JLL-Pittsburgh-Technology-Report
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PittsburghTechnology Report Industry Observations from a Commercial Real Estate Perspective 2018 1 Pittsburgh Technology Report | 2018 In the past decade, Pittsburgh’s economy has is high. Pittsburgh is at a turning point. Commercial experienced steady growth due to the diversity of development is concentrating in the urban areas to its industries. However, within the past five years, meet the tenant demand and these companies are now commercial development around the urban core has receiving resumes from all over the country. been driven by an increasing population of young talent and the growing number of companies looking A common label for a city experiencing a surge in to recruit them. In 2010, the total number of technology technology activity is “the next Silicon Valley.” However, companies in Pittsburgh was 279. Currently, that the substantial investment environment in Silicon number is nearly double at 495 and growing rapidly. To Valley differs greatly from the limited local wealth in be considered a “technology company,” an operation Pittsburgh. The blue collar tradition of Pittsburgh, along generally falls within these seven categories: Advanced with the limited exposure to capital, creates a different Manufacturing, Advanced Materials, Energy Technology, breed of technology company. Although Pittsburgh may Environmental Technology, Information Technology, not be “the next Silicon Valley,” there is a sense that the Life Sciences and Robotics. city is on the cusp of becoming something else entirely. Pittsburgh has a unique mix of companies in different Pittsburgh’s technology company environment is stages of funding. Management Science Associates unique, making it impossible to anticipate the real Incorporated has been in the city for more than 50 years estate needs of these companies based on national with hundreds of employees, while young startups trends or strategies found on the West and East coasts. are finding refuge in coworking space. Regardless of JLL Research conducted interviews with a mix of size, a common challenge is recruiting and finding the technology companies in Pittsburgh to find out exactly right office to accommodate flexibility. The growing what their needs are and what their workforce expects in number of companies is making it challenging to office space. The following report discusses the results find the right office, warehouse or flex location near of these interviews along with current market dynamics. downtown and competition for local talent recruitment 2 Introduction INDUSTRY BREAKDOWN Technology companies can be categorized in the following ways if a company: Information Technology Life Sciences Advanced Manufacturing Stores, sends, receives and Provides equipment, Improves manufacturing manipulates data using services and research aiming by way of automation, hardware, software and to improve human health. information technology telecommunications. and process controls. Environmental Advanced Materials Energy Technology Technology Develops chemicals, Researches and develops Provides services and plastics, rubber and other materials for the purposes of equipment that improve resources for improving reducing waste and improving the locating, extraction, use efficiency and sustainability. the state of the environment. and delivery of energy resources and its byproducts. Robotics Designs and manufactures computer science-driven equipment that requires limited-to-no human manipulation in order to operate. Introduction 3 Pittsburgh Technology Report | 2018 Contents 4 06 Growth of the Industry 06 Setting the Foundation – Pittsburgh Universities 08 Analysis from Jim Futrell | PRA 09 Building Pittsburgh 10 Technology Company Growth Contents 11 New Development & Technology Significant Events 12 Population Migration 14 Location Advantages 16 The Cost of Doing Business 16 Investing in Pittsburgh 17 Tenant Fit-Out Guide 18 Pittsburgh Innovation Zones & Opportunity Zones 20 Annual Cost of Living 21 Looking Ahead 22 Interview Results 24 Report Contributors 5 Pittsburgh Technology Report | 2018 Growthof the Industry Setting the Foundation – Pittsburgh Universities There are 31 four-year public and private colleges / Natural competition between universities can be universities within Pittsburgh and the 10 counties beneficial to a city’s economy, but it’s collaboration surrounding the city. At the top of the list ranked by that differentiates Pittsburgh from other cities. In the enrollment are the University of Pittsburgh (PITT) and early 2000s, PITT and CMU joined to expand the region’s Carnegie Mellon University (CMU). These two universities bioscience industry. Since then, the two universities drive the technology industry in Pittsburgh. CMU