As City leaders celebrate the flurry of construction activity within their borders, a news report indicates that a lack of anchor tenants may hinder some developments. The report notes that at some projects, an office complex on the North Shore, another at the SouthSide Works, along with a couple in the Golden Triangle, are being paused as their developers look for that one tenant that would make their projects viable.
This search may take a while. Even as the national economy gains momentum the local economy seems to be sputtering. The latest Pittsburgh metro labor statistics show the year-over-year growth to total non-farm jobs was just 1.2 percent in April. However, as we have pointed out, most of this growth has happened in the leisure and hospitality sector. There are not a lot of firms from this industry that lend themselves to being anchor tenants demanding large swaths of office space. Furthermore the industries that appear to qualify for such status seem to be few and far between. Even the one industry that comes to mind, energy companies drilling in the Marcellus Shale formation, has been reducing activity in the face of falling natural gas prices. And don’t look for new firms to step forward. The recently released Kauffman Index of start-up activity, places the Pittsburgh area last in its ranking of the forty largest metro areas for new firm start-ups. In sum, absent a flurry of movement of companies needing headquarter space in the City, the universe of firms that could be anchor tenants would appear to be very limited.
As we have been saying for many years, the business climate in Pittsburgh, the region, and even statewide, is not conducive to growth. With heavy taxation and regulations, and a fealty to unions, many such firms are hesitant to call Pittsburgh home. Gone are the days when the City was home to many Fortune 500 companies. Those that remain often demand public subsidies or abatements before moving from one side of town to another. Until the current business climate changes there will almost certainly be a dearth of anchor tenants for these developments to chase after.
