 2014 found that the workplace burgh office, Ackerman found himself preferences of the three major deciding to renovate the local office er workers may be demographic groups – Baby Boomers, ahead of schedule. GenX-ers and Millennials – weren’t all more adaptable to a that different. “CBRE first tried a workplace strategy more open environ- in the Amsterdam office a couple ment, one truth that The surprises of CBRE’s The Evolving years ago. It was open, collaborative, Workplace report were that while very high end with the conference seems to be emerg- Baby Boomers – the oldest of the rooms and client offices really beauti- ing is that the trends three cohorts – had the highest level ful,” Ackerman says. “We tried it in of preference for independent focus the U.S. in the Los Angeles office, in office utilization space, that group also had the lowest which is a really big office – over 300 preference for formal meetings. Only people – and it worked very well. The aren’t being driven 27 percent of Boomers wanted to strategy is being implemented across by Millennials. A have more formal interaction, exactly the country. half the number of Millennials who survey done by CBRE preferred formal meetings. Moreover, “We were out of space in Pittsburgh in summer of 2014 the share of Millennials who were and had the option of taking ad- seeking independent focus space ditional space but I chose to renovate found that the work- was nearly as high as the Boomers or our existing space to use it more GenX-ers, 86 percent compared to 91 place preferences percent for the latter two groups. efficiently.” of the three major The redesigned CBRE office features demographic groups Even more surprising was the fact an open floor with multiple work that when asked how they wanted to stations. There are private offices that – Baby Boomers, spend their time throughout the work can be reserved for short periods, GenX-ers and Millen- day, the replies from all three groups as well as conference rooms for were virtually identical, with no more client meetings. Along with the new nials – weren’t all than three percentage points separat- plan, there are also some significant ing any response. Here again, Mil- changes in how the staff works. that different. lennials surprised by responding with the highest preference for individual Ackerman explains that the office focus time, while all three groups at whatever desk they are using and is a “free address environment” replied that they wanted to spend their direct calls are forwarded to where people use a workspace that 17 percent of their day in formal that location. There is a “clean desk” is available rather than a static collaboration and 14 or 15 percent in policy that requires that the notes, space. Employees punch in a code informal collaboration.

42 DEVELOPINGPITTSBURGH | Spring 2015 Some of the usage data in Evolv- ing Workplace showed that workers occupied their offices less than half the time, leaving the average workspace empty 32 percent of the time. Employees spend 21 percent of their work time away from the office. The workforce is evenly distributed, with no generation representing more than 24 percent of the workforce. Some 12 percent of the workforce is made up of those over the age of 65. Those workers at the end and beginning of their careers – Boomers and Millenni- als – make up the same portion of the workforce. Developers and designers essentially have to accommodate the expectations and culture of both parents and their children. “The old idea was that you occupied “We’re seeing different designs an office like a hotel or dormitory Implementation at CBRE’s 600 Grant for multi-generational workforces, room. You had your room and a small Street offices has gone well, accord- different designs for different genera- common area,” Jeff Murray explains. ing to Jeffrey Ackerman. The renova- tions,” notes Dan Delisio, founder of “The modern office you occupy like tion was completed in November and NEXT Architecture. “That was a huge your house. You have your own room the staff has responded positively. requirement of CSC (the IT firm that but you move around and interact “We’re taking surveys of the employ- was planning to move to Pittsburgh). with others throughout the whole ees and it’s 90 percent favorable. Older employees tend to be managers house.” Around the country it’s 92 percent,” or have more responsibility and need he says. more privacy. One of our current More than one experienced observer energy clients is finding that it’s a big noted that the trend towards open What The Evolving Workplace part of their needs.” floor plans and smaller spaces has ultimately concluded was that the come and gone before. Some of that modern workplace was an important Part of what’s evolving is a re- ebb and flow of opinion coincides reflection of the culture and func- thinking about how the office with the ebb and flow of prosperity, tion of the business that occupied works for the administrative and but the long-term trend is still less of- the workplace. Its objective findings non-management staff and part is a fice per worker. Even as there seems were that companies that allowed re-shaping of the culture of privacy. to be more traction for designing employees to self select their work The trend towards free address or flexible open space there is already a location experienced 10 percent to 15 hotel-ing depends on employees not certain amount of backlash against percent higher employee satisfaction identifying a particular space as their the more collaborative design. scores and higher productivity from own. That means no decorating and their workers. Office cultures at tech personalizing. It also means creating “I’ve read a couple articles that were companies like Google may seem like private spaces for human resources or a reaction, although they had kind of extreme examples but all businesses for discussions that require privacy. a bitter tone,” laughs Desmone. “You that want to excel will have to create And it means that executives have to are giving up something with the an environment that is recognized adjust their expectations about their open plan and people don’t usually as exceptional in some manner. With space. acknowledge it. You give up quiet skilled talent becoming scarcer over space, a place to be alone and quiet the next decade, companies that “One thing we’re seeing more of is a with your thoughts. There is a belief wish to attract and retain the best client that has a lot of private offices that open office is detrimental to people will use their workspace as an but wants to go down to almost no concentration.” extension of their human resources private offices in new space,” says department. Chip Desmone. “We’re going to “It depends on how it is imple- more furniture systems. I don’t mean mented,” agrees Delisio. “In theory “The smartest companies I’ve demountable partitions but actual [open plan] works great but if you worked with use real estate as a furniture systems to create the work- have people in five-foot work stations retention tool, not just as a working spaces.” on top of each other they can’t even place,” notes Scalo. make a phone call.” DP

www.developingpittsburgh.com 43

Eye on the Economy

he U.S. economy finally showed blossoms in 2014 after a long winter of potential.T The economic winter that began with the 2008 financial crisis dragged on through false starts of confidence, global fears and slowdowns and eventually, an ex- traordinarily cold climate that froze demand during the first quarter of 2014. When the thaw – both figura- tive and literal – happened at last in summer of 2014, U.S. companies responded by hiring and expanding at a pace that was 50 percent faster of 2015. That’s more Economic expansion over the last half of 2014 peaked with an average of 363,000 new jobs in the fourth quarter. than expected. than double the rate in 2010. PNC sees hiring Going into 2014, economists increasing throughout to this point, especially investment liked the prospects for expansion 2015, causing wage pressure and in more employees. With most of because the headwinds of previous raising discretionary incomes. the impediments removed from the years were fading. As economists economy, businesses are expected to look into 2015, most see even less Following the excessive borrowing increase investment in 2015 and will drag from government cutbacks of the mid-2000s, consumers and have the war chests to fund it. and deleveraging by consumers and businesses had to reduce their debt businesses. Augustine Faucher, vice leverage. Deleveraging continued Faucher’s presentation is best president and senior macroecono- past the point of the previous summarized by his comment that, “I mist for PNC Financial Services cyclical levels, dropping roughly think by the end of the year people Group, emphasized these factors 3.5 percent below that mark to an will be saying that this is what a when he presented PNC’s expecta- overall financial obligation ratio good economy feels like.” tions for 2015 at a January 15 that is lower than any time since the NAIOP Pittsburgh meeting. 1980’s. That leaves more room for If job creation is any indication, the consumer purchasing and investing. good feelings about the economy Faucher pointed to the convergence may already be manifest. January’s of stagnant productivity and flush Corporations took advantage of hiring was up 257,000 new jobs, ac- corporate coffers as the formula the increases in productivity in the cording to the February 6 report by for increased hiring in 2015. The early stages of the recovery to build the Bureau of Labor Statistics (BLS) flat productivity is due to workers earnings. While demand and sales and wages rose 0.5 percent, the big- reaching their limit of working more returned, the average total labor gest monthly gain in six years. The for less. That matches up to an cost did not recover until 2014. That trailing 12-month wage rate increase increase in the so-called “quit rate” means that GDP reached record high of 2.2 percent was well above the – the number of people who are levels while the cost of production rate of inflation. willing to quit their jobs for a better remained at or below the pre-reces- opportunity. The quit rate moves in sion levels, creating greater profits As important as the positive jobs concert with wages generally, and and cash that wait to be mobilized. surprise was, it was the revision to is expected to reach almost three Wavering confidence in the economy the previous November and Decem- percent of the workforce by the end dampened business investment up

www.developingpittsburgh.com 45 ber estimates that were the bigger of investment for the year 2014, “Manufacturers are seeing a global surprise. December’s job growth was with 51 percent reporting increased slowdown and are concerned about revised upward to 329,000 and No- spending versus 33 percent in the the rising dollar hurting exports,” vember’s was revised to a whopping third quarter. Bach explains. “That could translate 423,000 new jobs. Job growth in in factories. That’s the property type the fourth quarter of 2014 averaged Among the other highlights from the most in the line of fire from overseas 336,000 per month, the highest survey were: 51 percent of respon- problems. But the lower cost of since 1997. Even the one negative dents said their companies planned imports and lower gas prices should from the February 6 BLS report was to raise wages in the first quarter of be better for consumer demand. viewed as a positive. The increase 2015; 34 percent of the economists That’s best for warehouse/distribu- in the unemployment rate from 5.6 indicated that their firms were add- tion centers and retail.” Bach puts percent to 5.7 percent was due to a ing to payrolls; and three-fourths of the U.S. economy into perspective return to the workforce by 703,000 the respondents said that the steep compared to the rest of the world. unemployed, another sign of more decline in oil prices would impact “For years people called the U.S. optimism in the economy’s strength. their businesses, but 57 percent in- economy the cleanest shirt in the dicated that the impact was positive, laundry basket and that’s certainly The National Association for Business compared to 18 percent who viewed true now. For commercial real estate Economics (NABE) quarterly Business the oil price as negative. all skies are sunny now.” Conditions Survey of 93 corporate economists showed that businesses Robert Bach, director of research Kurt Rankin, assistant vice president in nearly all sectors expected to for Newmark Grubb Knight Frank, and economist at PNC Financial increase headcount, wages and is keeping an eye on the slowdowns Services Group, sees a couple of capital spending in the first quarter in other parts of the globe for signs factors helping the U.S. manufactur- of 2015. Of the 64 respondents who that demand is slowing in the U.S. ing sector. reported on their firms' planned He echoes other economic observ- spending on structures, 30 percent ers in his outlook for the domestic “We have the prospect of more expect increased spending and 8 economy in 2015 and points out business investment than in past percent reported a decline. Respon- that the relative vibrancy of the U.S. years. There are a couple of reasons, dents indicated a similar disparity market has investment appeal. chief among them is the prospect of

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46 DEVELOPINGPITTSBURGH | Spring 2015 rising interest rates,” Rankin says. companies remain profitable even “With businesses having cash on as oil drifts below $50 per barrel. the books, if interest rates rise Among the other While oil represents a negligible it could prompt some businesses share of the extraction from the to borrow to expand before rates highlights from the Marcellus and Utica formations, go higher. Another factor I’ll be survey were: 51 percent the companies involved in the watching is capacity utilization. natural gas play in Western PA are It’s very close to 80 percent, of respondents said the same as in the oil business, which is where capacity utiliza- their companies planned and some of the staff reductions tion peaked during the boom. If and reorganization have hit home that reaches 80 percent it may to raise wages in the in this region. spark expansion to meet demand first quarter of 2015; 34 growth.” Chevron, for example, shelved percent of the economists plans for an Appalachian head- One sector not experiencing indicated that their firms quarters in Moon Township and growth is energy. The declining has begun a restructuring that oil price appears to be impacting were adding to payrolls; includes reducing its workforce in hiring in the oil and gas industry. and three-fourths of the Pittsburgh, although the company The Federal Reserve Bank of has leased additional space in Kansas City surveyed energy respondents said that Cherrington. Other regional companies and found that 25 natural gas players have reduced percent expected to make “signif- the steep decline in oil the rate of growth as prices have icant” cuts in staff in 2015. The prices would impact their fallen back to the $2.50 per mil- layoffs are part of an increasing lion BTU range. efficiency effort by U.S. drillers. businesses, but 57 percent Leaner headcounts, combined indicated that the impact Even with the low gas prices, with continuous improvements in the industry itself should still be drilling technology in the shale was positive, ... a source for some investment in formations, helps U.S. energy midstream expansion in 2015,

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www.developingpittsburgh.com 47 year. The mining and logging sector, which includes the region’s natural gas industry, grew employment by 700 year-over-year, but that rate represented a significant slowdown from the aggressive pace of growth in prior years. And barring unfore- seen improvements in the business conditions in oil and gas, employment in the energy sector is likely to decline slightly in 2015.

