developing pittsburgh spring 2013

DEVELOPINGPittsburgh SP

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PITTSBURGH’SNEXT ACT

Naiop PITTSBURGH s Annual Awards

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05 President’sPerspective Dan Puntil

19 DevelopmentProjectPittsburgh International Business Park

26 DeveloperProfileChapman Properties

36 EyeontheEconomy

40 OfficeMarketUpdateNewmark Grubb Knight Frank

44 IndustrialMarketUpdateLangholz Wilson Ellis

48 RetailMarketUpdate

CBRE

50 NationalMarketUpdateAvison Young

58 Legal/LegislativeOutlook

63 Benchmarks

69 Voices

73 NewsfromtheCounties

85 TransactionsofNote

CONTENTS | Spring 2013

06 Pittsburgh’s Next ActThe region’s assets are getting accolades from around the globe but the civic and commercial real estate leaders aren’t resting on their laurels. Regional leaders talk about what works and what needs to work better for Pittsburgh to keep thriving.

52 NAIOP Pittsburgh's AwardsNAIOP Pittsburgh’s 20th Annual Awards Banquet honors projects and individuals exemplifying excellence in the commercial real estate industry.

33 Developing TrendAn improved Panama Canal should change global logistics and create the need for more transportation and distribution to the Midwest and Northeast.

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We obtained the information in this document from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.

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W elcome to the second edition of Develop-ingPitts-burgh

Magazine, a publication focusing on the commercial real estate industry and brought to you by NAIOP Pittsburgh. It is my distinct privilege to serve as President of NAIOP Pittsburgh for 2013. I am humbled to follow in line with some of the most prominent and influential leaders in the commercial real estate industry that have served in the same capacity. These great lead-ers have developed a strong founda-tion that has served as the base from which this organization was built upon, much like a real estate project. NAIOP Pittsburgh has grown year after year, to become the preeminent real estate organization in Pittsburgh with a focus on our core values of Education, Advo-cacy and Leadership. Together with our outstanding Board of Directors, it will be my goal to further our mission and continue to grow this great organiza-tion.

This edition of Developing Pittsburgh Magazine will focus on ‘what’s next’ for commercial real estate in Pitts-burgh. The secret has been revealed that Pittsburgh real estate has not only fared far better than many other cit-ies during the economic downturn, it has in fact, prospered. Our controlled, sustainable growth as a result of high barriers to entry have prevented over building resulting in a real estate mar-ket that performs at the top of all mar-kets in the country. Our vacancy rates in office, industrial, retail and multi-family are among the lowest of all of the nation’s top 64 markets. Pittsburgh is now attracting regional, national and international institutional investors who have identified our region as a market that provides attractive returns while providing a stable real estate environment.

So what’s next for Pittsburgh? How do we maintain this position and most im-portantly, how do we continue to grow

this market while maintaining these enviable statistics? Will the growth come from “Eds and Meds?” The energy sector? Will it be in the form of new development or renovation of some of our existing assets? My sense is that it will include all of the above. In this edition of DevelopingPittsburgh, we will explore the factors that will impact our ability to maintain this momentum and continue to grow and prosper. We will discuss the challenges of keeping up an aging infrastructure, the need for pad ready sites and foster-ing public/private partnerships in a new era of austerity for government.

We’ll also spotlight our annual NAIOP Pittsburgh award winners. This Devel-oping Pittsburgh has a special section devoted to the projects and people that made special contributions to the commercial real estate industry.

We should all be proud of our accom-plishments, but not rest on our laurels. Much like the city of Pittsburgh has adapted over the years, so too does our real estate industry need to adapt. We need to continue to be creative, be proactive, be innovative and be disciplined. Those qualities have been the hallmark of Pittsburgh over the decades and have served our city very well. Let’s take the next steps and con-tinue to grow the Greater Pittsburgh commercial real estate industry.

President’s Perspective

5 DEVELOPINGPITTSBURGH | Spring 2013

PUBLISHERTall Timber Group

www.talltimbergroup.com

EDITORJeff Burd

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PRODUCTIONCarson Publishing, Inc.

Kevin J. [email protected]

ART DIRECTOR/GRAPHIC DESIGNCarson Publishing, Inc.Jaimee D. Greenawalt

CONTRIBUTING PHOTOGRAPHYCarson Publishing, Inc.

Jan PaklerPittsburgh Regional Alliance

CONTRIBUTING EDITORSAnna Burd

Cecelia CagniKaren Kukish

ADVERTISING SALES Karen Kukish

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MORE INFORMATION:

DEVELOPINGPittsburgh is published by Tall Timber Group for NAIOP Pittsburgh

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No part of this magazine may be reproduced without written permission

by the Publisher. All rights reserved.

This information is carefully gathered and compiled in such a manner as to ensure maximum accuracy.

We cannot, and do not, guarantee either the correctness of all information furnished nor the

complete absence of errors and omissions. Hence, responsibility for same neither can be, nor is,

assumed.

Keep up with regional construction and real estate events at www.buildingpittsburgh.com

Daniel P. Puntil


F E A T U R E

FOR PITTSBURGH?WHAT'S NEXT


“Our f i rm ident i f ied the character i s t i cs o f a good investment market . We look at the economic dr ivers. We be l ieve the next phase of economic deve lopment wi l l be dr iven by h igh tech, hea l thcare and en-ergy,” says Tim Wang, sen ior v ice pres ident

and head of invest -ment at ING Clar ion Par tners. “We be l ieve P i t tsburgh has a l l the r ight p ieces.”

I t wasn’ t that long ago that the econom-ic prospects for P i t ts -burgh were a b i t less rosy than they are to-day. I t was less than

a decade ago, in fact , that the twin c los ings of the Lazarus and Lord & Tay lor s tores in Downtown le f t the bus iness community fee l ing l ike noth ing would work to return the cent ra l bus iness d is t r i c t or the c i ty to i t s former hey days.

F E A T U R E


Of course what was happening at the t ime was the gradual and incremental improvement in the sectors that would be the leading economic dr ivers of 21st Cen-tury P i t tsburgh. Those gains were taking place below radar but the ‘new’ P i t tsburgh began a per iod of not-so-quiet improvements when Bob O’Connor became mayor of the City of P i t tsburgh, the Imagine P i t tsburgh campaign kicked off and the G-20 Summit came to town. A half-decade later and you could make an argument that P i t tsburgh is becoming overexposed but after a generat ion of bad news, few regional leaders are worr ied about too much good news.

