Region's Tight Industrial Space Ratchets Prices, Limits Options
Spatter, Sam, Tribune-Review/Pittsburgh Tribune-Review
The improving economy and demand related to Marcellus shale gas exploration have caused a shortage of industrial real estate space in the Pittsburgh region -- a trend that's encouraging but gives reason for concern, experts said.
The tight supply signals a healthy market but drives up prices and limits options for industrial companies looking to expand here.
"The Pittsburgh industrial market is at a tipping point," said Lou Oliva, executive managing director at Newmark Grubb Knight Frank's Pittsburgh office, an industrial real estate broker Downtown.
Vacancy rates for industrial space neared an all-time low of 7.4 percent at the end of last year, down from 9.2 percent in 2011, according to a report from Newmark Grubb Knight Frank. Another report from Grant Street Associates/Cushman & Wakefield put the vacancy rate at 8.5 percent.
The dwindling supply of sites for warehouses and industrial plants caused 67 companies to look elsewhere over the past five years, said Dewitt Peart, president of the Pittsburgh Regional Alliance.
"In the past few months, I have assisted two companies looking to lease ... only to lose them to neighboring states because of our lack of inventory and higher than national rental rates," said John M. Lisowski, vice president of Grant Street Associates.
When companies shy away from the market, the local economy loses job opportunities, said Don Smith, president of the Regional Industrial Development Corp. of Southwestern Pennsylvania.
"We could be losing about 1,000 new jobs a year with the failure to have sufficient space to accommodate new or expanding companies in the region," Smith estimated.
The trend in Pittsburgh mirrors the national market. Demand locally is expected to remain healthy because of leases by shale gas drillers and related companies.
More than a third of respondents to a Grant Street Associates survey said they were working on business related to the natural gas industry -- up 20 percent from 2010.
Though many manufacturers are not directly involved with the extraction process, they contribute to the supply chain for drillers, providing pipe or concrete.
Peart believes a need will arise for industrial buildings to house businesses related to the petrochemical industry if Royal Dutch Shell PLC builds a "cracker" plant in Beaver County as proposed. The plant would extract ethane and other compounds for use in making plastics and other materials. …