DEVE LPittsburghOPINGSpring 2014 RETAIL NAIOP PITTSBURGH CHANGES ANNUAL AWARDS COURSE YEAR END MARKET REPORTS ECONOMY 2014: LESS DRAG, MORE CONFIDENCE 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 We’re always On call 24/7 — 412.921.4030 60 Years of Trusted relationships and Proven experience Turnkey Development Solutions a full-service civil engineering firm www.gatewayengineers.com | Spring 2014 CONTE NTS 05 President's Perspective 06 Retail Changes Course 31 Developer Profile A deep recession and online Fourth River Development shopping change the character and direction of retail development. 35 Developing Trend P32 Site Development Fund helps with big site preparation. 38 Eye On the Economy 42 Office Market Update Avison Young 47 Industrial Market Update Colliers International 52 Retail Market Update Newmark Grubb Knight Frank 19 NAIOP Pittsburgh's Awards NAIOP Pittsburgh’s 21st Annual Awards Banquet honors projects 55 Capital Markets Update and individuals exemplifying excellence in the commercial real estate industry. 60 Legal / Legislative Outlook Endangered species can endanger a development project. 63 Benchmarks Foundations take a more active role in bricks and mortar development. 69 Voices NAIOP Pittsburgh Hall of Famers weigh in on the proposed ethane cracker. 23 Development Project Southpointe Town Center 73 News from the Counties www.developingpittsburgh.com 3 Congratulations USAA and GLL. We are proud to be your trusted real estate services provider. CBRE applauds USAA on their NAIOP “Renovation of the Year” award and GLL Real Estate Partners on their NAIOP “Green Building of the Year” award. PARK PLACE 11 STANWIX CORPORATE CENTER GREEN BUILDING OF THE YEAR RENOVATION OF THE YEAR GLL REAL ESTATE PARTNERS USAA cbre.com/pittsburgh DevelopingPittsburgh_NAIOP ad_USAA_GLL.indd 1 2/18/2014 4:02:15 PM President’s Perspective PUBLISHER Tall Timber Group www.talltimbergroup.com elcome to about shopping has changed how the Spring retail property is being developed. EDITOR 2014 edition Retailers are among the first to feel Jeff Burd of the award it when a downturn is coming and 412-366-1857 winning trends that influence retail devel- [email protected] Developing- opment have downstream impact Pittsburgh Magazine. on other commercial and industrial PRODUCTION W development. The shift to online Carson Publishing, Inc. Since the last edition of Developing- shopping, for example, has created Kevin J. Gordon [email protected] Pittsburgh the Pittsburgh chapter a market for warehousing that did has had many successes. One of not exist just a few years ago. The ART DIRECTOR/GRAPHIC DESIGN those was in our role in advocacy Internet companies that are thriving Carson Publishing, Inc. initiatives. Our membership played because of this shift, like Amazon, Jaimee D. Greenawalt a vital role in helping push through are still wrestling with what their the passage of Pennsylvania’s trans- logistics and fulfillment center needs CONTRIBUTING PHOTOGRAPHY portation funding legislation. We are. There are similar changes in Carson Publishing, Inc. received other good news when we commercial development that have Markowitz Communications learned that the Southern Beltway resulted from changes in consumer Rycon Construction connecting the Pittsburgh Interna- behavior in just a few years. Here in NEXT Architecture tional Airport and Interstate 79 was our own backyard we have seen that Desmone & Associates Architects also fully funded. NAIOP Pittsburgh influence already in the mixed-use has been actively advocating for its properties that have moved forward. CONTRIBUTING EDITORS completion for several years. A con- Anna Burd tingent of NAIOP Pittsburgh mem- Enjoy this edition of the award win- Karen Kukish bers recently attended the NAIOP ning DevelopingPittsburgh maga- ADVERTISING SALES Legislative Retreat in Washington, zine. We continue to strive to pro- Karen Kukish D.C. We spent a day on Capitol vide relevant and useful information. 