This i s P i t tsburgh’s new Golden Age. But whi le P i t tsburghers are happi ly accept ing accolades from al l over the planet, th is i s a lso probably a good t ime to ask, “What’s next?”

GETTINGHERE

Al l i t took to become one of the economic dar l ings of the globe was a generat ion to pass and a couple hundred thousand jobs to be re-placed. Business and c iv ic leaders have worked through three ‘Re-naissances’ to remake Pittsburgh’s economic landscape. For more than 30 years there were no home runs, just economic ‘smal l bal l ’ – s ingles and sacr i f ice bunts and bases on bal ls – that scratched out thou-sands of smal l wins.

Over the years, there were plenty of fa lse starts but behind the scenes there were cont inued ad-vances in educat ion, healthcare and whatever the technology of the day was. Seeds were sown at the Univers i ty of P i t tsburgh, Carn-egie Mel lon and the Univers i ty of P i t tsburgh Medical Center, among others. With operat ing models that re invested income in research, each of these inst i tut ions began form-ing a new ident i ty and the eco-nomic development leaders began to l ink the c i ty ’s image to those new ident i t ies . Advancement at the univers i t ies and hospita ls worked l ike compound interest . The effect was only breathtaking after enough t ime has passed.

A measure of the success that can be c la imed by the region’s inst i tu-t ions was a ided by publ ic pol icy. The Commonwealth of Pennsylva-nia made investments in the uni-vers i t ies that have y ie lded results . L ikewise, the federal government endowed research grants that resulted direct ly in a number of marketable advances.

The more diff icult investments to make over the years have been in projects and programs that worked to the benef i t of the pr ivate sec-tor, especia l ly those for pr ivate development. State or local a id for companies who promise to create jobs is pol i t ica l ly charged and often controvers ia l . Whether i t ’s a P IDA loan or a school d istr ict tax incre-ment f inancing (T IF ) deal , taxpayers have a hard t ime support ing the transfer of publ ic funds to pr ivate companies. Those sent iments can get even more inf lamed when the benef ic iary is a property developer. In the f inal analys is , however, i f you had to point to one pol icy that did the most to br ing the economy to where i t i s today i t might be the publ ic ly-funded support of develop-ment s i tes.

The c iv ic and business leaders who have worked to secure the publ ic support and pr ivate investment in the region’s s i tes could not have known what today’s opportunit ies would be but they needed to pre-pare as though they could. Those that best foresaw the potent ia l for economic growth were eventual ly rewarded.

“It i s important to remember that the successes we are exper iencing

in Washington County are not acc i -dental . They are the result of years of strategic planning undertaken by the Washington County Commis-s ioners, bus iness community and our economic development organi-zat ions to ant ic ipate future growth and be proact ive in developing s i te ready business parks,” states Jeff Kotula, pres ident of the Wash-ington County Chamber of Com-merce. “Whi le we of course did not foresee the tremendous posit ive economic impacts of the energy industry 15 years ago, the decis ions made then to develop ready-to-go s i tes made our county uniquely po-s i t ioned to take advantage of these energy opportunit ies and earn the moniker Washington County-The Energy Capita l of the East ."

Those next energy opportunit ies represent major turning points in economic direct ion for the region. Most casual observers probably expect that the natural gas industry wi l l s imply fol low an ever-c l imbing path of growth in Western PA but no success is assured. Success tends to come from opportunit ies f inding the wel l prepared. With potent ia l employers of hundreds of thousands deciding where to locate key assets, now would be a fortu-i tous t ime to prepare for the future of publ ic /pr ivate partnerships (P3) .

P3FORTHEFUTURE

NAIOP Pittsburgh and the P i t ts-burgh Regional Al l iance organize a biennia l tour of the c i ty for s i te se lectors, ca l led the Developers Showcase. The day ends with a presentat ion of the f indings of the s i te se lectors to an audience of developers and economic develop-ment off ic ia ls . One of the consis-tent points made by s i te se lectors is that attract ive c i t ies demonstrate regional ism and cooperat ion among al l p layers. Effect ive publ ic /pr ivate partnership is a key e lement.

The trans i t ion from the Rendel l to Corbett administrat ions was one that had a dramatic impact on publ ic /pr ivate partnerships. Even as tax receipts plummeted dur ing the recess ion, Gov. Rendel l kept up the stream of funding for pr ivate in-dustry. His last days in off ice even

A l l i t took to become one o f the economic da r l ings o f the g lobe was a genera t ion to pas s and a coup le hundred thousand jobs to be rep l aced .

F E A T U R E

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inc luded a f lurry of Redevelopment Ass istance Capita l Program (RACP)grants that were controvers ia l enough that Gov. Corbett delayed s igning off on the f inal funding. Businesses that were next in l ine for state grants weren’t so fortu-nate.

As incoming governor, Corbett was concerned about the amount of debt being taken on to fund the RACP grants, especia l ly without a methodology for tracking whether or not the investment returned re-sults that could just i fy the borrow-ing. L ike many funded programs, RACP foundered whi le the new administrat ion evaluated what was f iscal ly – and pol i t ica l ly – in l ine with their v iew of government.

The program was reorganized and tr immed down to $125 mi l l ion per year, to be managed in two rounds annual ly but in 2012 the evalua-t ion was reduced to a s ingle round. Funding for projects that were put in the pipel ine in 2012 was belat-edly announced dur ing the f i rst week in February 2013. Grants for 14 P i t tsburgh area projects tota led $24.7 mi l l ion but three large proj-ects , inc luding the RIDC’s Almono s i te missed out on grants this round.

Steve Guy is CEO of Oxford Devel-opment, one of the appl icants for i ts 350 F i f th Avenue project . He supports the administrat ion but f inds their economic development pol ic ies unclear.

“We need to gain a better and t imel ier understanding of Penn-sy lvania’s pos i t ion with regard to economic development. I don’t understand what the administra-t ion intends; what’s avai lable and how to access i t ,” he says. “ I ’m pro administrat ion but i t ’s d i ff icult for bus iness to understand the state and what is avai lable.”

