Pittsburgh risks even its Potemkin Village status

Pittsburgh risks even its Potemkin Village status

A great reckoning is continuing – some would argue that it is accelerating – for Downtown Pittsburgh. Let’s call it The Great Office Occupancy Diaspora.

The latest bad news: Health insurance and hospital giant Highmark has announced it is giving up about 145,000 square feet of office space in the recently renovated Fifth Avenue Place.

Let’s put this into perspective: That’s five full floors of this 31-story high rise in the heart of the Golden Triangle.

Highmark will attempt to sublet the space. Another nearly 17,000 square feet of space on the 28th floor is up for sublease from another company.

And while a Post-Gazette story links the move to “the challenges of a Downtown office market still struggling from the effects of the pandemic,” the reality is even worse.

Highmark concedes to the P-G that it was trying to offload the space before the first quarter of 2020, when, late in that quarter, Coronavirus-related business shutdowns hit with a vengeance.

That points to a fact that too many rah-rah-sis-boom-bah-ers tend to conveniently omit. The Great Office Vacancy Diaspora was in full force well before the pandemic hit.

But it also raises another issue that also has been escaping too many observers:

Real-estate experts have been arguing that part of Pittsburgh’s office vacancy issues involve a so-called “flight to quality” – leaving older and perhaps not-so-up-to-date office space for more rehabbed modern space.

While, indeed, that does happen, multimillion-dollar upgrades at, say Fifth Avenue Place and William Penn Place, have not necessarily stemmed their tenants’ downsizing and/or flight.

Long-term records will confirm or debunk how valid or invalid the “flight to quality” track is in the Pittsburgh market. But as one real-estate professional told the P-G, “More people are giving up space than taking it. That’s a problem.”

And, again, as we’ve noted many times, while the pandemic and changing work habits certainly have contributed to the stubbornly high Downtown office vacancy rate, the problem existed and was growing before.

Failure to acknowledge that and a concomitant failure to identify the root causes and address them head-on – and the continued touting of “eds and meds” with shockingly little economic growth or population gain to show for it — will leave the erstwhile Steel City struggling to maintain even its Potemkin Village status.

Never – ever — has “The Great Collective” that has run things into the ground ‘round these parts for multiple scores of years worked so assiduously to fail.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).