Supply and demand dynamics within the commercial real estate sectors changed little from 2013 to 2014. Office occupancy rates remain above multi-cyclical high levels, although prospects for the Central Business District began to slow. Industrial development remains virtually nonexistent, even though little vacancy exists. Apartment A brighter employment picture is bringing increases in the quit rate development hit a generational and wages for workers. Chart courtesy The PNC Financial Services Group. high, with more in the pipeline. Likewise, construction of hotel as collection and processing facili- properties increased, as did the ties still lag even the existing gas occupancy and revenue rates in volumes being produced. And while Supply and demand regional hotels. price pressures on Shell could force dynamics within the a delay in the final approval for the According to Newmark Grubb ethane cracker plant in Monaca, commercial real estate Knight Frank (NGKF), office va- contractors have mobilized for sectors changed little cancy at the start of 2015 was 15 the first stages of what will be percent overall, with Class A at 11 hundreds of millions in preparation from 2013 to 2014. percent. Absorption was positive work. Monaca is also not the only Office occupancy for the year at 398,000 square cracker plant on the boards in the feet. There were 800,000 square Marcellus play. rates remain above feet of speculative office space multi-cyclical high under construction, with half of Natural gas industry aside, the that leased in January. economic picture remains positive levels, although at the regional level. After a flat Industrial properties ended the year year for job growth in 2013, there prospects for the at 7.2 percent vacant, according to were 12,600 jobs added to the Central Business CBRE. Class A space vacancy fell to employment rolls in metropolitan four percent. Absorption was over- Pittsburgh in 2014, a 1.1 percent District began to whelmingly positive, at 800,000 increase. Employment in the region slow. Industrial square feet with another 850,000 reached another record high and square feet under construction. at year’s end 1.176 million people development Research by NGKF showed rents were working and unemployment remains virtually declining ten cents in 2014 com- for the seven-county metropolitan pared to the end of 2013, mainly market was at 4.6 percent. Depend- nonexistent, even because of the lack of available ing on the source, employment though little vacancy Class A space for which higher growth forecasts for Pittsburgh rents could be asked. range from 14,000 to 20,000 new exists. Apartment jobs annually for the next couple development hit a At the end of 2014, there were 11 of years. Rosy as this data may be, hotels under construction. While there are signs of weakness that generational high, that volume of construction is low could limit the upside for Pitts- compared to the gateway cities burgh. with more in the around the country, it represents pipeline. an aggressive year in metro Pitts- Manufacturing jobs in Pittsburgh burgh, particularly in light of the declined by almost 1,500 year-over- higher-than-normal volumes that

48 DEVELOPINGPITTSBURGH | Spring 2015 occurred in 2013. Owing to the started construction. With about “When you look at the largest 150 increased construction, the inventory 3,500 more units in the municipal metros and their gains during the of available rooms has grown more approval pipeline, fears that the early stage of the recovery, they are than 20 percent since 2012. In many apartment market was becoming not that great,” Venkatu notes. “If markets that growth level would overbuilt would seem founded; we are getting into a mature phase signal overbuilding but the funda- however, occupancy remains high as of expansion, we may be reverting mentals of the hospitality market are does the demographic support for back to the drivers that drove the actually improved during that period apartments. The accelerated pace last expansion. That means a slower of time. of multi-family construction coin- growth rate for a region like Pitts- cides with a prolonged slowdown burgh than in a region with faster As reported by Integra Realty in new single-family construction. population growth. I expect things Resources in its annual Viewpoint, How much longer the high demand to be relatively good but if we’re not Pittsburgh’s average daily occupancy for apartments can last will likely seeing large gains in population [in increased to 68 percent in 2014 and depend on how many new jobs – Pittsburgh], we won’t see large gains the average daily room rate went up and thereby new households – are in jobs.” to $116. That is slightly above the created over the next few years. DP national average and $6.76 higher than the rate in 2012. While contin- Guhan Venkatu, vice president ued additions to inventory are going and senior regional officer for the to eventually lead to an imbalance Federal Reserve Bank of Cleveland’s in supply and demand, it’s clear that Pittsburgh office, is optimistic about the Pittsburgh market hasn’t reached the regional economy but isn’t as that point in early 2015. positive that a new jobs engine is revving up. He says that the Apartments continue to be among economic climate in 2015 reflects the hottest of commercial properties the performance of the Pittsburgh in Pittsburgh. Construction of new economy coming out of the reces- apartments reached a generational sion, when other regions were high in 2013, with over 2,900 units struggling with decline. started, and another 2,138 units

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Office Market Update

and ANH Refac- tories secured 42,000 square feet in Building 210 at Pittsburgh International Business Park.

At the close of the year, 800,000 square feet of speculative building remained in the construction pipeline, with 400,000 square feet uncommit- ted. The Gardens in Market Square in the CBD progressed. The project will consist of 128,000 square feet of office space as well as hotel, retail space and parking. In the very tight Oak- sale/lease back at 420 Boulevard land-East/End, of the Allies for 177,000 square the 105,000- square foot Schenley feet. Additionally, EDMC renewed Place moved forward. The building verall 117,000 square feet in K&L Gates is located in the heart of Oakland vacancy in Center. The University of Pittsburgh at the corner of Bigelow Boulevard the Pitts- Medical Center (UPMC) gobbled up and Ruskin Avenue. Also in this burgh Of- 140,000 square feet of sublease submarket, construction began on fice market space at the Heinz 57 Center and the first of two 200,000 square ended the 4Moms leased 80,000 square feet foot buildings at Bakery Square 2.0 fourth quarterO of 2014 at 15.0%, at 912 Fort Duquesne Boulevard. In the Parkway West submarket, an increase of 30 basis points from All properties are located in the the 53,000 square foot Building the beginning of the year. Asking Central Business District (CBD) sub- 300 in Pittsburgh International and rental rates maintained an upward market. Google further expanded Business Park broke ground, and trend, escalating by $0.33 during in the Oakland East-End submarket, the 60,256 square foot 400 Indus- the same timeframe, and year- leasing another 66,000 square try Drive progressed. Construction to-date net absorption posted a feet in the Bakery Square complex. neared completion for a regional positive 368,000 square feet. Class In the North submarket, Accredo headquarters for Noble Energy Inc A product remained tight, ending expanded by 56,000 square feet in Southpointe, in the South sub- the fourth quarter with an 11.0% and renewed 43,000 square feet in market. Noble will occupy 139,000 vacancy rate. Tenants requiring Keystone Summit Corporate Park square feet in Town Square Center. larger blocks of existing space while Federated Investors renewed In the North submarket, shovels faced few options and competition their lease for 94,000 square feet have hit the ground on the 47,000 from other users. in the Park. In the Parkway West square foot Blaymore IV. submarket, Calgon Carbon com- Larger lease commitments through- mitted to 76,000 square feet at Office completions during the out the year included EDMC in a Westpointe Corporate Center Four year included the 186,000 square

www.developingpittsburgh.com 51 foot Zenith Ridge One in the Southpointe segment of the South submarket, which will serve as the new headquarters for Ansys Inc. The company vacated 107,000 square feet in nearby 275 Technology Drive to accommodate expansion requirements. Also in Southpointe, the 150,000 square foot Zenith Ridge Two completed, as did the 60,000 square foot 400 Woodcliff Drive. Rice Energy leased the entire building. The 130,000 square foot Westpointe Corporate Center Four was added to the competitive inventory in the Parkway West submarket as was the 53,000 square foot Pittsburgh International Business Park Building 210. In the North Shore segment of the Fringe submarket, North Shore Place I & II delivered 80,000 square feet to the marketplace and welcomed tenants including Continental Office Environments and the Pittsburgh Post Gazette.

A lack of existing large blocks of Class A space as well as escalating rents prompted a surge in announcements regarding potential new construction projects.

Several sizable endeavors made the headlines during the year including the transformation of 192 brownfield acres at Pittsburgh Interna- tional Airport into a world-class center for international trade. The center is envisioned to include office space, a research and development component and a hotel with convention space. Environmental re-

52 DEVELOPINGPITTSBURGH | Spring 2015 In the SouthSide Works of the escalate. Should low gas prices Fringe submarket, Raleigh-based persist, growth in the energy sec- Highwoods Properties proposed a tor will likely slow. However, Several sizable four-building complex comprising Pittsburgh’s diverse economy will 400,000 square feet of office assure balance throughout the endeavors made space. The initial structure would marketplace. the headlines consist of a six-story glass office building along the Monongahela For more information: during the year riverfront. In the North Shore sec- Gerard McLaughlin, Executive including the tor of the Fringe submarket, Alco Managing Partner Parking Corporation unveiled plans Newmark Grubb Knight Frank transformation for a pair of 11-story office towers 210 Sixth Avenue, Suite 600 of 192 totaling 600,000 square feet. The Pittsburgh PA 15222 towers would be constructed above (412) 281-0100 brownfield acres a 1,227-space parking structure [email protected] at Pittsburgh on General Robinson Street. Each www.ngkf.com project is seeking an anchor tenant DP International prior to ground breaking. Three Airport into Crossings, an 11-acre mixed use development in the Strip District a world-class segment of the Fringe, gained momentum. Consisting of 300 center for residential units, up to 375,000 international square feet of office space and 1,200 parking spaces the project is trade. The center expected to complete by 2018. is envisioned to The most notable development an- include office nouncement of 2014 came late in space, a research the fourth quarter, when U.S. Steel Corporation formally announced and development that it would build a new world component and headquarters on the 28-acre site of the former Civic Arena in the a hotel with Central Business District (CBD). The Gerry McLaughlin convention space. steel giant will be the first anchor tenant for the development. When Environmental fully developed, the site will consist of 500,000 to 600,000 remediation square feet of office and retail measures, a new space as well as 1,100 residential units. The five-story headquarters access road to building will comprise 268,000 the site and square feet of space, of which U.S. Steel will occupy 250,000 square preparation feet. The building will also feature for pad site a steel museum and retail space. Construction is scheduled to break development ground in the third quarter of are expected to 2015, with a 22-month completion date. The vacation of 425,000 begin in the near square feet by U.S. Steel from its future. current location at U.S. Steel Tower will not occur until 2017, and therefore, will provide no relief for new and expanding tenants in the CBD in the immediate future. mediation measures, a new access Looking ahead to 2015, demand in road to the site and preparation for the office sector in the Pittsburgh pad site development are expected region is expected to maintain. to begin in the near future. Tenants will continue to deplete inventory and rents will further

www.developingpittsburgh.com 53 for showing what can be done.

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2014 saw a number of local developers break ground on speculative or partially pre-leased buildings in the Pittsburgh region. Eight of those structures are scheduled to be available for occupancy in the first quarter of 2015. Those projects will deliver 703,122 square feet of space of which 476,403 square feet (67.8%) is pre-leased. Gordon Food Service will be occupying one of these buildings, taking 400,000 square feet on Solar Drive in the Findlay Industrial Park.