Regardless of your pol i t ics you can’t real ist ica l ly look at the cur-rent successes in the region’s economy without f inding traces of publ ic investment throughout, but certa in ly in the area of real estate development. Western PA is a region with topographical and s i te chal lenges that make develop-ment diff icult . When the industr ia l economy crumbled thirty years ago there were hundreds of abandoned s i tes that were a lso unsuitable for redevelopment because of environ-mental hazards. Without the use of publ ic funding, few of the projects

we hold up as successes – The Wa-terfront, South S ide Works, P i t ts-burgh Technology Center – would ex ist today.

The posit ion of the f iscal conserva-t ives is understandable: pr ivate de-velopment should be able to stand on i ts own business case or not at a l l . The problem is that compet i -t ive markets haven’t operated as free markets in decades and with-drawing publ ic funding that pr imes pr ivate investment puts Pennsylva-nia at a disadvantage. With the gas industry expanding in Ohio, West V irginia and New York at the same t ime i t i s matur ing in Western PA, this i s a good t ime to remove any disadvantages, says Avison Young’s Duke Kingsley.

“We are a lways in compet i t ion with other states and r ight now some of them are gett ing more compet i -t ive,” he says.

Given the current government f is-cal environment i t i s fa l l ing to the Commonwealth to create programs that can al low investment and funding opportunit ies. In 2004, the state launched the Business in our S i tes loan program, which has been valuable to projects l ike Alta V ista, Starpointe and Almono but has reached the point of having l imited funds avai lable from its revolv-

Redevelopment Assistance Capital Program grants for Metropolitan

Pittsburgh projects were announced by Gov. Corbett’s office February 11.

“We are a lways in compet i t ion wi th o ther s t a tes and r igh t now some o f them are ge t t ing more compet i t i ve , ”

F E A T U R E


ing loan proceeds. Legis lat ion adding as much as $75 mi l l ion in underut i l ized development funds has been proposed but no act ion has been taken.

Whi le there may not be the money avai lable nor the pol i t ica l wi l l to use i t at the moment, there is l i t t le d isagreement about what would be the best use of publ ic support for pr ivate development.

“The big issue is st i l l that we don’t have enough pad-ready, shovel-ready s i tes for development,” says PRA pres ident DeWitt Peart .

At the most recent Developers Showcase, held in No-vember, s i te se lectors were effus ive in their pra ise for the region’s accompl ishments but among the kudos were comments that echoed Peart ’s concern.

“Pittsburgh could benef i t f rom a process of gett ing more s i tes ready for the development of industr ia l and manufactur ing fac i l i t ies ,” noted Wil l iam Hearn of CH2M Hi l l .

With the improving economy, there is more urgency to f inding a way for publ ic /pr ivate s i te preparat ion proj-ects to happen more quickly. “We can spend years and years gett ing s i tes ready but most c l ients can’t wait two or three years for a property,” says Randal l For is-ter, d i rector of development for the Al legheny County Airport Author i ty. “ I f we don’t have the s i tes ready i t ’s imposs ib le to attract development.”

Gregg Broujos’ suggest ion is specif ic and succinct, “We have a lack of avai lable speculat ive industr ia l f lex product.” Broujos is a broker and the managing partner for Col l iers Internat ional , so his product-or iented answer isn’t surpr is ing. But his concern about the short supply of industr ia l space was focused less on the developers than on the process. “ I t ’s a def in i te detr iment to the region not to have the space now. The complexity of the development process makes i t d i ff icult to move a project a long.”

The last point Broujos makes is one that is often over-looked in P3 discuss ions. Publ ic funding for pr ivate de-velopment is wel l and good but i t may be more useful in the long run for state and munic ipal leaders to look at the process of ent i t l ing a project as an opportunity for partnership with pr ivate industry. Pennsylvania has earned a reputat ion for unwieldy environmental and transportat ion approvals for development, even when there are no complex issues involved. Moreover, the lack of uniformity and consistency at the munic ipal level can leave developers frustrated. For developers that aren’t accustomed to deal ing with the permitt ing environment – l ike those coming from out of state – the hass les may prove to be too much.

“When you ta lk about due di l igence that takes nine, twelve or f i f teen months to get approvals , that dis-courages development,” notes Donald Smith, CEO of the RIDC. “Everybody should be looking for high

F E A T U R E


qual i ty projects but when you get a high qual i ty project [ regulators] should do everything they can to expedite the process.”

Smith makes the point that cor-porat ions aren’t making decis ions l ight ly, certa in ly not in the eco-nomic condit ions of the last few years, and that once a decis ion to proceed with a project i s made the companies don’t want to wait another year wait ing to have a plan approved. He advocates for a fa i r and predictable regulatory process so developers know exact ly what can be expected when they start down a project . “ Investment capita l wants a consistent, predictable path,” he says.

One of the hal lmarks of this new era in P i t tsburgh’s real estate his-tory is that many of the industr ies and capita l that are dr iv ing devel-opment are coming from out of the region. In most parts of the

country – and certa in ly in the parts f rom which the oi l and gas industry is coming – the process of gett ing approvals to bui ld is much more streaml ined. Moving in that direc-t ion at any level would s ignal to those businesses looking at West-ern PA that there was a business -fr iendly culture.

THECULTUREOFSUCCESS

There’s l i t t le quest ion but that a change in att i tude accompanied the improvement in the economic fortunes of the region. I t i s not a bad thing to shift f rom an att i tude that expects the other shoe to drop to one that is looking for the next good thing to happen. Of course, the inherent danger in that is com-placency.

“Our corporate community has been so posit ive for us. That has to cont inue and I th ink i t wi l l , but we st i l l have to be attract ive to busi-nesses,” says Duke Kingsley. “We benef i t ted from everyone saying P i t tsburgh is on the upswing and we have to be careful to keep that up.”

