Pittsburgh's Industrial Potential
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DEVE LPittsburghOPINGFall 2014 PITTSBURGH’S INDUSTRIAL POTENTIAL 2014 NAIOP BUYER’S GUIDE PROFILING JENDOCO REAL ESTATE UPDATING PITTSBURGH’S ACTIVE DEVELOPMENTS Highest and Best Use...SM opportunities and constraints strategically transformed CEC uses informed analysis to identify and harness the potential of each site’s unique conditions, creatively enhancing value while delivering a conscientious integrated design. CEC’s diverse consulting services for the commercial, institutional, educational, retail, industrial and residential real estate markets are utilized by owners, facility managers, developers, architects and contractors at all points in a property’s life cycle. Rendering Courtesy of PNC Realty Services and Gensler Architects S e r v i c e s ► Site Selection / Due Diligence ► Land Survey ► Landscape Architecture ► Civil Engineering Services ► Geotechnical Engineering ► Construction Phase Services ► Building / Site Operation & Maintenance ► Construction Management E x p e r t i s e ► Acquisition ► Development ► Management ► Redevelopment Civil & Environmental Consultants, Inc. www.cecinc.com | 800.365.2324 Celebrating 25 Years | Fall 2014 CONTE NTS 05 President's Message 23 Development Project Gordon Food Services Distribution Center 29 Developer Profile Jendoco Real Estate 39 Eye On the Economy 06 Feature Pittsburgh’s Industrial Potential 45 Office Market Update Tight space and an energy-driven boom push industrial development. Cushman & Wakefield | Grant Street Associates 49 Industrial Market Update CBRE 53 Retail Market Update Langholz Wilson Ellis 57 Capital Markets Update 62 Legal / Legislative Outlook Navigating a closing during construction. 65 Benchmarks Pittsburgh is attracting progressive real estate leaders. 33 Developing Trend What does it take to build Downtown? 69 Voices Pittsburgh SWOT analysis: Looking at the biggest threat to healthy growth. 2014 Buyer’s Guide 72 Development Updates 75 News from the Counties 88 Buyer’s Guide The 2014 NAIOP Buyer’s Guide puts contacts for designers, engineers, People / Events contractors and lenders in one easy-to-use resource. 86 www.developingpittsburgh.com 3 President’s Perspective PUBLISHER Tall Timber Group www.talltimbergroup.com elcome to will bring much needed improve- the fifth ment to Pennsylvania’s highways, EDITOR edition bridges and mass transit systems. Jeff Burd of NAIOP 412-366-1857 Pittsburgh’s I am particularly proud of the newly [email protected] award minted mentorship program. A winning magazine DevelopingPitts- recent meeting of the inaugural PRODUCTION W burgh. As you read the articles I mentors and mentees gave high Carson Publishing, Inc. hope you will feel the same sense marks to the initiative and provided Kevin J. Gordon [email protected] of excitement about the Pittsburgh suggestions for an even better sec- region that I felt. ond class. ART DIRECTOR/GRAPHIC DESIGN Carson Publishing, Inc. The feature article “Pittsburgh’s You will be very interested in two Jaimee D. Greenawalt Industrial Potential” provides a bal- new must-attend programs being anced look at the industrial develop- offered by NAIOP Pittsburgh this CONTRIBUTING PHOTOGRAPHY ment scene. While there are many fall. The first, in conjunction with Carson Publishing, Inc. opportunities on the horizon there is CoreNet features Gunnar Branson, Oxford Development also the chance that limited inven- CEO of the National Association of Gunton Corp. tory could hamper the region from Real Estate Investment Manager. Jan Pakler Photography taking full advantage of these op- The second will include 2013 NAIOP Millcraft Investments portunities. You will learn the history Developer of the Year Seattle’s Ven- Desmone Architects behind Imperial Land Corporations ture Real Estate and Ray Gastil who Denmarsh Photography success in securing the Gordon Food is Pittsburgh’s new Director of City CONTRIBUTING EDITORS Service 420,000-square-foot distri- Planning. For more information on Anna Burd bution center at the Findlay Indus- both programs check out DP Bench- Karen Kukish trial Park and hear from the experts marks “Pittsburgh Gets Progressive” about what it takes to develop in this edition ADVERTISING SALES Downtown. Another highlight of Karen Kukish this edition of DevelopingPittsburgh I am grateful to Leo Castagnari and 412-837-6971 is the focus on Jendoco Real Estate. Melodee Bright for their support [email protected] The multi-generational company is during my tenure. I also want to not only a successful business it is a thank the NAIOP Pittsburgh Board MORE INFORMATION: great corporate citizen of the region of Directors for their outstanding ef- DevelopingPittsburgh is published by and a foundational piece to NAIOP forts and their unwavering commit- Tall Timber Group for NAIOP Pittsburgh Pittsburgh’s success. ment to the Chapter. 