has have worked together to champion innovation in this one of the leading computer science programs in the area, leveraging each other’s strengths. CMU is the world, while PITT has a legacy of making significant leading computer science university in the world and strides in medicine. The remaining educational PITT ranks within the top three of NIH-funded research institutions continue to provide specialized talent to institutes. The technology community in Pittsburgh other industries, but they, too, have made contributions reflects that same collaboration. With most founders to technology. Among the numerous notable alumni and veterans of the industry getting their start at PITT of these surrounding institutions is Chad Hurley, who and CMU, the comradery extends across generations. graduated from Indiana University of Pennsylvania (IUP) and went on to co-found YouTube with Steve Chen and Jawed Karim. JLL interviewed 33 local technology companies about recruitment and, by no coincidence, CMU and PITT were routinely mentioned as target universities for applicants. In most cases, the emphasis was on CMU. However, that line may be blurring, according to Antonio Torres, Executive in Residence at the Innovation Institute at PITT. Mr. Torres admitted that a lot of the attention CMU has 56.3% received from the technology and robotics research done of the 25 and older at the university is well deserved, but PITT is starting population in the to catch up. Mr. Torres explained that the Innovation greater downtown Institute rolled out over 20 startup companies from PITT area have a bachelor’s during the 2017-2018 school year, which would put PITT degree or higher in the top five universities in the nation for total number of startups in a single school year. 6 Setting the Foundation – top Pittsburgh universities by last recorded enrollment University of Pittsburgh Carnegie Mellon University Indiana University Duquesne University Founded: 1787 Founded: 1900 Founded: 1875 Founded: 1878 28,642 total enrollment 12,441 total enrollment 12,316 total enrollment 9,256 total enrollment 19,326 undergraduates 6,804 undergraduates 10,143 undergraduates 5,998 undergraduates 9,316 graduate students 5,637 graduate students 2,173 graduate students 2,854 graduate students Growth 4% international enrollment 42% international enrollment 7% international enrollment 6% international enrollment Slippery Rock University California University Robert Morris University Point Park University Founded: 1889 Founded: 1852 Founded: 1921 Founded: 1960 8,317 total enrollment 7,788 total enrollment 5,199 total enrollment 4,093 total enrollment 7,145 undergraduates 5,557 undergraduates 4,384 undergraduates 3,276 undergraduates 1,172 graduate students 2,231 graduate students 815 graduate students 817 graduate students 1% international enrollment 1% international enrollment 10% international enrollment 4% international enrollment 7 Pittsburgh Technology Report | 2018 GROWTH OF THE INDUSTRY Analysis from Jim Futrell | PRA* The Pittsburgh Regional Alliance (PRA) focuses its analysis on the five key sectors that drive the regional economy – advanced manufacturing, energy, financial and business services, healthcare and life sciences and information technology and robotics. Not only does southwestern Pennsylvania offer important competitive advantages to companies looking to expand in these sectors, but it offers an economic diversity that benefits all parts of the 10-county region. In 2017, information technology and robotics emerged as the most active sector for the first time with the number of announcements rising from 39 in 2016 to 59 in 2017. Much of this increase can be credited to the growth in robotics announcements, which more than tripled from six in 2016 to 20. IT and robotics was also the leading sector in generating new jobs (1,872). Unlike the other sectors, which tend to be more geographically dispersed, information technology and robotics, and related investments, are much more geographically concentrated. In fact, 51 of the 59 investment announcements took place in the city of Pittsburgh. It’s probably no surprise that about 20 percent of the announcements took place in the emerging “Robotics Row” in the Strip District and Lawrenceville where the autonomous vehicle industry is concentrated. * Mr. Futrell is Vice President Market Research at Allegheny Conference on Community Development / PRA KEY SECTOR ANNOUNCEMENTS BY GEOGRAPHY 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Manufacturing Information Healthcare & Life Financial & Energy Technology & Sciences Business Robotics Services City of Pittsburgh Allegheny County Remaining Counties 8 600 Technology companies added in Pittsburgh by year 500 400 300 200 100 20012001 20022002 20032003 20042004 2005 2006 2007 2008 2009 2010 2011 2012