Occupancy improved in the second quarter in the 50.2-million-square-foot Pittsburgh general purpose, multi-tenant office market, but rents remained weak. The quarter saw 201,000 square feet of positive net absorption, and the vacancy rate fell 40 basis points to 15.5%. That is down 80 basis points from a year earlier. Another 42,000 square feet of net absorption reduced the rate to 15.4% in July. The Class A vacancy rate is lower at 12.3% as of the second quarter, down 30 basis points from the period, down 70 from a year earlier, and perhaps low enough to encourage new supply. The Class B/C rate of 18.7% is higher but falling even faster.
The Pittsburgh office market didn’t suffer as much as many others in the decade following the tech bust and stock market crash of 2000. In the decade from 2002 to 2011 net absorption averaged 400,900 square feet per year, and while new supply averaged 685,500, inventory losses limited the supply increase to an average of 532,400 square feet. Reis predicts rough balance will persist, as the vacancy rate ends 2012 at 15.5% and 2016 at 14.4%.
Rents are flat. In the second quarter both the average asking rent and the average effective rent slipped 0.1%, with the former the ninth worst among the top Reis markets. The respective averages of $20.70 psf and $17.49 psf were up 0.8% and 0.9% year-over-year. The effective average added a penny in July, and gains of 0.9% and 1.1% are forecast for 2012 as a whole. Larger annual increases, eventually reaching the 3.0% to 4.0% range, are expected to follow. The Class A and B/C asking averages for the second quarter, meanwhile, were $24.22 psf and $17.08 psf.
Cushman & Wakefield reports an overall vacancy rate of 16.5%, down 330 basis points from a year earlier, and a direct asking rent of $19.06 psf, up 2.0%.