412-928-8303 www.naioppittsburgh.com This edition is also the final time I hope you enjoy this edition of that you will see my byline as NAIOP DevelopingPittsburgh and thank you No part of this magazine may be reproduced without written permission Pittsburgh president in Developing- for allowing me the honor of serving by the Publisher. All rights reserved. Pittsburgh. It has been my honor the Chapter. and privilege to serve as president This information is carefully gathered and com- for the last two years. I am very piled in such a manner as to ensure maximum proud of what we have accom- accuracy. We cannot, and do not, guarantee plished during this period and look either the correctness of all information furnished forward to helping future leaders nor the complete absence of errors and omis- continue to build and improve our sions. Hence, responsibility for same neither can Chapter. be, nor is, assumed. Keep up with regional construction I have spoken about many of our and real estate events at successes in underDevelopment and www.buildingpittsburgh.com previous issues of DevelopingPitts- burgh. I will highlight just a few here. Our membership is at an all time high. Our advocacy efforts and our ability to mobilize our member- ship helped with the passage of a Daniel P. Puntil $2.3 billion transportation bill that NAIOP Pittsburgh President www.developingpittsburgh.com 5 f e a t u r e Pittsburgh’s INDUSTRIAL POTENTIAL Photo courtesy Jendoco Real Estate 6 DEVELOPINGPITTSBURGH | Fall 2014 f e a t u r e uried in the feel-good story of the South- western PA commercial real estate resur- gence is the “good news, bad news” that is the industrial market. Like most of the commercial real estate categories, indus- Btrial property fundamentals are exceptionally strong in mid-2014, with demand ahead of supply. But those conditions haven’t kick-started new development and construction in the way that you might expect and that may be creating problems. www.developingpittsburgh.com 7 f e a t u r e Getting from potential to being pre- “This year there have been some pared and then to executing deals bigger deals and only two buildings will require a different set of rules remained with more than 120,000 than has guided development over square feet of Class A space,” says the past 30 years or so. Potential can Lou Oliva, executive managing direc- be a blessing and a curse but it pres- tor in Newmark Grubb Knight Frank’s ents problems every region would Pittsburgh office. “Amazon took out love to tackle. one of those two buildings. Why aren’t people stepping up to build new space?” ince the middle The Current State of the last de- Oliva says he has had conversa- cade, regional Even the numbers don’t do complete tions with national developers about leaders and state justice to the state of the industrial building speculative industrial space government have market at the midpoint of 2014. Ac- in Findlay Township, where his firm worked to deal cording to market reports from CoStar represents developer Imperial Land with what site and a handful of Pittsburgh’s real Co., but no projects have advanced. selectors said was Western PA’s num- estate service companies, less than ber oneS problem: a lack of shovel- 7.5 percent of the region’s 117 million “The brokers tell me that I have ready sites. No region can have too square feet of industrial space was nothing to lease. We’re full,” laughs many available sites – and Pittsburgh available at the end of June. But those Robert Lloyd, vice president at Jen- is nowhere near that description – numbers represent the total market, doco Real Estate. “Seriously though, but the efforts to create pads have including several very large former in- there has been a lot of activity. succeeded. In all four directions dustrial plants that have been re-pur- We’re showing space to companies throughout the region, industrial posed into multi-tenant spaces. In the that the [current tenant] hasn’t sites exist. This is especially true in Class A segment of the market, the moved out of yet. That’s a worry. I the areas where the natural gas busi- vacancy rate is roughly four percent. do believe that if we had more space ness has its deepest roots. Yet, few With the Amazon lease in Crafton – we could lease it up.” new industrial projects are ready to announced since those reports were start, whether build-to-suit or specu- done – space in Class A buildings is Lloyd says that Jendoco has roughly lative buildings. While the status virtually gone. two small spaces totaling 4,000 quo is good for rents, the industrial square feet available in its Settlers market is chock full of potential that Cabin Business Center project in the is unrequited. Owners of industrial buildings – par- ticularly Class A buildings – have much to enjoy at the moment and even more to look forward to in the future. At a time when lots of posi- tive developments are making the news in Western PA, one story seems likely to dominate the economic landscape for the coming decade.