The industrial real estate vacancy rate in Pittsburgh stood at 7.5% at the end of 2014. This figure is just slightly higher that the US industrial real estate vacancy rate, which stood at 7.2% at year’s end. Throughout the US, the average quoted annual rental rate for all available industrial real estate was $5.50 per sq.ft.; in the Pittsburgh market that average quoted annual rate stood at $5.46 per sq. ft.

The Fourth Quarter of 2014 showed a negative net absorption of space in the overall market, in large part as a result of GE-Ionics moving out of 300,000 square feet of space in Canons- burg and United Sta- tioners Supply moving out of 124,047 square feet in Cranberry. The amount of vacant sublease space in the Pittsburgh Market grew from 63,900 square feet at the end of the first quarter of 2014 to as much as 118, 829 square feet by the end of the year.

According to the CoStar Group’s 2014 Year-End Pittsburgh Industrial Market Group, the largest

www.developingpittsburgh.com 55 building in the Clinton Commerce park in Findlay Township. That building was constructed in 2009 by the Buncher Company for Flabeg, a Ger- man glass manufacturer. This facility replaces significantly older, separate, and less efficient structures located in the City of Pittsburgh.

One local industrial redevelopment project, Ambridge Regional Distri- bution & Manufacturing Center, announced plans in 2014 for the eventual construction of new flex buildings, totaling approximately 80,000 sq. ft., to complement the 1,000,000 sq. ft. of existing space, situated on approximately 85 acres, located high above the Ohio River in Beaver County.

Gene Pash, President of Ambridge Regional, indicated that in 2014 two specific long-standing tenants, signed lease deal was for a total a 144,000 sq. ft. expansion by who have grown their business at of 252,540 sq. ft. at 2250 Roswell Genco at the Allegheny Distribution the industrial park, have been so Drive in the Chartiers Industrial Center in Blawnox. Also in 2014, The successful they have relocated to Park. That space serves today as the Pittsburgh Post-Gazette relocated its new properties they purchased. Amazon Fulfillment Center. Another production and distribution opera- Also, a 60,000 sq. ft. tenant signed significant size transaction included tions to an existing 245,000 sq. ft.

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56 DEVELOPINGPITTSBURGH | Spring 2015 a ten-year lease at a rental rate Bank remained brisk at this early significantly higher than the prior stage of 2015, according to Kline. lease term rates, according to Pash. Much of the low Much of the low vacancy rates in Most renewals done in 2014 also vacancy rates in the the Pittsburgh industrial real estate included tenants taking addition market can be attributed to the space, and rents for both new and Pittsburgh industrial explosive growth of drilling activity renewal leases were up 5% - 8%, in the Marcellus/Utica Shale Gas and according to Debi Leopardi, general real estate market Oil regions. The recent significant manager of Ambridge Regional. The can be attributed to drop in oil prices has definitely impact of businesses operating in scaled back operations of a num- the Gas & Oil Industries has had a the explosive growth ber of such companies. One gas positive effect on land lease rates. of drilling activity in industry source cited October 2014 Gene Pash stated that annual land as the month when drilling-related lease rental rates have risen approxi- the Marcellus/Utica activities began to slow down in mately 50% in the past seven to ten the region. A best-case scenario for years. Shale Gas and Oil the length of this down-turn is six regions. The recent months and hopefully the worst-case Fueling much of the 2014 business scenario is about a year and a half, expansion and increased levels significant drop in oil according to the same source. of leasing activities in our region is the return of a more favorable prices has definitely As a result of the significant reduc- commercial lending climate. John scaled back operations tion in global oil prices in the second Kline, a Senior Vice President in the half of 2014, January 2015 brought commercial lending department of of a number of such news of significant cuts in both S&T Bank, stated that there was an workforce and capital expenditures 8% increase in 2014 over 2013 for companies. by several large energy-related all types of approved loan balances. companies currently operational Commercial lending activity at S&T in the Marcellus and Utica Shale

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www.developingpittsburgh.com 57 regions. Consol Energy announced it for Fedex Ground to be constructed released in 2015 for Lock and Dam will spend $1 billion dollars in 2015, on 60 acres in Jackson Township, work, as well as improvements to which reflects a 23% reduction Butler County. Sippel Development multi-modal terminals in the region. from the $1.3 billion spent in the Co. will be handling that project, Marcellus and Utica shale in 2014. which is ultimately expected to bring For more information: Similarly, Range Resources and Rex over 500 jobs to the region. Gene Galiardi Energy have cut planned spending Vice President in 2015 by 40%. Chevron is laying 2014 saw a significant increase in PA Commercial Real Estate, Inc. off 162 of its 700 workers in Ap- rail freight traffic in the region. Benedum-Trees Bldg. palachia. These announcements will Mike Filoni, Vice-President of Sales 223 Fourth Avenue, Suite 150 likely have negative ripple effects & Marketing for Carload Express, Pittsburgh, PA 15222 on the many suppliers and service stated that there was “double digit (412) 995-2232 firms to the gas and oil industries. growth” over 2013 in freight traffic [email protected] Additionally, in late January Ken- along Carload Express’ Allegheny www.penncom.com nametal announced plans that it will Valley Railroad system. The major- DP close plants and lay off workers in ity of that growth was directly response to both weakness in the attributable to the Shale Gas and Oil energy field and overall softness in industry. Projections for 2015 rail international markets. freight traffic in the region, is for continued but slower growth. Mr. The expected downturn in the Filoni added that he expects 2015 to Energy Industry will test the widely be another strong year for industrial held belief amongst economists, and firms from all sectors to continue hopes of government and business seeking opportunities to ship both leaders that in 2014 the overall raw materials and finished products economy had “turned the corner” by rail. and that the economic recovery is strong and now broad-based. The Barge traffic on the rivers was also Allegheny County Airport Author- slightly up in 2014. The bulk of the ity clearly believes that as well, materials moved, and the increase and announced in early 2015 that in those materials, was primarily Al Neyer, LLC, a Cincinnati-based related to the general increase in builder/ developer will construct a construction activity, and not the 200,000 sq. ft. warehouse/distribu- gas drilling throughout the region. Gene Galiardi tion building at the Clinton Com- According to one industry source, merce Park. Neyer officials indicated one negative impact on the river that groundbreaking could begin transportation in 2014 was the in June, and tenants could secure repairs made to the Ohio River dams occupancy as early as January 2016. at Emsworth, Dashields, and Mont- Another significant building project gomery, which slowed barge traffic announced for 2015 includes a new by 2-3 days per destination trip. 300,000 sq. ft. distribution facility Additional funding is expected to be

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burgh Market and the redevelop- between $25 and $35 per square ment of Curry Hollow Shopping foot and landlords are in a position Center. There are a lot of retailers to provide fewer concessions to in the market looking for fresh new prospective tenants. According to quality properties", Jeff stated. Integra Realty Resources, a national Once the center is improved with valuation consultant, Pittsburgh’s new facades and signage, he is overall retail vacancy rate is the hen de- confident retailers will flock to that fourth lowest in the country and veloper location. the average capitalization rate for Jeff Paul sales of quality community centers contem- Jeff isn’t alone in his optimistic at- is a healthy 7.25%. Stores con- plates the titude toward the regional market tinue to have a strong interest in renova- for retail real estate. With vacancy the market, although the decision tion of hisW newly acquired Curry rates at a four year low of 3.7% to spend on bricks and mortar loca- Hollow Shopping Center he can’t and limited opportunities for new tions is scrutinized very closely by help but be optimistic. Jeff’s com- construction, it’s a great time to many retailers. pany, Paul Property Management, be a retail landlord in Pittsburgh. purchased the property with an Rates have been rising for 16 Today’s national retailers are look- eye toward bringing the somewhat straight quarters and, with the na- ing for specific criteria when they forgotten shopping center back to tional economy coming back to life, consider where to put their physi-

life. The Pittsburgh retail market there is no sign of a slowdown in cal locations. Ideally, most retailers is as strong as it has been in quite the market. While the average rent- are looking for retail locations with a few years and he sees this as a al rate is near $12 per square foot, full stop light access, ample park- great time to acquire or develop top quality locations go for as high ing and at least one quality anchor retail property in Pittsburgh. "We as $40 per square foot. Desirable tenant. For some national tenants are very excited about the Pitts- new developments typically lease Pittsburgh can be a challenging

60 DEVELOPINGPITTSBURGH | Spring 2015 Colliers International | Pittsburgh specializes in adding value to our clients to accelerate their success.

market, due to its unique topogra- phy and convoluted highway system that makes large scale development difficult. High quality corner locations with full stoplight access are rare, and many national retailers are forced to either compromise or wait for their desired locations. Landlords with in-line locations that don’t have full highway access may have to wait for a retailer that can’t find their ideal locale. Many Commercial Real Estate Sales and Leasing Services retailers may be forced to wait for > Valuation and Advisory the development of new property > Real Estate Management to meet their needs. > Corporate Solutions > Investment > Sustainability > Auctions Most tenants agree that the Pitts- burgh market could use more large 412 321 4200 | www.colliers.com | @PghCRE scale developments and developers Learn how we are living our values of service, expertise, are doing their best to meet this community and fun at www.colliersinternationalpittsburgh.com need. Significant projects that are currently under development or planned include McCandless Cross- ing, Sienna at St. Clair, Newbury Market and Northway Collection. Anchored by Trader Joe's, Cinemark and Lowes, McCandless Cross- ing has proven to be a success for DLA+ A UNIQUE APPROACH TO Adventure Development’s Kevin ACHIEVE YOUR UNIQUE VISION Dougherty although completing transactions can be difficult. Ac- Minimize risk. Maximize results. cording to Kevin, “The amount of time to get decisions made has greatly increased. It is decision by committee. The negotiation is pro- tracted and we had several retailers that completed the process and still could not pull the trigger and ex- ecute their lease.” Many national retailers have a real estate committee that review location decisions, Architecture interior Design and a site that passes local review PlAnning may not meet the committee’s re- consulting quirements.

