Thursday, August 03, 2006
Office Vacancy Rate Worsens in Golden Triangle
Developers have been building office space on the North Side and South Side. While local officials see this as economic progress, this increase in office space continues to contribute to the hollowing out the Golden Triangle. The most recent data, for the second quarter of 2006, shows that the office vacancy rate for Pittsburgh’s central business district reached 28.3 percent—up from 18 percent in the third quarter of 2004.
Why the increase? While the vacancy rate increased in the central business district, it declined in the suburban and fringe market. New office space has been constructed at the Southside Works, which has attempted to lure a major law firm from the Golden Triangle. Then too, the new office buildings on the North Shore have brought employees from older office buildings downtown. It is worth noting that these recent developments were done with public subsidies. In addition, PNC Bank has just started construction on a new office tower within the central business district that is being financed to the tune of $50 million by taxpayers. A major law firm will relocate there from existing downtown space.
Analysts believe that an equilibrium vacancy rate among national central business districts is about 10 to 12 percent. Through the first two quarters of 2006, Pittsburgh’s vacancy rate in the Golden Triangle is nearly triple that amount. The problem does not seem to be easing. Analysts from a major realtor noted that “vacancy in (Pittsburgh’s) CBD (central business district) is likely to climb as competing submarkets continue to lure tenants with new product, free (or inexpensive parking), good access, and lower taxes.”
But instead of addressing the issue of excessive government spending and high taxes, government officials seem to be content with using public money to spur development that the market doesn’t want or need, while the Golden Triangle continues to hollow out.
Why the increase? While the vacancy rate increased in the central business district, it declined in the suburban and fringe market. New office space has been constructed at the Southside Works, which has attempted to lure a major law firm from the Golden Triangle. Then too, the new office buildings on the North Shore have brought employees from older office buildings downtown. It is worth noting that these recent developments were done with public subsidies. In addition, PNC Bank has just started construction on a new office tower within the central business district that is being financed to the tune of $50 million by taxpayers. A major law firm will relocate there from existing downtown space.
Analysts believe that an equilibrium vacancy rate among national central business districts is about 10 to 12 percent. Through the first two quarters of 2006, Pittsburgh’s vacancy rate in the Golden Triangle is nearly triple that amount. The problem does not seem to be easing. Analysts from a major realtor noted that “vacancy in (Pittsburgh’s) CBD (central business district) is likely to climb as competing submarkets continue to lure tenants with new product, free (or inexpensive parking), good access, and lower taxes.”
But instead of addressing the issue of excessive government spending and high taxes, government officials seem to be content with using public money to spur development that the market doesn’t want or need, while the Golden Triangle continues to hollow out.