For certa in there is l i t t le that re-sembles complacency with regard to the biggest opportunity in front of the region. The announcement

“Ever ybody shou ld be look ing fo r h igh qua l i t y p ro jec t s bu t when you ge t a h igh qua l i t y p ro jec t [ regu la to r s ] shou ld do ever y th ing they can to exped i te the p rocess . ”

F E A T U R E

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of a preferred cracker s i te by Shel l was trumpeted around the globe but regional off ic ia ls have con-t inued to work to answer Shel l ’s quest ions and concerns. Most lead-ers expect the project to be bui l t in Monaca but the work to c lose the deal i s ongoing. The oi l and gas industry is st i l l in the discov-ery stages about the shale forma-t ions in our region. Some of that discovery is geological but some of the feel ing out is to ensure that companies land where i t ’s best for them to do business.

“One of the issues we must ad-dress as a region is encouraging the City of Pittsburgh to rescind its ban on natural gas dri l l ing. This anti-gas posit ion is harmful to our regional attraction efforts and has the potential to discourage new energy company relocations and job growth,” Kotula says. “And while it is correct that our regional eco-nomic results are encouraging, the true economic growth is occurr ing in counties that have embraced the energy industry such as Washington, Greene and Butler. However, make no mistake, we are now competing with Ohio’s Utica Shale and we must convince the City to also welcome the jobs, business opportunit ies and economic growth the natural gas industry is offering our region”

Steve Guy is concerned about the impression outsiders get about the current debate from taxing non-profit organizations.

“We need an appropriate resolution for some of our largest corporate cit izens with regard to their non-profit status. The negative PR hurts us,” he says. “I can’t say which outcome is r ight but a definit ive resolution is necessari ly better than saber ratt l ing from both sides in the press.”

Bi l l Hunt was reminded how impor-tant the projection of enthusiasm was when he traveled around the U.S. as NAIOP Corporate chairman. “In Nashvi l le it was actual ly their pol it ic ians. Everyone said they lovedthe pol it ical leaders, how they seemed to be everywhere,” he says. “The developers said the pol it ic ians were al l about growth but at the same time they do the r ight thing for the community and environ-ment. People were saying that made them want to go to work.”

“I st i l l think we are not the greatest ambassadors of our region. I think that is important to companies that are looking at a city – how enthusi-ast ic the residents are about l iv ing there,” continues Hunt.

Of course, a culture of success is about more than att itude and

public relat ions. For Pittsburgh to continue to be a ‘top ten’ city, systemic changes wil l be required in a number of our inst itutions. Some of these changes can be driven by business or civ ic leaders but others, l ike changing the culture of elected government, wil l have to be part of an American cultural change. It may seem beyond the cal l of duty for the average cit izen of Western PA to lead a national movement but the economic opportunity in front of our region creates that chance.

Don Smith, the RIDC’s CEO, thinks that publ ic pol icy has been focused on the wrong issues. “There is no growth coal i t ion at the state, fed-eral or local level . The debate has been about f iscal problems and the l ike but i t ’s not about how to solve our economic growth problem,” he says. “The focus should be on creat ing condit ions conducive to a better bus iness c l imate. I t ’s an investment problem not a consump-t ion problem.”

Smith suggests that the debate should be on improving the tax and regulatory environment, education and training for workforce. While he expects that funds wil l st i l l have to be avai lable to create opportuni-t ies his bel ief is that the long-term return wil l come from the better standard of l iv ing that results from investing in the people.

Attracting and training a ski l led workforce is another problem that is national rather than local, as is one of the solutions: foreign immigra-tion. Obtaining an H1B visa is nearly impossible for workers with the kinds of technical ski l ls in construc-tion or manufacturing, for example, especial ly since unemployment is st i l l high in the U. S. Demographics tel l us that the need for more ski l led workers wil l be upon us sooner than the public thinks – certainly in less than a decade – but the polit ical

A shift in population trend is showing a net increase in population. A trend that includes a long-term trend

towards a younger average age. Source: Pittsburgh Regional Alliance.

F E A T U R E


cl imate is not conducive to antici-pating that need.

Another workforce-related issue is the right to work. Nearly half the states in the U.S. have laws that protect a worker’s right to be em-ployed without joining a union. In January, six different PA legislators introduced laws that would create a right-to-work environment. Gov. Corbett has said in past that he would sign such legislation that passes but it is sti l l unlikely that he wil l get the chance. Both sides of the argument make the case that they are protecting work-ers’ rights and the debate wil l stir emotions on both sides.

For many businesses outside Penn-sylvania, the right to work legisla-tion is one of the boxes that must be checked before they wil l consider a location. The subject is difficult for economic development leaders in Pittsburgh because they are charged with making the region as competi-tive as possible but union leadership has also been a helpful partner in the region’s turnaround.

Changing the environment for taxa-tion is not necessari ly a national is-sue, however. As companies evaluate locations, the corporate and busi-ness taxes play a big role in the final decision. PA’s corporate taxes have long been a competitive disadvan-tage, even though few companies pay the full tax rate. Many of the states that compete for employers with PA have tax structures based on consumption or usage rather than income. For businesses, this seems fairer since it taxes them more pro-portionally to the public resources they consume. This means higher sales and excise taxes, highway tolls or gas taxes. The latter is especially appealing for Pennsylvania, since it would encourage the use of natural gas instead of oil.

States with lower income tax struc-tures do better at attracting new employers. That’s a reality that should keep legislators motivated while they consider revamping Penn-sylvania’s revenue sources.

NEXTSOUTHPOINTE

I f you ask 50 economic development or real estate executives what the region needs most, don’t be sur-prised if most of them say the same thing: the next Southpointe.

“Thank God we had Southpointe to absorb al l the demand when it came,” says Peart. While he doesn’t think the natural gas industry would have avoided the region without Southpointe’s capacity, Peart says, “I don’t think we would have seen al l the suburban off ice deals that we’ve had without Southpointe.”

When asked what project or sub-market could become the next land-ing place for new businesses Peart cited several opportunit ies.

“The Almono site I think is a huge opportunity for the region,” he says. The RIDC project is a 178-acre planned development along Sec-ond Avenue and the Monongahela River in Hazelwood. Its adjacency to Oakland creates excit ing potential for research and technology expan-sion but its mixed-use master plan is what Peart referred to. “It offers a l ive/work environment. That’s sort of the next wave for Pittsburgh.”