The nature of modern retail development has changed, relying less on the large department store concept and leaning more toward grocery anchored and entertain- www.DLApLus.com Pittsburgh ment retailing, where restaurants 412-921-4300 play a larger role. “The tenant

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www.developingpittsburgh.com 61 “I should say the death mix is very important and retail- “I should say the death of the store ers feed off of each other’s uses,” of the store has been has been greatly exaggerated. explained Mr. Dougherty.� Part of There will be a transformation of this shift is due to lackluster sales greatly exaggerated. retail real estate, but not an end to from traditional department store There will be a it. You could step back and connect retailers like JC Penney and Sears, the dots and say, ‘the world’s go- who have not managed to keep up transformation of ing to have e-commerce only’ and with changing consumer demands. retail real estate, that ‘stores are dead,’ but we don’t Likewise Radio Shack has been try- see that future at all – in part being desperately to stave off bank- but not an end to cause I don’t think consumers want ruptcy and close over 1,000 stores. that future. I think people like to While Radio Shack may be a victim it. You could step shop and they like the serendipity of its own overexpansion, many back and connect the of stores.” – Devin Wang, President blame the internet for this change Ebay Marketplaces (source “How in retail market strategies. dots and say, ‘the Digital is Transforming Retail: The View From eBay,” McKinsey & Com- The effect of the internet on retail world’s going to have pany, July 2014) sales is real, although perhaps less e-commerce only’ and catastrophic to real estate than Many retailers, such as Crate & Bar- some would proclaim. While inter- that ‘stores are dead,’ rel, Starbucks and American Eagle net sales have expanded exponen- are moving toward an omni-chan- tially over the past decade, online but we don’t see that nel marketing plan, where their transaction figures are still minis- future at all – in part online presence is integrated into cule compared to in-store sales. In the physical shopping experience or 2013, in-store sales accounted for because I don’t think drives in-store sales. Consumers are over $4 trillion, while online sales consumers want that still looking for a retail shopping were $263 billion. According to experience beyond what they can the International Council of Shop- future. I think people find on the internet. The net effect ping Centers, 94% of total retail on retail centers may be a prolif- spending is done in-store, while like to shop and they eration of smaller scale stores that a recent MIT report showed that like the serendipity don’t need to carry as much inven- 80% of consumers check prices tory, and a greater emphasis on online. The belief is that consum- of stores.” – Devin restaurants and entertainment. ers still prefer to see and touch the While this move toward smaller products that they purchase; they Wang, President Ebay stores may play out eventually, it just do it with their smartphone in Marketplaces hasn’t stopped some significant hand, or after doing research at merchants from expanding their home. large store formats. Value oriented

62 DEVELOPINGPITTSBURGH | Spring 2015 stores like Walmart and Dollar For more information contact: General continue to aggressively Mark E. Anderson expand their real estate presence Vice President, Office and Retail throughout the country. Grocery Colliers International stores like Giant Eagle and Weg- Two Gateway Center, 603 Stanwix mans continue to expand larger Street, Suite 125 store formats that offer greater Pittsburgh, PA 15222 amenities for shoppers and higher 412-321-4200 ext. 222 per square foot sales numbers. [email protected] At the opposite end of the size www.colliers.com spectrum, smaller grocery con- DP cepts like Aldi’s, Trader Joe’s and Whole Foods continue their growth trends. Mark Anderson One big change for 2015 in Pitts- burgh’s retail landscape is the shuttering of Bottom Dollar’s grocery locations, due to the chain’s purchase by competitor Aldi’s. Bottom Dollar over-extended itself with an aggressive growth strategy Before our steel and the closing of Bottom Dollar’s stores could offer an opening for reinforces anything, competitors like Supervalu’s value brand Save A Lot. Supervalu CEO MB&M supports us. Sam K. Duncan recently told ana- lysts “We compete very well with Aldi. We will gladly take them on Robert Simpson, President and Owner Simpson Reinforcing Inc. any time, any place.” It is unclear MB&M client since 1994 how Aldi’s will handle the divesti- ture of the former Bottom Dollar locations, although it is anticipated that most will be available for lease or sale. While Bottom Dol- lar focused its stores on a lower demographic profile, it still took spaces in some of Pittsburgh’s top retail markets, such as McKnight Road. Those locations may be highly sought after by other retail uses.

The availability of the closed Bottom Dollar stores will help to relieve some market pressure on prospective tenants, but the Pittsburgh retail real estate market should remain tight for the fore- seeable future. Rents are expected Maiello lays the legal groundwork to continue to increase throughout for our ConstruCtion Business 2015 and into 2016 with retailers facing stiff competition for high quality locations. Without substan- tial new development vacancy rates should continue to decrease. De- velopers will continue to look for opportunities for new development or the redevelopment of existing obsolete properties. 3301 McCrady Rd.Pittsburgh, PA 15235 412-242-4400 - mbm-law.net

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Equal Housing Lender. Member FDIC.here Copyright are © 2012,a Dollar Bank, Federalthe Savingsprogram Bank. would end because have obligations and actuarial realiBUS037_12- handful of con- the economy was strong enough to ties – death benefits – that require a cerns about the withstand the loss of the artificial sufficient return to cover the obliga- prospects and support. While markets rose early in tions and turn a profit. In a 10-Year prosperity of 2014 with an eye towards an interest Treasury environment of two percent BUS037_12.indd 1 2/14/12 11:08 AM the capital mar- rate bump in mid-2015 – the Fed’s or less, bonds won’t satisfy the needs kets at theT start of 2015 but liquidity stated plan – bond buyers gradually of such institutions. is not among them. Depending on the accepted the trajectory of the taper- lending channel, concerns exist about ing, especially as the economy grew Dividend yields for REIT’s are roughly regulation, spreads, competition and unexpectedly faster in the third and double the yield of the 10-Year global economic health. What there fourth quarter of 2014. With growing and within one percent of the yield is no comment about in 2015 is the global issues driving more investors for BAA-rated corporate bonds. availability of funds and the desire to towards U.S. Treasuries later in the Until interest rates push the spreads deploy them in commercial real estate. year, interest rates ended 2014 lower between real estate returns and bonds than the rates a year earlier. further apart, capital will be looking “Everyone is back for real estate. in the game,” says Daniel Puntil, senior Attendees of the Mort- vice president for gage Bankers Associa- Grandbridge Real tion’s (MBA) Commercial Estate Capital. “The Real Estate Finance/ life companies have Multi-family Housing increased their alloca- Convention experienced tions, CMBS is back the increased appetite and all lenders are for real estate firsthand. back because of the Attendance at the MBA relative value of the convention was over bond market.” 5,000 people, more than double what it had been Perhaps the discussion in 2009. Puntil relates of capital market that Sun Life upped its conditions should allocation for real estate begin with interest from $500 million to $800 rates. Up through the million. Another of the middle of 2014, there life companies doubled its was anxiety about allocation to $1.2 billion, the impending end raising its minimum deal of the Federal Reserve’s bond-buying size from $25 million to $40 million program, or quantitative easing. Rates Commercial real estate is the risk-on in the process. The higher interest for the benchmark 10-Year Treasury bet of choice for large institutional also coincides with a cyclical peak in bill jumped in late 2013 when the lenders when the risk-off bet – bonds maturing loans, which can erode the Fed began to taper its $85 billion – produces returns that are too low share of the commercial real estate monthly bond purchases, even though to meet the lenders’ needs for yield. loans in the lenders’ portfolios. the Federal Reserve pointed out that For example, life insurance companies

www.developingpittsburgh.com 65

“A lot of loans are rolling off for CMBS and life companies, so they would have to increase allocations just to meet their averages of 12 to 14 percent,” notes Puntil.

While U.S. lenders are seeking yield, there will be increased interest and competition from foreign investors. According to the Association of Foreign Investors in Real Estate’s annual survey conducted in December, 90 percent of respondents planned to maintain or increase the same level of investment in U.S. properties that they had in 2014. Creating Value Throughout the Construction Process Foreign investors continue to rank the U.S. higher than other Western countries for stability and capital appreciation. This puts the United States, in terms of attractiveness, ahead of European economies and emerging economies like China and Brazil.

“The foreign capital coming into the U.S. is a currency hedge, a security hedge,” says Gerard Sansosti, executive managing director for HFF. “The perception of the U.S. as a safe place for whatever fear is out there is why overseas investors are parking money here.”

For borrowers, market conditions like those that exist today are extremely favorable. Investors seeking yield Connecting ideas, have few places to put their money, especially since the equity markets are capital and clients. at record highs. Treasuries offer safety and poor returns. With commercial real estate fundamentals improving, lenders and investors are working hard Grandbridge Real Estate Capital provides the vital link between complex market to mobilize their cash in acquisition conditions and capital solutions. As a national full-service leader in commercial and and development projects. Add in multifamily finance, we combine our wide range of capital sources with a knowledgeable the downward pressure on rates and and experienced team to deliver results, deal after deal. spreads and the cost of capital is at historic low levels. But the danger in our scope of services includes: such conditions is that the competition for loans will encourage the kinds of ® - Freddie Mac Program Plus Seller/Servicer | Seniors Housing practices that created the “frothy” - Fannie Mae DUS® markets of 2006 and 2007, practices - FHA-insured Loans | MAP and LEAN that led to crises a few years later. Thus - Nearly 50 Insurance Companies far, at least, lenders seem to be keeping - CMBS | Institutional Investors | Pension Funds their heads. - Proprietary Lending Platform | Structured Finance - $29 Billion+ Loan Servicing Portfolio Feedback from lenders at the MBA Convention showed that loan-to- value ratios remained at or below 80 C o n t a C t U s percent, with the exception of certain multi-family deals. Underwriters are Two Gateway Center | 603 Stanwix Street | Suite 1899 Pittsburgh, PA 15222 | Phone 412.391.3366 | Fax 412.471.1773 considering rents in place for income, rather than trending rents to make grandbridge.com deals work. CMBS underwriting is

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66 DEVELOPINGPITTSBURGH | Spring 2015 becoming more restrained for hospitality properties – which many feel peaked in 2014 – looking at trailing 12 months income and the performance for 2012. And while rates are still being quoted at between 175 and 250 basis points above the 10-Year Treasury rate, some lenders have begun putting a floor in their quote. This would keep rates at four percent, for example, even if the 10-Year rate dropped to 1.5 percent or RELATIONSHIPS | REPUTATION | RESULTS lower.

Rate floors would be welcomed by most banks today. With interest rates at such low levels, banks need higher loan volumes to generate revenue from deals. Because of the extended period of low rates, refinancing has run its course and the results from 2014 – a 39 percent decline in mortgage originations to $1.12 trillion – showed that. With Fannie and Freddie re-introducing more products that will allow lower down payments – including a more streamlined loan with three percent down –originations should rise in 2015, but not enough to ease competition. LANDAU BUILDING COMPANY 9855 RINAMAN ROAD, WEXFORD, PA, 15090 724-935-8800 www.landau-bldg.com “The permanent market is driven more by competition with the banks. The banks set the bar,” notes Puntil. “Every- body looks at CMBS as the bad guys but the preponderance of the lending is ENVIRONMENTAL MANAGEMENT & SITE DEVELOPMENT ENGINEERING being done by the banks.”

Numbers bear out Puntil’s point. In the fourth quarter of 2014, chartered depository institutions held $1.6 trillion of the total $3.3 trillion in outstanding loans for commercial real estate and multi-family apartments. That’s roughly half the market and nearly three times the CMBS loan total of $585 billion. Life insurance companies had the third- highest share at $350 billion in loans. ENGINEERING STRONGER COMMUNITIES AT THE GROUND LEVEL In the hey-day of the CMBS market, during the real estate bubble, CMBS issuances exceeded $300 billion in KU Resources offers a wide range of 2007. As designed, CMBS was always environmental management and meant to be a vehicle through which site development engineering services. investors could look for higher returns Let us do the groundwork to help by investing in riskier assets. The minimize your risk and maximize your profits. attraction of CMBS bonds was that the higher risk properties were identified and aggregated together as “B” or KURESOURCES.COM “C” tranches of the bonds, allowing the buyer to price the risk higher and spreading the risk across many properties. CMBS was intended to appeal to seekers of higher yields while giving

www.developingpittsburgh.com 67 Apartment Complexes—Senior Living Facilities—Condominiums—Hotels borrowers with riskier projects or properties a way to get to market, albeit with a higher cost. When the bubble burst, the CMBS market fell into a period of five years in which less than $50 billion in bonds were issued in the U.S.

As with most of the property-related financial instruments that were oversold in the 2000s, CMBS issues saw delinquencies and defaults rise dramatically through the post-recession period. Delinquency for CMBS peaked at 8.5 percent in early 2012 but has fallen to 4.03 percent at the beginning of 2015. Volume in CMBS issuances recovered similarly, hitting $94 billion last year in U.S. volume and $100 billion globally. Expecta- tion for 2015 CMBS issuances are for between $110 and $115 billion. That’s still only one-third of the 2007 peak.

