Curves steep & curves flat
As the Allegheny Institute already has, the Post-Gazette is noting how “the COVID-19 pandemic could bring big changes to the (Pittsburgh) commercial real estate market.”
But even the P-G’s narrative could be a gross under-assessment. For the changes could prove cataclysmic to what many considered to be the timeless concept of a “central business district.”
Pittsburgh entered the coronavirus pandemic with an already troublingly high vacancy rate for premium Downtown office space. The rate at one prominent skyscraper was approaching 60 percent at the end of last year.
Other prominent central business district towers’ vacancy rates were well into the double-digit percentages.
But that’s not the only problem.
As the pandemic struck, there was a plethora of new office space construction underway throughout Pittsburgh. And much of that was the beneficiary of either special land and/or tax deals.
Even without the effects of the coronavirus – social distancing to the extreme that has led to millions of American office workers doing their jobs from home – an existing glut of office space was on the road to being exacerbated by a glut of publicly underwritten office space.
Now, this.
Indeed, some economists are predicting that myriad pent-up factors could lead to a post-World War II-like rebound once the pandemic passes. We certainly hope so.
But the longer business closures remain in effect – and more than a few analysts are pondering if re-openings will be later than sooner – recovery could be a longer slog than first thought. Much longer.
What if, as more than a few observers have debated, businesses embrace the kind of cost-savings that en masse remote workers provide? Rebuilding devastated bottom lines could make it the new norm.
So, then what becomes of Pittsburgh’s generally higher-than-peer city central business district prime office space occupancy malaise? Are building owners bailed out by taxpayer “stimuli”? Do they seek bankruptcy protection or even liquidation?
What of all this glut-compounding, favored-status office space construction? Again, bankruptcy in one form or another? More public subsidies? Block after block of vacant skyscrapers? Or, in the extreme, a command-style Soviet-esque “five-year plan rebuilding program”?
And we’re only talking Pittsburgh here; consider the ramifications nationwide.
Much remains to play out in what, by any standard, rapidly has become a national emergency.
But, and as stated in past columns, Pittsburgh and the nation can ill afford to allow anyone to use the coronavirus pandemic as cover for their own or other’s pre-pandemic policies that only have made recovery from this emergency all the more challenging.
Perhaps in this time of crisis, and seeing that, in life as in matters economic, what is reaped is what is sown, the Pittsburgh of the future will eschew such mistakes.
But past sadly being prologue, that learning curve will remain steep even as the coronavirus curve flattens.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).