Another area with lots of land and great access to transportation is the Pittsburgh International Air-

port. There are almost 10,000 acres of airport-control led and private s ites that are within a mile or so of the I-376 interstate connection. Exploration of the shale forma-tions is moving in that direction, whether it is in Ohio or northwest of Pittsburgh. The Shel l cracker and the polyethylene-fed industr ies that wil l fol low wil l be accessible to I-376 just ten minutes or so from the airport and the recently-announced Southern Connector wil l complete the connection from the airport/ I-376 to Southpointe.

The drawback for the airport sub-market is that the biggest chunk of land there is subject to Federal Aviat ion Administrat ion rules, the most restr ict ive of which is that the land control led by Al legheny County must be leased not sold. For the oi l and gas industry, this is counter-cultural. As t ime goes on, the advantages of the location wil l probably outweigh the desire to own land for new businesses. In the meantime, the FAA rules should be a st imulus for the private develop-ments already underway, l ike Chap-man Westport, F indlay Westport and Pittsburgh International Business Park.

One other alternative to the large suburban development is the wise investment in infrastructure that promotes the development of un-

F E A T U R E

The $900 million mixed-use Almono development is planned to be the next live/work/play project

along the riverfronts of Hazelwood.


deruti l ized land nearer to the city’s core. De Peart considers that infra-structure planning to be one of the keys to continued prosperity.

“It’s easy to lose s ight of the im-portance of transportation infra-structure. If we can get a federal and state transportation bi l l and invest wel l , I think there is a better opportunity to f ind the next South-pointe,” he says. “The transporta-t ion issue r ight now is that we’re at capacity for infrastructure. I think the region has to look at transit-oriented development. We have a f ixed system but we don’t take advantage of it . That has to inform our planning process because there are some areas that real ly need new investment.”

The focus on transit-oriented development would be especial ly important to communit ies that are along historical ly active corr idors at

the edge of the City of Pittsburgh. These sites – l ike Route 51, the Etna-Mil lvale-Sharpsburg area, or McKees Rocks – have transit infra-structure other than roads and are within 10-15 minutes from Down-town. Most of these sites also grew original ly because of the access to industry and would be areas of inf i l l between town and suburban markets that are currently growing. Most would also be well-suited for new manufacturing or transporta-tion that supports the new indus-tries.

For al l the talk of new urban plan-ning and culture change, it is the new industries that represent the game-changing potential. The region may well be sitt ing at one of those intersections of opportunity and preparation that happen only rarely, but have happened in Western PA a few times before. No matter how poorly or well we have managed the

opportunities over the years, the natural advantages of the Pittsburgh region have ult imately won the day. The rivers, access to water and labor and abundant energy made the region attractive. Those assets, especial ly the latter, are sti l l bolster-ing the regional balance sheet.

Dean Barber, president/CEO of Bar-ber Advisors was one of the experts who toured Pittsburgh as part of the Developers’ Showcase. He looked at the region as having an historical opportunity to provide companies a great economic environment and a unique take on energy indepen-dence.

“The idea of locating on a site and being energy independent because you can actually tap into the gas wells on your property, that’s not so wild a dream,” he said. “It could happen. It could actually happen in Pittsburgh.” DP

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Cranberry Business Park - Cranberry Township, PAChaska Property Advisors

Pittsburgh International Business Park - Moon Township, PAContinental/Chaska, LLC.

Three projects.Two developers.

One contractor.

Carl Belli 412.464.3006

Development Project

www.developingpittsburgh.com 19

Pittsburgh International Business Park

L ike many de-velopers, the partners in the Pittsburgh International Business Park

have had diff iculty gett ing a spec bui lding started, although not for the reasons you may think.

When Continental Real Estate Companies and Chaska Propert ies s igned an agreement to develop the 40 acres along Cherrington Parkway Extension into a s ix-bui lding off ice complex of roughly 350,000 square

feet they also agreed to get a f irst bui lding underway in 2012. On the way to planning the 53,000 square foot spec bui lding a funny thing happened: they signed a lease for two bui ldings of that s ize with loan service company, ServiceLink. By November of 2012, the Bui lding 100 and 110 were under construction and the master plan was already in need of an update.

Pittsburgh International Business Park (PIT Business Park) is the culmi-nation of several long-range public pol icy projects and the work of pub-l ic agencies at the local, regional and state levels. The project is an example of publ ic investment in a s ite that pays taxpayers back with the fruits of private development.The development is one of several that have been offshoots of the Al legheny County Airport Author-

ity’s effor ts to convert as much of the 10,000 acres sur rounding the a i rport to pr ivate , tax-generat ing use. In 2004, the Author i ty com-pleted a master p lan that ident i -f ied the most l ike ly s i tes for deve l -opment and created a h ierarchy of opportuni t ies for publ ic support . Governor Rendel l was s t i l l ear ly in h i s f i r s t term and had a l so ident i -f ied opportuni t ies for publ ic in-vestment that would opt imize the return in new jobs . Among those was the ‘Bus iness in Our S i tes ’ program, which a imed to support reg iona l deve lopment of pad-ready s i tes wi th h igh l ike l ihood of at -t ract ing deve lopers . As i t turned out a couple of publ ic author i t ies had a s i te in mind in Moon Town-sh ip.

“We looked at al l the sites that were developable at the airport and

The finished exterior of the ServiceLink buildings (rendering by WTW Architects)


l iked the Cherrington site the best. At the same time Moon Township came to us and said that they would real ly l ike to see the Cherrington site move ahead,” remembers Randy Forister, senior director of develop-ment for the Airport Authority. “The Moon Township Transit Authority (MTA) indicated that it was wil l ing to fund work that could get the site ready. Our feel ing was that if the community is behind this, let’s see what we can do in Harr isburg.”

The site that was attracting interest was land that lay between Ewing Road and the end of Cherrington Parkway, just southeast of the Eaton

Corporation headquarters. The land had been used as a coal mine in past and the topography wasn’t conducive to development. To make the site attractive, the plan was to extend Cherrington Parkway south to Ewing Road and undertake the grading and remediation needed on a brownfield. The price tag for the work was $14 mil l ion and would require the coordination of a mult i-tude of agencies.