“The forecast is for $125 billion [in General Contractors CMBS] but I don’t see that happen- Fast and safe execution with a clear cost ing,” predicts Sansosti. Even with 45 benefit solution for our clients. to 50 CMBS lenders in the market, Sansosti says the recent deals are Dave McMullen - [email protected] showing that everything coming to www.franjoconstruction.com 412-462-4371 CMBS is not getting into the bonds that go to market. “The recent deals have been starting with $1.3 billion pools but they have gone down to $800 million because the ‘B’ piece TWO TITLES buyers are kicking deals out. That shows discipline to me.” ONE INDUSTRY For banks, the appetite to partici- pate to a higher level also exists but the regulatory environment is still one that holds them back.

In the wake of the financial crisis of 2008, government and industry regulation grew tighter. Federal regulation has added significantly to the bank’s cost of doing business in 2015, creating compliance requirements that have added to lenders’ overhead. Global banking industry self-regulation by the Basel Com- mittee on Banking Supervision also tightened. The main issue was risk rating for loans and the cash that banks were required to reserve as provision for loan losses. As might NO EVENTS. JUST INFORMATION be expected, standards for risk rating were higher after 2008 and INVEST YOUR ADVERTISING DOLLARS WHERE YOUR CUSTOMERS ARE INVESTING THEIR TIME. became quite arbitrary. There was no room for a loan with a “good Call us to put your business in the right places. 412/837-6971

68 DEVELOPINGPITTSBURGH | Spring 2015 story” from a long-term borrower time to evaluate how much HVCRE little or no inflation, there won’t be with excellent credit. will impact loan production but the much pressure to continue. In fact, as good news is that it appears not to be global economies remain risky bets, “Someone asked me if the pendulum as intrusive as feared. demand for U.S. debt grows and the was swinging back the other way on need to offer higher rates is nonexis- credit. I told him that banks had all “HVCRE has already started to impact tent. What rate concerns exist are for let go of the pendulum,” jokes Chris our business but only for develop- 2016 and beyond. Martin, president for Northwest Sav- ments that have less than 15 percent ings Bank’s southwest region. “What’s equity or above 85 percent of the “The market condition or change tethering us now is the oversight.” appraised total value,” notes Kris that will have the most significant Volpatti, for First Niagara Financial impact will be if interest rates actually Compounding the risk oversight in Group. Volpatti says that the regula- rise. Astute developers are having 2015 is the implementation of Basel tion is being interpreted differently by conversations around the probability Committee regulations for High Veloc- financial institutions and more time of rising interest rates,” says Craig ity Commercial Real Estate (HVCRE). will be needed to judge any impact. Howard, vice president, commercial The definition of HVCRE is fairly real estate for Fifth Third Bank. broad, taking in some percentage of Pittsburgh regional bankers are mostly “Increased interest rates could come commercial real estate acquisition in agreement about the regulatory in the form of increased base rates and development deals. Loans that environment, and lending conditions such as LIBOR, prime rate or U.S. meet the HVCRE definitions must be in general for 2015. In a Tall Timber Treasuries or in loan pricing spreads carried on the bank’s books with a Group survey of banking executives reflecting increased risk or increased

risk weighting of 150, meaning that it and credit officers from Southwestern costs related to the regulations of would be judged one-and-a-half times PA’s publicly-traded and privately-held Dodd/Frank and Basel III (meaning riskier and could require one-and- banks, over 81 percent agreed that HVCRE). This potential rising tide of a-half times the reserves required in the regulatory environment would be rates will increase most developers’ 2014. There are also some provisions the same or tighter; that underwriting cost of equity and cost of debt. This that could be especially onerous for standards would be the same or ease; increase in carrying costs could force Pittsburgh developers. and that interest rates would stay many cost sensitive projects to be put within 100 basis points in 2015. The on hold.” For example, one restriction on respondents were nearly unanimous valuation requires that any land put in in taking a more cautious view of “What concerns me is the plan for as equity be valued at its cost, rather apartments. The only area with slight easing, the unwinding of the rates up- than its market value. Pittsburgh has disagreement was the question of ward,” notes Paul Griffith, managing more than its fair share of develop- their bank’s expectation for loan pro- director for Integra Realty Resources. ers that have legacy land holdings duction, which 63.6 percent thought “What sort of unknown, what black that were acquired years or decades would increase in 2015. swan event could occur that would earlier. This regulation on land value blow up whatever plan the Fed has for could cost developers dearly, since the Almost all financial market observers easing the rates back to normal.” difference between the market value agree with Pittsburgh’s bankers on and the cost basis has to be made up the subject of interest rates. The “We don’t see the rate going up by in cash. threat of rates jumping hung over the more than 25 basis points or so. It’s commercial real estate market like not the first increase that’s important. HVCRE regulations ignore many of the Sword of Damocles over the past It’s that the trend is set,” says Martin. the dimensions of credit-worthiness few years, yet even the most hawkish “It’s what happens after that that is and underwriting. High debt coverage observers don’t expect rates to go up important. Rates tend to go up more ratios or the fact that the commercial until mid-year and then only slightly. from there.” property is owner-occupied or Recent significant improvements in DP adequately income-producing won’t the job market and the economy in serve to offset the risk rating. As of general seem to assure that the Fed mid-February there has been little will let rates rise mid-year but with

www.developingpittsburgh.com 69 art & science full-service, turnkey approach to design and construction for every claycorp.com market segment. Legal/Legislative Outlook

although a mechanics’ lien gener- The amendment will apply to me- Pennsylvania ally has priority as of the date of chanics’ liens perfected on or after visible commencement of work, a the effective date of September 7, Enacts mechanics’ lien was subordinate to 2014, including liens relating to an open-end mortgage where the construction of an improvement for Amendments That proceeds are used to pay all or part which the visible commencement of of the cost of completing erection, work occurred prior to the effective Significantly Alter construction, alteration or repair date. Now that the amendment is of the premises. The Kessler Court in effect, open-end construction The Mechanics’ interpreted the Lien Law to mean loan mortgages, where proceeds are that, in order for the exception to used for purposes other than “hard Lien Law priority to be applicable, all of the costs,” will regain their “super- loan proceeds must be used for hard priority” over mechanics’ liens, as By Danny P. Cerrone Jr., Esq. costs and not for other purposes, long as the threshold requirement such as closing costs, satisfaction of for payment of the loan proceeds to wo significant an existing mortgage or payment of “costs of construction” is met. amend- other judgments and liens. ments to the B. Payment May Be A Defense Pennsylvania The amendment clarified that for Certain Residential Mechanics’ priority is enjoyed by all open-end Projects Lien Law (the mortgages “where at least 60 per- “Lien Law”)T were enacted last year. cent of the proceeds are intended The July 2014 amendment also On July 9, 2014, the Lien Law was to pay or are used to pay all or eliminated a subcontractor’s right to amended to clarify that an open-end part of the costs of construction.” file a lien against residential prop- mortgage construction loan, where In addition to clarifying that loan erty when the residential property at least 60 percent of the proceeds proceeds may be used for purposes owner has paid the full contract are used to pay the costs of con- other than construction costs, the price to the prime contractor. This struction, will have priority ahead amendment added an expansive amendment only applies to a single of any mechanics’ lien claims, even definition of “costs of construc- townhouse or a building that con- when the visible commencement of tion” to include all costs, expenses sists of one or two dwelling units work occurred prior to the record- and reimbursements pertaining to intended to be used by the owner or ing of the open-end mortgage. The erection, construction, alteration, a tenant of the owner. Additionally, amendment also restricts, in certain repair, mandated off-site improve- where the full price was not paid to situations, a subcontractor’s right ments, government impact fees and the prime contractor, the amount of to file a mechanics’ lien against other construction-related costs, the mechanics’ lien can be reduced residential property. On October 14, including, but not limited to: costs, to the unpaid amount of the con- 2014, the Lien Law was amended to expenses and reimbursements in the tract price. create a structured notice procedure. nature of taxes; insurance; bonding; The amendment created a central inspections; surveys; testing; per- C. The Construction Notices repository for filing notices related mits; legal, architect, engineering, Directory to construction. The amendment will consulting, accounting, management provide owners with a better method and utility fees; tenant improve- The October 2014 amendment cre- of identifying subcontractors and ments; leasing commissions; pay- ated an internet-based Construction material suppliers that may have lien ment of prior filed or recorded liens Notices Directory (the “Directory”). rights. or mortgages, including mechanics' The Pennsylvania Department of liens; municipal claims; mortgage General Services (“DGS”) was A. Open-End Mortgage origination fees and commissions; designated to create and maintain Construction Loan finance costs; closing fees; record- the Directory. The Directory must be ing fees; title insurance or escrow operational by December 31, 2016. The July 2014 amendment was in fees; or any similar or comparable If the Directory is operational on a response to the Superior Court's costs, expenses or reimbursements date other than December 31, 2016 decision in Commerce Bank/Har- related to an improvement, made (whether earlier or later), the DGS risburg, N.A. v. Kessler, 46 A.3d or intended to be made, to the must publish written notice, in the 724 (Pa. Super. 2012). Prior to property. Pennsylvania Bulletin, in advance of Kessler, the Lien Law provided that, the actual operational date.

www.developingpittsburgh.com 71 the county in which the project is lo- The amendment to the Lien Law cated; (3) the legal description of the applies to a “searchable project.” The amendment property upon which the project is A searchable project is a project in being constructed, including the tax which the construction, alteration permits four types parcel identification number; (4) full or repair costs are $1.5 Million or of notices to be filed name, address and email address of more. If the project costs are less the Project Owner; (5) if applicable, than $1.5 Million, the amendments with the Director y: the name and contact information do not apply and the existing Lien of a surety for any performance or Law procedures should be followed. (1) Notice of payment bonds, including the bond Commencement; (2) numbers; and (6) the unique identify- The amendment permits four types ing number that is assigned to the of notices to be filed with the Direc- Notice of Furnishing; Notice of Commencement. tory: (1) Notice of Commencement; (3) Notice of (2) Notice of Furnishing; (3) Notice The Project Owner must post a of Completion; and, (4) Notice of Completion; and, copy of the Notice of Commence- Nonpayment. ment in a conspicuous place at the (4) Notice of property prior to the commencement First, the Project Owner, or an agent Nonpayment. of any physical work. The Project of the Project Owner, may file a Owner also has an obligation to take Notice of Commencement. The reasonable measures to ensure the Notice of Commencement must be Notice of Commencement remains filed prior to the commencement of rized by contract and the Project posted until the completion of the any labor, work or materials being Owner assumes responsibility for the project. “Reasonable measures” furnished for the Project. The Project contractor’s actions. The Notice of means that the Project Owner must Owner may designate a contractor Commencement must include (1) the repost the Notice of Commencement as its agent for purposes of filing full name, address and email address within 48 hours after becoming the Notice of Commencement, if of the contractor; (2) the full name aware of, or being notified (verbally the contractor is specifically autho- and location of the project, including or in writing), that the Notice of