412-837-6971 Hill meeting with some of Western We are always receptive to input on [email protected] Pennsylvania’s elected government new topics so please do not hesitate officials further advocating for tax to reach out to us. Remember to MORE INFORMATION: reform for Leasehold Improvments visit the NAIOP website (www.naiop- DevelopingPittsburgh is published by and Brownfield Development, in- pittsburgh.com). We look forward Tall Timber Group for NAIOP Pittsburgh corporating economic consideration to seeing you at any of our upcom- 412-928-8303 for energy saving initiatives in new ing events. www.naioppittsburgh.com construction, a comprehensive En- dangered Species Act (ESA) reform Regards, No part of this magazine may be and more transparency in the imple- reproduced without written permission mentation, and the reauthorization by the Publisher. All rights reserved. of a multi-year Federal Transporta- This information is carefully gathered and com- tion bill. piled in such a manner as to ensure maximum accuracy. We cannot, and do not, guarantee On the leadership front, we rolled either the correctness of all information furnished out our Developing Leaders Mentor- nor the complete absence of errors and omis- ing Program in January 2014. The sions. Hence, responsibility for same neither can response to participate by our mem- be, nor is, assumed. bership was tremendous and the program was actually oversubscribed Keep up with regional construction by members willing to act as men- and real estate events at www.buildingpittsburgh.com tors to our DLs. We have received favorable input from both the men- tees and mentors. Frankly, it seems like the mentors may be learning just as much as the mentees. Daniel P. Puntil In the Spring edition of Develop- NAIOP Pittsburgh President ingPittsburgh, we’re taking a look at how changes in how we think www.developingpittsburgh.com 5 f e a t u r e The Game Changes for Retail Development 6 DEVELOPINGPITTSBURGH | Spring 2014 f e a t u r e Rendering of the McCandless Crossing town center phase, looking from McKnight Road. Courtesy AdVenture Development. In his 2000 bestseller, The Tipping recent holiday season was just such Point, author Malcolm Gladwell defines a tipping point and the impact of the the title as “that magic moment when changes that are taking place as a an idea, trend, or social behavior result are impacting commercial real crosses a threshold, tips, and spreads estate development across many like wildfire.” For retailers, the most kinds of properties. www.developingpittsburgh.com 7 f e a t u r e The re-branding of Ross Park Mall that began with the attraction of Nordstrom’s has been one of the most successful retail projects in the region. Photo courtesy Markowitz Communications. fter more Five years later it’s quite clear that Welcoming the Consumer Back than a decade retail development has been altered of aggres- and probably not for just the short Those who feel that malls are lag- sive retail run. What is equally clear is that the ging because Americans aren’t development Great Recession had only a tem- shopping are ignoring the data. fueled by porary chilling effect on shopping. According to the Commerce Depart- consumption Consumers cleaned up their balance ment’s figures, total retail sales were that exceeded any previous trend sheets and reduced debt with some up 4.1 percent year-over-year in (or reasonA as it turns out), the retail old-fashioned belt tightening for a 2013. The same report showed that segment of the commercial property few years but had roared back by in-store sales soared 9.9 percent. universe came crashing down with 2013. What changed the face of re- The National Retail Federation (NRF) the financial crisis in 2008. Within tail wasn’t less consumer spending; reported that industry sales rose 3.7 12 months the amount of retail it was the advent of multi-channel percent in 2013. The NRF forecasts space opened fell by two-thirds from shopping, creating an approach an increase of 4.1 percent in 2014, its peak. By 2011, new space totaled called ‘omni channel retailing.’ but predicts online sales will grow less than ten percent of the space between 9 percent and 12 percent. delivered on average between 2000 “For two years we haven’t seen a and 2008. The jarring nature of the change in the pattern, where we The industry association sees the financial crisis and the fear that fol- don’t get that build in traffic past economy growing at a faster rate lowed put a freeze on retail develop- Black Friday. How much of that has than the historical average in 2014 ment; moreover, many analysts felt moved online? The pattern shifted and believes that the housing mar- that because the crisis was brought this year,” says Diane Ellis, CEO ket will continue to expand. These on by consumption run amok, there of the Limited Brands. “Is that the trends have proven to loosen shop- would be a shift in behavior. Many tipping point towards online? That pers’ purse strings, as does increased were of the opinion that Americans is where we see our growth. So we employment.