The Airport Authority and the MTA entered into an agreement to pro-ceed with the work, which meant l ining up funds from the county and state that would cover construc-

“The f l ex ib i l i t y i s the impor tan t th ing about the des ign . The bu i ld ings a re ve r y amenab le to d i f f e ren t u t i l i z a t ion , be tha t l i gh t manufac tur ing o r a l l o f f i ce , ” no tes Br yan t Robey, pa r tner a t WT W Arch i tec t s .


t ion. Funding came from the Al legheny County Redevelopment Author-ity, s ix mil l ion in loans and grants from the state through the Airport Authority, two mil l ion in state loans through the MTA and $2.5 mil l ion in-vested by the MTA’s capital funding and Moon Town-ship respectively. The Air-port Authority managed the contracting and oversaw the construction, which wrapped up in September 2008, just as the f inancial cr is is was break-ing.

Another developer planned several mult i-tenant off ice bui ldings at the site, hoping to capital ize on the location and the number of corporate users in the market. The market was softening in 2008, however, and a severe economic chi l l eventual ly scutt led the project.

By 2011, business condit ions had recovered in Western Pennsylva-nia. The gas industry – which was only arr iv ing when plans for the site were announced – was now en-trenched and beginning to expand to the airport corr idor. Vacancy rates were fal l ing with no new con-struction planned. Late in the year the airport authority’s marketing of its s ites succeeded in attracting new interest.

“We held a tour for developers. Bar-ry Ford and his people were there – Dick Donley may have been too – and a few days later Barry cal led me to say that they had a concept that might work on the site and could we talk,” Forister recounts.

The concept that Ford had in mind was single-story f lex off ice bui ld-ings s imilar to the ones developed by Chaska Propert ies at Cranberry Business Park. By coincidence, Ford and Chaska’s Donley had been in discussions about working together for some time before the site tour took place.

“I asked Dick to join Jason and I and several other business fr iends for dinner at one of our bui ldings

on the North Shore. The conversa-t ion was along the l ines of we’re in the middle of this recession so how are we al l going to make a l iv ing next year,” remembers Ford, who is president of Continental Real Estate Companies. “I said we ought to f ind someplace else to bui ld Cranberry Business Park.”

The product at Cranberry Business Park has a number of features that make it different from the tradi-t ional off ice product. One differ-entiat ing factor is the generous parking, with f ive or s ix spaces per thousand square feet. The bui ldings have twelve- to s ixteen-foot high windows that create lots of natu-ral l ight and open f loor plans that al low for great f lexibi l i ty in layout. There are no elevators or central core to reduce the usable space in the bui lding or to add common area maintenance. Tenant spaces each have their own ground-level entrance for which they can control secure access.

Construction is brick and steel, with a matching concrete block on the back of the bui ldings. The front elevation is broken up with EIFS-covered entrances and canopies. The windows are set in 6’4” open-ings to al low for door sets to be in-stal led instead of glazing. The shel l bui lding is able to be del ivered for approximately $65 per square foot. Depending on the tenant’s bui ld out and parking requirements, rents are between $15.50 and $17 per square

foot. Because the tenants’ access, restrooms and loading/storage areas are al l within the leasehold, there are no common areas. Useable space and rentable space are the same.

“The f lexibi l i ty is the important thing about the design. The bui ld-ings are very amenable to different uti l izat ion, be that l ight manufac-turing or al l off ice,” notes Bryant Robey, partner at WTW Architects. While the bui ldings are from a simi-lar concept, Robey points out that the team works at making improve-ments on each project. “We have lessons learned meetings after each job that are l ively and the discussion can get pretty spir ited but we have been able to use those meetings to make a better bui lding.”

Putting the two developers together wasn’t a tough sel l . “I talked with Barry about being our partner in [Cranberry] but they were busy with the Waterfront, so I ’ve known him

and Continental for a number of years,” Donley says. “And then we ended up using Continental Bui ld-ing Systems to bui ld the bui ldings in Cranberry. They are real ly good people to work with.” He says that Jason Stewart was the f inal piece of the puzzle in common. “Barry has been using Jason for their off ice space for years and I ’ve used Jason for al l our f lex space so we al l knew each other very wel l .”

(From left) Mike Hudec and Barry Ford from Continental Real Estate Companies with Dick and David Donley from

Chaska Property Advisors.


Stewart was aware of the Cher-r ington Parkway site by the airport and he real ly l iked it . The site was a mile or less from two interchanges on what is now cal led I-376, with access at Thorn Run Road and Ewing Road exits on the Parkway West. He also felt that the f lex off ice had great advantages in the airport cor-r idor.

“One of the things about the Park-way West is that it is so deep with corporate users – where do you start - with Bayer, Thermo Fisher, Dick’s, Cigna, GlaxoSmithKline,” notes Stewart. “The Parkway West is the biggest suburban sub-market but it ’s seen far less new construction than Cranberry or Southpointe. You have the biggest numbers of users work-ing in an older product. The fact that it ’s a 2013 product in a market with 1980’s bui ldings is a big advan-tage.”

“The theory that we al l bought into was that the airport market is the largest suburban market and with 8 mil l ion square feet of conventional off ice product there was no way we couldn’t lease up 50,000 square feet,” says Donley. “It seemed to us that we had a relevant part of the market and the opportunity to do a large enough park that it could be something special . There’s enough latent demand in the market that we can land tenants who want the convenience of a s ingle-story mod-ern off ice.”

Stewart bel ieves the opportunity to move into single-story sole ten-ant bui ldings – property types that varied greatly from the mult i-story, mult i-tenant off ices they were in – was attractive to ServiceLink. He says that having that kind of unique new product in the Parkway West market was a big factor but not the only factor.

“The other advantage is Cranberry Business Park,” he explains. “The idea of s ingle-story, no common area add on, ful l control of uti l i t ies looks good on paper, but the fact that we could take them to seven exist ing bui ldings was very helpful. When we started in Cranberry it was more a case of ‘trust us’.”

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Despite their mutual interest in the project and their bel ief that the one-story f lex bui lding was the r ight product, the team would not have come together without some help from Donley’s family.