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72 DEVELOPINGPITTSBURGH | Spring 2015 Commencement is not posted. The a written notice that the failure to Notice of Completion within 45 Project Owner is required to make file a Notice of Furnishing will result days of the actual completion of reasonable efforts to ensure that the in the forfeiture of lien rights. work. The Notice of Completion is Notice of Commencement is made transmitted, through the Directory, part of the contract documents The Lien Law amendment protects to all subcontractors who filed a provided to all subcontractors. against an unlawful attempt to Notice of Furnishing. The Notice of force a subcontractor to waive its Completion is filed for informational Second, if the Notice of Commence- lien rights by not filing a Notice of purposes only. ment is properly filed and posted, Furnishing. A subcontractor cannot a subcontractor is required to file a be required to refrain from filing Fourth, and also for informational Notice of Furnishing. A subcontrac- a Notice of Furnishing as a condi- purposes only, a subcontractor is tor must file the Notice of Furnishing tion precedent to entering into a permitted to file a Notice of Nonpay- within 45 days after first performing contract. Any person that requests, ment when payment is not received. work or delivering materials to the encourages or requires a subcontrac- The failure to file the Notice of project. The Notice of Furnishing tor not to file a Notice of Furnishing Nonpayment does not impair a must include: (1) a general de- may be subject to criminal penalties. subcontractor’s lien rights, nor does scription of the labor or materials If a subcontractor proves that it did the Notice of Nonpayment relieve furnished; (2) full name and address not file a Notice of Furnishing, as a a subcontractor from its obligation of person supplying the labor or direct result of a Project Owner or to comply with the requirements to materials; (3) full name and address its agent, the subcontractor will not perfect a mechanics’ lien. of the person that contracted for the lose its lien rights and will have a labor or materials furnished by the civil cause of action against the per- Danny Cerrone is a member in Clark subcontractor; and (4) a sufficient son who caused the subcontractor Hill PLC’s Construction Practice description of the project in order to to not file a Notice of Furnishing. In Group. Should you have any ques- identify it based on the description such a situation, the subcontractor tions regarding these amendments, set forth in the Notice of Com- would be entitled to recover actual or the Lien Law in general, please mencement. A subcontractor’s fail- damages, in addition to reasonable feel free to contact him at dcer- ure to “substantially comply” with attorney fees and court costs. [email protected] or 412-394- these requirements results in the 7757. Learn more about Clark Hill at forfeiture of lien rights. A contract Third, the Lien Law amendment www.clarkhill.com. for a searchable project must include permits a Project Owner to file a DP Mt Lebo Office Ad:Layout 1 8/15/13 10:19 AM Page 1

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ing to the Centers for Disease and The problem is something of a Prevention, the birth rate in the U.S. chicken-or-egg question. A sud- reached an all-time low in 2013 (the den or steady influx of population last full year for which there is data). into Western PA would not in and The general fertility rate in 2013 was of itself ensure future prosperity. More Population, 1.86 (the number of births divided People move to where jobs are being by the mean number of women aged created but the migration also does More 15-49). That’s well below the rate create its own employment opportu- of 2.1 needed to maintain a stable nities. When the energy crises of the Opportunities population in the U.S. There were 1970s made oil companies extremely (And More Problems) nine percent fewer births in 2013 profitable, hundreds of thousands of than in 2007. jobs were created in the oil indus- It’s clear that our try. The economic driver attracted region will be Without immigration to fill the more than a million people to move experiencing a gap between births and deaths, to Houston. That in-migration in third generation population will decline. So too, will turn created jobs by the tens of of transforma- the demand for services and the thousands in industries that served tion. Our diverse available labor force. Should a lower consumers and businesses. economy is strong, but a wave of birth rate continue, the demand gap “ will accelerate as the demographic The Allegheny Conference’s strategy demographic changes is coming that will challenge that strength. We tsunami that is the Baby Boom ages is to target population on the move can let it happen to us, or we can and dies. to attract talent. Some of those on take the lead. If we are proactive the move are veterans, one-third of and become a magnet for talent, we Metropolitan Pittsburgh has these whom will transition out of service have the opportunity to have the same demographic issues, but to a to a location that has jobs. Another youngest, best-skilled population in greater degree. Even as the median initiative is Hola Pittsburgh, which the country,” age of a City of Pittsburgh resident focuses on the current emigration of is declining significantly, the median educated workers from Puerto Rico. Allegheny Conference on Community age of the workforce in the greater There is also an effort to provide Development CEO Dennis Yablonsky metropolitan area is not. Pittsburgh what Laura Fisher calls “business introduced the Conference’s 2015- has the oldest working population boot camp” to arm college gradu- 2017 strategic plan with that assess- of any major metropolitan area. ates with some of the skills needed ment of Pittsburgh’s human resource The workers here also work longer. to hit the ground running in the challenge. After engaging more And these numbers aren’t going industries growing in Pittsburgh to than 1,000 conversations about to change without intervention. keep grads in the region. the region’s needs, the Allegheny There are 135,000 to 140,000 more Conference concluded that increas- residents between the ages of 45 Fisher, senior vice president, special ing the population of Southwestern and 65 than there are between the projects for the Allegheny Confer- PA was its highest priority over the ages of 24 and 45. And one of the ence, sees the improving economy coming years. This conclusion came real job creating engines in South- creating opportunities and chal- from hearing the frustration of hun- western PA, the energy industry, is lenges for the grads and employers. dreds of business leaders about their aging much quicker than the average “The recession gave corporations difficulties in recruitment and from industry. the chance to get college graduates objective analysis of the demograph- with work experience. That won’t ics of Southwestern PA. In the final That means that by 2030, Pitts- continue.” analysis, the demand for population burgh’s workforce will have gone growth is as much about maintaining through what the gas industry “If you look at the Southwest – strength as it is about growth. calls “the great crew change.” The Texas, Arizona, Colorado – places upside? Within a decade, Pittsburgh that have had a lot of in-migration To set the record straight, the need may well have the youngest work- over the last decade or so, over for people is not just a Pittsburgh force. The downside? Thousands of the past 20 years the movement to problem. While Pittsburgh’s much- critical jobs may be unfilled. In a warmer, more hospitable climates publicized older population is indeed city with over 24,000 unfilled jobs has generated demand for jobs in a reality, so is the fact that America in 2015, that’s not an attractive hospitality or retail. These were not as a whole is growing older. Accord- prospect. necessarily high income jobs,” explains Guhan Venkatu, vice president

www.developingpittsburgh.com 75 and senior regional officer for the disputes the claim that rapid growth Federal Reserve Bank. “If you look at leads to prosperity. the Northeast, there hasn’t been so “People can move much population growth as income Others are concerned that significant growth.” to a city because of population growth would impact better quality of life quality of life. “[Growth] is not al- Venkatu makes the point that popu- ways bad, but if adding more people lation attraction isn’t as important but if the city has made a place safer, the world’s big- as an in-migration of people making tech jobs or higher- gest cities would be safe havens,” better incomes. That is encouraging notes Tim Inglis, CEO of the Colcom for an area that may not have all the paying jobs then Foundation, a Pittsburgh-based natural advantages that a southern people can have a foundation committed to examining or western city has. the causes and consequences of better quality of overpopulation and its impact on “People can move to a city because employment,” environmental sustainability. “We’re of better quality of life but if the city learning that sustainability and has tech jobs or higher-paying jobs safety go hand-in-hand. Growth is then people can have a better quality inherently not sustainable. I don’t of employment,” he continues. “If think we’ve noticed the correlation the 2010 study on The you look at the data from the Sunbelt between the number of “Best in Relationship between Growth and it shows that cities with a gradual the U.S.” and “Best in the World” Prosperity in the 100 Largest Metro- influx of people are doing well. Cities ratings and our stable population.” politan Areas. In the abstract of the that are attracting a better-educated study, Fodor wrote: population are also doing well.” Inglis uses an analogy of unsustain- able growth and the early stages “This study examines the relation- Whether the Pittsburgh of 2030 of childhood, pointing out that ship between growth and economic needs a couple hundred thousand maintaining the growth rate of the prosperity in the 100 largest U.S. more people or just a couple hun- first five months of a newborn’s life metropolitan areas to determine dred thousand people that are a would lead to the child weighing whether certain benefits commonly better fit for the work being done more than the planet Earth before attributed to growth are supported in the region is the nub of the age 30. In response to concerns by statistical data. The annual popu- question. The answer may depend about the potentially inadequate lation growth rate of each metro on the kinds of work being done. workforce, Colcom points out that area from 2000 to 2009 is used to Certainly if the vision being cast by a tighter labor market can lead to compare economic well-being in the natural gas industry comes true, higher wages and quality of life terms of per capita income, unem- there will need to be people living benefits for a broader cross section ployment rate, and poverty rate. The in Pittsburgh who aren’t here yet, of the region. study finds that faster growth rates probably a lot sooner than in 2030 are associated with lower incomes, too. If there is a gradual shift in the “We need to work even harder to greater income declines, and higher kinds of jobs here to a more highly- help people who already live here poverty rates. Unemployment rates skilled workforce, the solution may through training and education, as tend to be higher in faster growing lie in providing better direction to opposed to the shortcut of importing areas, though the correlation is not those being educated at the present. talent,” he asserts. statistically significant at the 95% confidence level. The 25 slowest- The latter will be a slightly easier Fisher explains that working with the growing metro areas outperformed solution. Attracting population to underserved populations in Western the 25 fastest growing in every move to an old northern or Midwest- PA is a key piece of the workforce category and averaged $8,455 more ern city is a daunting challenge and strategy. She points to the Three in per capita personal income in with it comes problems that Pitts- Rivers Workforce Investment Board 2009. The findings raise questions burgh doesn’t currently experience (TRWIB) as an example of using the about the efficacy of conven- to a great degree. resources of the public and private tional urban planning and economic sectors to more efficiently address development strategies that pursue Over the past decade the region the gap between those looking for growth of metro areas to advance has been honored with a plethora work and employers looking for the economic welfare of the general of “best of” awards that related to skilled workforce. One of TRWIB’s public.” the quality of life, including afford- board members, Mark Cherna, ability and safety. For those who led the development of a Data It’s worth noting that the timeframe advocate against growth for the sake Warehouse in his role as director of of Fodor’s study ends with two un- of growth, an influx of population Allegheny County Department of Hu- usually difficult years economically. could risk those qualities. man Services. The Data Warehouse That steep decline in employment tracks anyone getting social services in 2008 may have exaggerated the Eben Fodor of Fodor Associates, an in the county, allowing those in a findings to some degree but during urban planning consultant, authored position to help or hire to have an the full span of the study the data

76 DEVELOPINGPITTSBURGH | Spring 2015 inventory of those in creator it once was but need. the immigrants continue to flock to southeastern “It’s not just a moral Michigan because there imperative but also an are others like them economic imperative to there. That cultural help educate and employ familiarity gives refugees those in underserved people to talk with, communities,” Fisher places to worship and says. “It starts with the interact while they learn willing, those who want to assimilate into Ameri- to move into family- can culture. Those who sustaining jobs.” have studied the density of Muslim immigration in Providing training and Michigan have concluded opportunities to the that the cultural familiar- underserved communities ity is far more influential also helps with the lack than the draw of a better of diversity in the region. economy that other cities A greater portion of can offer. those in poorly-resourced communities are minori- How does a community ties. Helping to pull the with small numbers of existing minority popula- new immigrants – like tion into sustainable Pittsburgh – create that prosperity helps elevate cultural familiarity? In a the communities in which country that is becoming those people live and more non-Caucasian, is a positive signal for the lack of diversity may considering Pittsburgh make Pittsburgh less as a place to live. We attractive to talented can look to southeastern people who would want Michigan to see how to work in the kinds of an industrial region can jobs that are available. appeal to ethnic or racial The challenge goes be- minorities. yond matching up people to job openings. The City of Dearborn has long been home to “It starts with a job but a disproportionate share it’s about building a life in of Arab and Muslim a place,” explains Laura Americans. Attracted first Fisher. “Is there depth in by the job opportunities the opportunity? Will his offered by Ford Motor or her spouse have work Co., Arab immigrants opportunities? Is there a have continued to come community to meet ethnic to Dearborn. Nearby or racial needs? How do Hamtramck is now home you network in a city to a population that is where you don’t know nearly half Muslim. anyone?” DP While the original immigration wave was primarily Lebanese, as a result of the warfare of the 1970s, the unrest in the Middle East over the past five years has driven another immigration wave of Iraqis, Syrians and Yemenis. The auto industry is no longer the job

www.developingpittsburgh.com 77

Voices

"What is the most important thing that the Wolf administration can do to help economic or real estate development in your county?"

Jeff M. Kotula Don Chappel Michael P. Coonley AICP President Executive Director Executive Director Washington County Chamber of Greene County Industrial Devel- Armstrong County Department of Commerce opments Inc. Economic Development

The most The diver- My initial important sity of the reaction to thing ten county this question the Wolf south- was simply Administra- western to say that tion can do Pennsylva- I want the to assist nia region Governor to economic is what show me he growth makes the has the ability in Wash- area unique to lead both ington when sides of the County and comparing aisle. If he the Com- it to the can do this, monwealth is to seriously consider rest of the Commonwealth. One many - if not most - of the obstacles the effects of a severance tax on plan does not fit all qualifies for facing successful economic or real the natural gas industry. In the past each individual county. The rolling estate development in my county can be decade, the natural gas industry has hills and pastoral splendor is what overcome. Actually, if he can do this it completely revitalized our economy makes Greene County green but also will certainly work beyond the boundar- creating thousands of jobs and at times cost prohibitive to develop. ies of Armstrong County. bringing new opportunities. We Earth moving is costly in the entire want that growth to continue. A region but even more evident in the In my world, economic development is severance tax is more likely to cause extraction laden economy acreage defined by job creation, unfortunately, production to stagnate than grow as of Greene County. Grant funding there are many more facets and the true well as cause us to lose any eco- keeps us in the ball game since we definition is infinitely more complicated. nomic momentum we have seen in are not gaming funds eligible. I Governor Wolf (and other elected our state because of the industry. urge Governor Wolf to maintain or officials) need to simplify rules and improve the site development grant regulations to help the private sector funding available through DCED to create jobs. Keep the rules clear, the help offset the high costs of earth administration consistent and the review moving and infrastructure expendi- process both competent and timely (if tures associated with developing pad this means increasing staff, do so). Make ready sites in Greene County. this the basis of all future decisions and rulemaking.

Other "things" to consider include; the need for consistent tax assessment between counties ( in terms of both calculation and frequency), the pending state pension crisis (this is not just a Har- risburg issue), workforce development, continued infrastructure improvements, the growing divide between eastern and western Pennsylvania, etc..... Nobody said the job would be easy!

www.developingpittsburgh.com 79 Kenneth Raybuck Executive Director Butler County Community Development Corp.

The Redevelopment As- sistance Capital Program (RACP) is a great tool to assist with economic development projects and we look forward to the Wolf administration continuing to facilitate the program, helping applicants receive prompt turnaround and for grantees to receive quick funding when approved.

Roads, bridges, and money for sewer and other infrastructure projects continue to be critical for local economic development success. Continuing State Route 228 improvements is an example of the type of improvement we need to foster additional growth.

The Commonwealth must address the pension issue plagu- ing our schools and institutions of higher learning. We cannot delay pension reform.

James Palmer President Beaver County Corporation for Economic Development

The mission of CED, a non-profit economic development corporation, is to support job creation and private investment. Part of CED’s role is to invest in developing sites and facilities that would not otherwise exist without CED’s participation. These investments are almost exclusively speculative.

Such investments occur in places where the costs to develop are greater than the market value of the properties after improvement. Causes could be environmental consider- ations, site development costs, and depressed real estate values due to community economic conditions. Part of the value equation as a non-profit becomes the job creation and increased tax base that would not have otherwise occurred without the investment.

CED invests its own resources and borrows funds to undertake its real estate projects. The value of the projects after improvement must be such that CED’s investment is returned and its debt re-paid so as to be able to do future projects. Where the costs to develop exceed the return, grant support is essential to finance the gap between cost and value.

For many years the commonwealth maintained dedicated site development grant funds to support speculative investments in public infrastructure that filled this gap. Those resources have been vastly reduced, opened to other purposes, and/or not been supportive of speculative investment.

What the Wolf administration can do is re-establish a dedicated, speculative, grant funding source for public infrastructure for economic development projects. DP 80 DEVELOPINGPITTSBURGH | Spring 2015 News from the Counties

stories during the second half of 2014. The Armstrong County Industrial Development Council (ACIDC) provided services and resources such as financing, incentives, site selection assistance, start-up assistance, and workforce development to businesses considering expansion within or relocation to Armstrong County.

CWM Environmental, a full service environmental firm, purchased a lot in the West Hills Industrial Park, located in Kittan- ning, PA. CWM will construct a 9,600 square foot building during 2015 that will house their administrative offices and cutting edge laboratories. CWM Armstrong County provides professional services ranging from analytical testing, Armstrong County treatment plant operations, Armstrong County Department of cleanout projects, and sludge Economic Development hauling. Also in the West Hills Northpointe Technology Industrial Park, construction for Center Center II a new State Police barracks is 187 Northpointe Boulevard proceeding. The 11,410 square Freeport, PA 16229 foot building will open in 2015. 724-548-1500 (T) 724-545-6055 (F) At the Parks Bend Farms Indus- Michael Coonley, Executive Director trial Park in Leechburg, a preci- [email protected] sion manufacturer completed www.armstrongidc.org construction of a 12,000 square foot building. Metal Solutions Economic growth in Armstrong moved into the facility in October County was tied to several success 2014, purchased new Computer

www.developingpittsburgh.com 81 Armstrong County (continued)

Numerical Control machining centers to improve product quality and timely delivery, and created new jobs.

Additional projects occurred during the second half of 2014 in Armstrong County. A 14,200 square foot building was constructed for Lutheran SeniorLife on the Armstrong County Memorial Hospital campus in the West Hills In- dustrial Park. The LIFE (Living Independence for the Elderly) facility will create 50 new jobs. Also at the Armstrong County Memorial Hospital, the emergency department under- went a $6.3 million expansion and renovation. The 14,800 square foot emergency department will include a reconfigured entrance, new nursing stations, trauma, triage, and treatment rooms. In Ford City, a 10,000 square foot adult education center was constructed at Lenape Technical School. The Nextier Bank Adult Education Center opened in November 2014.

Phase I of the Downtown Kit- tanning Revitalization project began in April 2014. It is anticipated that the project will be completed in mid- 2015. The project includes the removal and relocation of overhead utilities, sidewalk replacement, decorative historic-style street lights and mast arm traffic signals, landscaping, and implementation of two-way traffic on McKean Street. Future phases of the Kittanning Revitaliza- tion project will go out for bid in 2015.

The ACIDC continues to promote the Keystone Op- portunity Zone (KOZ) sites located in Armstrong County. For additional information about the services offered by the ACIDC, or to search available land and buildings in Armstrong County, visit www. armstrongidc.org.

82 DEVELOPINGPITTSBURGH | Spring 2015 job impacts, and construction and uses. The developer is undertaking Beaver County real estate tax value; and identify due diligence and market analysis Beaver County Corporation and estimate off-site improvements to determine the appropriate mix of for Economic Development necessary to support development of uses for the 12 acre site. 250 Insurance Street, Suite 300 the identified sites. CED will use the Beaver, PA 15009 analysis as part of its ongoing effort Finally, three occupants of Phase I 724-728-8610 (T) to insure a varied inventory of avail- of CED’s Aliquippa Industrial Park 724-728-3666 (F) able sites and structures to support are undertaking building expan- James Palmer, President industrial growth. sions. The site is 100% occupied, [email protected] with CED selling the final, available www.beavercountyced.org CED signed an agreement with a parcel of its 120 acre brownfield developer for its Bridgewater Cross- redevelopment project in 2013. The The Beaver County Corporation ing property. Bridgewater Crossing development is home to a variety for Economic Development (CED) is a site proposed for mixed-use of industrial and industrial-support completed an analysis of real estate development located at the conflu- businesses, and the expansions opportunities along the PA Route ence of the Beaver and Ohio Rivers of these three original occupants 18 corridor in Potter Township, in Bridgewater Borough, Beaver continue to validate CED’s invest- Beaver County, in the vicinity of County. CED completed over $4 mil- ment in the site as well as all of the the Horsehead Corp. former zinc lion in site improvements including occupants’ selection of the site as a smelter site. The purpose of the site roads, water, sewers; a riverfront viable business location. analysis was to identify specific park; connections to a trail system sites for development; quantify that connects the Beaver and Ohio potential impacts those sites could riverfronts; and, a transient boat have in terms of building capacity, dock to support on-site commercial

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www.developingpittsburgh.com 83 Sports Complex which will open later is the restoration of the Kaufman Butler County in the summer. House in Zelienople. This effort is Community Development very appropriate as Zelienople is not Corporation of Butler County Freeport School District will open only revitalizing Main Street, but 112 Hollywood Drive #102 a $33 million middle school in fall also celebrating its 175th birthday Butler, PA 16001 2015. XTO recently announced its this year. Congratulations Zeli- 724-283-1961 (T) headquarters will be relocated to enople! 724-283 3599 (F) 190 Thorn Hill Road which is a very Ken Raybuck, Executive Director welcome addition to Butler County. The CDC recently reduced the price [email protected] The U.S. Department of Veterans on 29 acres of shovel-ready land www.butlercountycdc.com Affairs announced the selection of a available at the Pullman Center site for a new 168,000 square foot Business Park. Lots are priced as low Butler County’s building activity has VA Health Care Center to be built on as $50,000 per acre. There are also remained quite robust as construc- 46 acres along Duffy Road in Center 60 acres available at Victory Road tion is continuing on the four-level Township. Cambridge Health Care Business Park in Clinton Township, a $12 million county office building; Solutions PA, the developer, noted Keystone Opportunity Zone. Please a 48,000 square foot, $20 million that construction will begin this fall. contact the CDC at 800-283-0021 Butler Health System medical office for information on land, commercial building and the completion of the Finally, an exciting new project, buildings and office space available 185,000 square foot UPMC Lemieux spearheaded by the Butler County for sale or lease in Butler County. Tourism and Convention Bureau,

house a community-based charitable Missouri, Boeing Defense, Space &

Fayette County organization that provides much- Security is a $33 Billion business Fay-Penn Economic needed services to the county. with 56,000 employees worldwide. Development Council 1040 Eberly Way, Suite 200 Fay-Penn worked tirelessly with Fay-Penn was awarded $500,000 Lemont Furnace, PA 15456 Marathon Petroleum on the attrac- in funding from the U.S. Depart- 724-437-7913 (T) tion of Speedway to the University ment of Agriculture's (USDA) Rural 724-437-7315 (F) Business Park. Groundbreaking is Development Office to support Michael A. Jordan, Jr., scheduled for spring 2015. small business development. This Executive Director money will be made available as low [email protected] New development in the Fayette interest loans to small businesses www.faypenn.org Business Park continues as one of through Fay-Penn’s Rural Microen- the few remaining parcels was sold terprise Assistance Program (RMAP). Fay-Penn Economic Development to Lee’s Plumbing and Excavation The RMAP is designed to provide Council (“Fay-Penn”) was incorpo- for a new headquarters building. affordable, non-conventional rated in 1991 and its mission is to financing to eligible small busi- foster economic prosperity in the The Boeing Company, also located nesses with 10 or fewer employees, county by assisting businesses to in the Fayette Business Park, re- or to individuals requiring a loan become more viable. To accomplish ceived a funding proposal from of $50,000 or less for a business its mission, Fay-Penn offers a com- the Department of Community start-up. prehensive set of business services, and Economic Development that including site selection, financing, included $336,000 in Job Creation Since its inception, Fay-Penn has workforce development, real estate Tax Credits. Boeing is projecting to become the pre-eminent, “One and business park development, double its employment at the site Stop Shop” economic development local economy initiatives, tax credit with the addition of up to 168 new organization in the county, serving incentives, consulting, and many jobs over the next three years. Fay- businesses through its in-house others. Penn, working in collaboration with programs and/or its partner organi- the Governor’s Action Team (GAT), zations. In 2014 Fay Penn was able to assist coordinated the project. Boeing’s numerous businesses through its Smithfield facility is part of Boeing real estate/site selection programs. Defense, Space & Security, one of Notable among the projects was the the world’s largest defense, space acquisition by Fay-Penn of a build- and security businesses specializing ing to accommodate a tenant that in innovative and capabilities-driven had outgrown their current space. customer solutions, and the world’s The building that had been under largest manufacturer of military lease was subsequently sold to aircraft. Headquartered in St. Louis,