“My wife didn’t want me to get in-volved in another project unless one of our chi ldren was involved to take on some of the work, so the day before we needed to pul l the tr igger I was going to tel l Barry that I was happy to help them with the product but that I couldn’t be their partner,” he recal ls. “My son David cal led me that day from Florida to say that he and his wife real ly wanted to move back to Pittsburgh. I said, do you need a job? He said yes so I said great, we can do this deal now!”

For several reasons the planning stage of the project was compressed. Of course, the most pressing of the factors was the successful pre-leas-ing of the ServiceLink bui ldings, but the project was on a fast track from the start.

With Continental Real Estate as one of the development partners, construction was going to be done by their s ister business Continental Bui lding Systems, which had more than a decade of experience working with the principals involved in the project. The partners also brought in WTW Architects and engineers from Herbert Rowland & Grubic, both of which had designed the Cranberry Business Park that served as the inspirat ion for the PIT Business Park. Matt Curtis, v ice president of con-struction for Continental says that the famil iar ity made handling the accelerated planning less diff icult.

“We did the f irst bui lding with Dick from a sketch off a napkin as a de-sign/bui ld and we’ve treated them al l as design/bui ld projects,” says Curtis. Even though WTW develops a complete set of documents before construction Curtis says the design/bui ld mental ity and approach lets the team skip a lot of intermediary steps that would be needed for a new cl ient. “It helps that these are fair ly economical bui ldings to bui ld. They are attractive and well bui lt but there’s nothing very complicated about the bui ldings.”

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PIT Business Park represented change for Continental in a couple of ways. For Ford, the product was a depar-ture from the off ice product he was accustomed to developing.

“It real ly is a new product type for me personal ly. Of course, [Continen-tal CEO] Frank Kass started develop-ing 30 years ago with this same type of property in Columbus,” he ex-plains. “I watched our construction group put the bui ldings together for seven or eight years and watched Dick f igure the product out to the point where it real ly works wel l in the market.”

The more signif icant shift was in the speculative nature of the proj-ect. Continental prefers not to bui ld spec – in fact they had done no spec off ice development in Pittsburgh prior to this – but Ford says they had a higher level of comfort because of their famil iar ity with this f lex off ice concept as a contractor. Plus, Ford says, their partner was entirely com-fortable doing spec development. “Dick always says he can’t lease what he doesn’t have.”

Of course, in this case that adage turned out to be untrue. ServiceLink had been in the market for more and better space for a couple of years. They wanted more eff ic ient space and a bigger parking f ield that made a s ingle-story layout ideal – although they didn’t necessari ly know it at the t ime. The f lexibi l i ty of the PIT Business Park design gave them the chance to have about ten percent of their space as mail room/storage, with both loading dock and drive-in dock access. The open f loor plan that put al l of their people on one level also improved their work f low and productivity. Having the exist-ing park in Cranberry was a big advantage, as ServiceLink was able to touch and feel the product there, and make changes to customize the space for their specif ic needs. In some ways this project was the bui lding they didn’t know they were looking for; however, there was one issue that was a potential deal breaker. ServiceLink’s corporate real estate pol icy required that they sign a f ive year lease, a condit ion with which the developers weren’t com-fortable.

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“We had a tenant that had a cor-porate pol icy of not entering into leases of longer than f ive years for a number of reasons that made sense for their business but we didn’t want to have two bui ldings and 100,000 square feet come due on the same date,” explains Don-ley. “What we did was approach them and say how about if we do a four-year lease on one bui lding and a s ix-year lease on the other. I f Ser-viceLink decided not to renew that would al low us to have only 50,000

square feet on the market and two more years to market the second bui lding before that lease expired.”

The creative solution was in l ine with the spir it of ServiceLink’s pol icy. The staggered leases were accepted as proposed.

PIT Business Park is off to a great start. Not only does the ServiceLink lease effectively double the space that was planned to be under con-struction by now, it has also re-duced the speculative nature of the project, although Jason Stewart has-tens to remind you that Bui ldings 100 and 110 were moving along towards 2012 construction without the ServiceLink deal.

“They effectively did go spec to get ServiceLink in the f irst place. If they had not already invested heavi ly for services l ike the engineering, entit lements and approvals to do in nine months what often takes eighteen, there may not have been a deal,” he says. “Randy Forister went out of his way to make that happen. He went outside his role at the Airport Authority to smooth the way with Moon Township.”

Forister says his motives were both ideal ist ic and practical.

“The real ity is we’re a member of the community too and we want to see Moon Township thrive and do well ,” he says. “We’re also a publ ic entity and are l ike any other publ ic entity struggl ing for funding. We converted a property that was a brownfield into land that is generat-ing revenue for the Airport and tax revenues for the Township.”

As the plan for PIT Business Park is revised and the next bui lding is planned, interest in the park re-mains high and the possibi l i ty exists that another s ingle-tenant user may snatch up the bui lding prior to construction. The development partners are resolute about moving ahead with a third bui lding, with or without a tenant.

“Jason is shaking the bushes awful hard but we’re confident enough that we wil l move forward this year,” says Barry Ford. “I hope to have something in place before we bui ld but we’re pressing ahead either way.”

Dick Donley chuckles at the irony of their fortunes thus far. “We’re trying to bui ld a spec bui lding there but we may never be able to,” he jokes. DP

The P IT Bus iness Pa rk des ign a l lows fo r open f loor p l ans w i th lo t s o f na tura l l i gh t .

PROJECT TEAMContinental Real Estate Companies .......................... Co-DeveloperChaska Property Advisors .......................................... Co-DeveloperContinental Building Systems........................... General ContractorJones Lang LaSalle, Jason Stewart .......................... Leasing AgentWTW Architects .................................................................ArchitectNEXT Architecture ................................... Interior Design ConsultantHerbert Rowland & Grubic ........................................ Civil EngineerDollar Bank ..........................................................................Lender

Developer Profile


Chapman Properties

T here aren’t many commer-cial real estate developers who can look back fondly

at the last f ive years. The f inancial cr is is and resultant recession made business condit ions for development very diff icult. For Steve Thomas, the market wasn’t part icular ly kind during that period, yet he is upbeat and proud about the course that his company, Chapman Propert ies took during that period.