84 DEVELOPINGPITTSBURGH | Spring 2015 The Right Place. The Right Time. 119 Business Park Greene County Greene County Industrial Developments, Inc.  25.74 shovel-ready acres 300 EverGreene Drive Waynesburg, PA 15370 Contact with full infrastructure 724-852-2965 (T) the CEO  Excellent highway access to 724-852-4132 (F) Today! Don Chappel, Executive Director U.S. 119, 422, 22 [email protected]  Build-to-suit opportunity on www.gcidc.org 2 to 14 acre parcel sizes The second half of 2014 in  Greene County saw serious Private setting with close infrastructure development that proximity to retail services, enhanced the utility of existing parcels in the EverGreene Tech- lodging and golf nology Park in Waynesburg.  KOZ Tax Incentives

A 12-acre parcel of land in the EverGreene Technology Park INDIANA COUNTY CENTER FOR ECONOMIC OPERATIONS was sold to Colorado’s Vantage FOR MORE Byron G. Stauffer, Jr. Energy LLC/Vista Gathering LLC. INFORMATION Executive Director Vantage also has plans to drill an PLEASE 724-465-3870 x3161 oil/gas well in Gilmore Township. CONTACT Excavation and utility work was 801 Water Street Indiana, PA 15701 Phone 724.465.2662 www.indianacountyceo.com completed to create a new 12- acre pad-ready site in EverGreene ⦁ ⦁ ⦁ to replace the one just sold.

Other infrastructure work in the park extended an access road 1,000 feet and extended a 12” IN MEMORIAM public water line for new parcel development. Construction of two buildings was completed for housing gas and oil company FMC and a coal mine supply company, Irwin Car & Supply. These represent private company investments of $7 million and created 40 jobs.

The Commonwealth’s Depart- ment of Community and Economic Development has a Small Business First program that provides financing. Working with them and the Southwestern PA Commission, we secured financing for a tenant to expand the size of their building in the SAM SPATTER Paisley Industrial Park in Carmi- Tribune-Review Real Estate Writer chaels. 1927 - 2014

For more details, contact Don We proudly salute and fondly remember Sam, Chappel at 724-852-2965. recipient of the NAIOP Pittsburgh’s Supporter of Development Award.

www.developingpittsburgh.com 85 The Centennial Building Project will Indiana County renovate about 45,000 square feet The Central Allegheny Challenger Indiana County Center of the current facility and include Learning Center received a $2 million for Economic Operations approximately 40,000 square feet of grant from the Redevelopment As- 801 Water Street new construction. sistance Capital Program, which puts Indiana, PA 15701 the project more than halfway to- 724-465-2662 (T) Development is progressing at the wards the total fundraising goal. The 724-465-3150 (F) KOZ-designated 197-acre Windy center will also incorporate a STEM Byron G. Stauffer, Jr., Executive Director Ridge Business & Technology Park. Academy dedicated to developing [email protected] Approvals have been secured for SR workforce skills in industries requir- www.indianacountyceo.com 286 highway improvements and the ing disciplines in science, technology, land development plan. Highway engineering, and math. Having recently celebrated its construction, signalized intersections, 100th anniversary, Indiana Regional and underground utilities to support Multiple restaurants are also open- Medical Center will expand upon its pad-ready sites are scheduled to start ing up throughout Indiana County. services with new operating room this spring. Jimmy John’s is opening along suites, a new intensive care unit, a Philadelphia Street, and an Apple- post anesthesia care unit, a 15-bed The 119 Business Park is now ready bee’s and Chipotle are both opening post-acute care unit, an endoscopy for occupancy, with the installation on Oakland Avenue. unit, as well as numerous structural of street lights and completion of To learn more about economic and patient service upgrades to the the road paving. The KOZ-designated development opportunities in Indiana current facility. park offers pad-ready sites totaling County, visit www.indianacountyceo. approximately 25 acres. com.

Other Publications from Carson Publishing inC.

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86 DEVELOPINGPITTSBURGH | Spring 2015 Project7_Layout 1 2/12/15 3:11 PM Page 1 Washington County Washington County Chamber of Commerce 375 Southpointe Boulevard #240 Canonsburg, PA 15317 724-225-3010 (T) 724-228-7337 (F) Jeff Kotula, President [email protected] www.washcochamber.com

Although Washington County is known as the En- ergy Capital of the East for its large concentration of energy companies, the county also witnessed Let’s Get Down To Business! increasing expansion of its retail, public invest- ...in Westmoreland County ment, manufacturing and real estate sectors in the last half of 2014.

The opening of Southpointe Town Center was NOW celebrated in October 2014 with an open house sponsored by Horizon Properties and the Wash- ington County Chamber of Commerce. The retail AVAILABLE! operation now hosts All Star Sports Bar, Zoup!, Hempfield Twp. Zoned I-1 • 143 Southpointe Nails, Toscana Brick Oven, Crazy total acres (3.44-14.9 acre lots Mocha, and Yum Yum Yogurt with Montana’s available) • 11 lots open Rib & Chop House and Saga Hibachi Steakhouse & Sushi Bar due to open soon. Also, offices for Bowles Rice, Burleson LLP, State Farm Insurance, CALL Modis, High Crush Partners, and PNC are located TODAY! in Southpointe Town Center. The Old Mill retail development in South Strabane East Huntingdon Twp. No zoning Township welcomed Field & Stream, Hobby Lobby, • 183 total acres (1.25-44.36 acre Buffalo Wild Wings, Longhorn Steakhouse, Any- lots available) • 5 lots open time Fitness, Valley Pool and Spa, Parry Custom Homes, Yes Yogurt, Sun Club, Noodles & Co.; Why Here? Ichiban Steakhouse, Chic-fil-A and Penn Station East Coast Subs. • 182,311 qualified workers. • Real estate tax benefits. The county’s growth has lead utility companies • Access to major highways, Pennsylvania American Water Company, West rail lines & regional airport - Unity Twp. Zoned light industrial • Penn Power and Columbia Gas making a com- plus it’s beautiful! 210 total acres (2.3-8.2 acre lots bined $19.1 million in investments to expand available) • 14 lots open and improve service delivery in the county. Also, Washington County invested nearly $6,000,000 to increase the footprint of the county airport and to improve the apron, runways and add hanger pads.

Universal Electric Corporation is investing $11,500,000 to add 81,000 square feet to their facility in Cecil Township and a start-up company, Quality Pasta, opened their facility in Charleroi. 724.830.3061 The Meadows Casino invested $6,000,000 to westmorelandcountyidc.org upgrade its restaurants and bars as well as to add new slots and an outdoor arena.

WCIDC Board of Directors: Finally, Burns & Scalo started construction of the Charles W. Anderson, R. Tyler third building in the Zenith Ridge Development at Courtney, Ted Kopas Southpointe. DP

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Burchick Construction is a performance-driven provider of quality construction and construction management services. Our dynamic approach to management made the difference to BNY Mellon when it needed to strip and repaint the complete exterior of the 54-story BNY Mellon Center in 18 months during constantly changing weather conditions. Call us today. One Call. One Source. Complete Satisfaction. Burchick Construction Company, Inc. • 500 Lowries Run Road • Pittsburgh, Pennsylvania 15237 Telephone: 412.369.9700 • Fax: 412.369.9991 • www.burchick.com People & Events

NAIOP Pittsburgh Wins Capitol Dome Award NAIOP, the Commercial Real Estate Development real estate development industry. The chapter was Association, honored the Pittsburgh chapter with presented with the award at NAIOP’s annual Chapter the 2015 Capitol Dome Award for Government Af- Leadership and Legislative Retreat, held in Washing- fairs, recognizing excellence in effectively impacting ton, D.C., during a special luncheon on February 10. an issue of importance to NAIOP and the commercial

(left-to-right) Leo Castagnari, Rep. Keith Rothfuss, Dianne The NAIOP Pittsburgh contingent at the Leadership & Legislative Weaver, Michael Sharp and Jamie White. Retreat in Washington included (from left) Michael Sharp, Dianne Weaver, Jamie White, chapter President Brian Walker, Executive Director Leo Castagnari, Melodee Bright and Bill Hunt

Grandbridge’s Megan Zillweger-Jones (left) with Krista Foster (From left) Rob Karl from National Office with Bob Dezort from Al Neyer Inc. from Anderson Interiors and CBRE’s Jeremy Kronman (right).

David Eisen from M. J. Wilkow with CBRE’s Kyle Prawdzik (From left)Pennoni’s John Skorupan, Tim Goetz from Grant and Tony Rossi (right). Street Associates and Dave Rudolph from TriState Capital.

90 DEVELOPINGPITTSBURGH | Spring 2015 CONGRATULATIONS HORIZON PROPERTIES GROUP & Cooper Carry

on Southpointe Town Center NAIOP Pittsburgh’s Best Mixed-Use Project! Sharon Landau with Kim Donnelley and Joe Sisely from Westmoreland Industrial Development Corp.

2525 Liberty Ave. | Pittsburgh | www.ryconinc.com

TRANSPORTATION SOLUTIONS Mt. Lebanon Office Furniture’s Brandon Moore and Jim Droney Jr. (right). FOR TODAY AND TOMORROW

PITTSBURGH · STATE COLLEGE · COLUMBUS

TRAFFIC ENGINEERING AND PLANNING TRAFFIC SIGNAL AND SIGNAL SYSTEM DESIGN HIGHWAY AND ROADWAY DESIGN PARKING CONSULTING MULTI-MODAL PLANNING AND DESIGN (From left) Achieve Realty’s Sharon Scheidemantle, Terri Sokoloff from Specialty Bar & Restaurant Brokers and Christy Neroni from Agency Assist Outsourcing Solutions at the CREW Holiday Party. WWW.TRANSASSOCIATES.COM 1-866-490-0630

www.developingpittsburgh.com 91 FedEx Ground’s Sarah Lamperski, CREW President (left) with M & T Bank’s Steve Olsavsky with Angela Vicario from Huntington. Guardian’s Christina Bucciero, CREW past president.

92 DEVELOPINGPITTSBURGH | Spring 2015

NOWNOW OPENOPEN:: Lowe’s Home Improvement Hilton Home2 Suites Hotel Dick’s Sporting Goods L.A. Fitness CVS/Pharmacy IHOPIHOP WesBanco Doodle Bugs! Children’s Center Sport Clips Verizon/Wireless Zone DiBella’s Old Fashioned Subs Handel’s Homemade Ice Cream GEICO Insurance Nail Salon II The Residence at McCandless Crossing

COMINGCOMING SOON:SOON: HomeGoods Trader Joe’s Cinemark Theatre Panera Bread Chipotle Mexican Grill Bonefish Grill Phase IV Longhorn Steakhouse McCandless Town Center First Watch GNC Supercuts UPS in the North Hills of Pittsburgh Massage Envy RE/MAX

www.adventuredev.com/projects/mccandless-crossing

Additional Development Opportunities Call Kevin Dougherty at 919.965.5661

111 E. Oak Street, Selma, NC 27576 Shaping Communities

The Partnership Behind the Project.

412-683-3810 412-261-8810