Just prior to the downturn, Chap-man acquired two propert ies that were to mark the launch of the next

phase of the company’s expansion. Thomas explains that both deals were leveraged, and the reces-sion pretty wel l ki l led any oppor-tunity to develop the projects on the t imetable that was planned. Instead of spinning a tale of gloom and bad luck, Thomas is c lear that the fortunes of Chapman Proper-t ies blossomed because of its most important assets: i ts people.

“This business started to take off in the way we function and interact about f ive years ago, and has accel-erated and been cl icking on al l cyl-inders s ince then,” he says. “During

a diff icult period, we were st i l l able to progress and grow, and that had everything to do with our people. In terms of eff ic iency, synergy and how we’re posit ioned for the next development we’re in a far superior posit ion than we ever were before.”

Thomas is part icular ly effusive in his praise for key executives Tony Rosenberger, vice president of operations, and Kevin Withers, Chapman’s chief f inancial off icer, who helped set the tone for a more customer-focused approach. He’s also clear in explaining that the cur-rent trajectory of Chapman Proper-

A rendering of the Chapman Westport project.

t ies comes from every-one on staff pul l ing in the same direction. He describes the work atmosphere by using the F-word: Fun.

Chapman Propert ies has evolved over the course of the last three decades. Like many Pittsburgh-based developers, Chapman’s story is also the story of its chief executive. And Thomas’ story has a few twists and turns, although the roots of his business go very deep.

“I was always fascinated with real estate. When I was 16 years old I borrowed $500 from my grand-mother (my parents wouldn’t lend it to me) and bought a piece of R-2 land with two buddies in Cardiff, Cal ifornia near where we used to surf,” Thomas says. “We put $1,500 down against a $13,000 price, and exactly twenty years later to the day we sold the property for $260,000.”

Getting a 20-bagger on his f irst deal should have set the course for his career path but Thomas instead went on to col lege and graduate school before accepting posit ions in marketing with J. Walter Thompson and, subsequently, Seagrams in New York. On his honeymoon in Greece he had a few dinners that would bring him back to his interest in real estate.

“A buddy of mine from grad school was in Athens working for General Motors sel l ing heavy equipment and he had a couple of meals with my new bride and me,” Thomas re-members. “He told me that he was leaving the business there to move to Los Angeles to join Coldwell Banker, then the largest commercial real estate company in the world.

Another buddy of mine from col lege showed me a big commission check that came from just one real estate deal. I decided I was in the wrong business.”

After marrying in 1973, Thomas moved back to Cal ifornia to f ind his fortune in the commercial real estate business, joining Coldwell Banker as an investment property broker.

“Back then with Coldwell i t was kind of “al l in” if you were a bro-ker. I got a small salary while I was being trained, but then went on a $400/month draw after leaving a $40,000 a year job in New York. My wife wondered if she had mar-r ied the wrong guy,” Thomas jokes. “My f irst big deal took 14 months. I made nothing for over a year and then got several big checks. I was sol idly committed to the business after that.”

After a decade with Coldwell Banker, Thomas formed his own development company, Chapman Evans Company in Beverly Hi l ls. He had done well as a broker, but says “I was working with a number of successful developers who were do-ing real ly wel l , so I thought why not try it myself.”

Chapman Evans rede-veloped several older bui ldings into off ice and retai l propert ies, bui lt a str ip center and profitably im-proved and f l ipped a number of residential propert ies. Thomas describes that period in LA as especial ly heady t imes as he and his wife, Judith, were becoming establ ished and start ing their family. At the same time they were main-taining t ies to Judith’s hometown of Pitts-burgh. Her father was

Joe Mulach, owner of Mulach Steel. According to Thomas, his father- in-law persisted for a decade in his at-tempts to attract them to Pittsburgh to help transit ion his business. In 1987, the Thomas’s made the com-mitment to move back.

For the next year, Thomas commut-ed between Los Angeles and Pitts-burgh, winding down projects of his Cal ifornia development business while taking on the management of a steel fabricating and design/bui ld parking garage business. Mulach wanted to f ind a buyer for Mulach Steel but the market was diff icult for their businesses. Many of their projects weren’t making money and the company would eventual ly shut down operations. The upside for Thomas was that he had the chance to work with the assets of Mulach Steel, one of which was Leetsdale Industr ial Park.

The property was owned 50/50 by Mulach Steel and the principals of Turret Steel. Leetsdale Industr ial Park consisted of 130 acres and one mil l ion square feet of bui ldings that had previous l ives as a steel processing center for several com-panies, eventual ly ending up in the hands of Bethlehem Steel. During


The Chapman Properties management team includes

(from left) Steve Thomas, Tony Rosenberger and Kevin Withers.


their ownership, Bethlehem Steel bui lt a 360,000 square foot bui lding as part of an init iat ive to compete with American Bridge. They shut-tered that business after f ifteen years.

Just before Thomas moved to Pitts-burgh, Joe Mulach had reached out to a young industr ial contractor who was having success redevelop-

ing the former American Bridge and Armco Pipe mil ls in Ambridge. Tony Rosenberger was focused on making former industr ial bui ldings attractive for small tenants who were often startups. Mulach thought Rosen-berger might have ideas that would al low them to get more out of the Leetsdale property. Rosenberger saw the massive structures’ potential and hit i t off with Mulach. “Joe was a card, a real character and we fel l in love immediately,” he jokes. “So whenever he had something to f ix or update he cal led me.”

For the next decade, Rosenberger’s company worked to renovate pieces of Leetsdale Industr ial Park. Thomas was impressed with Rosenberger’s work ethic, optimism and steady stream of ideas for improving the property. He was also impressed with the opportunit ies that the property presented. After arrang-ing to buy out the Turret Steel interests in 1998, Thomas began a program of development over the

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next decade that would f i l l a market demand that was going unmet.

“The demand for Class A ware-houses was much greater than most people real ized, because the major-i ty of the region’s inventory was funct ional ly obsolete,” he expla ins. “Class A vacancy rates were low, and people who came to look at th is market for modern warehouse and manufactur ing space often couldn’t f ind what they needed and went e lsewhere.”

Those f i rst few bui ld ings were done as spec projects and the market rewarded Chapman as companies s igned leases for roughly 500,000 square feet before the bui ld ings were completed. Dur ing a ten-year per iod, Chapman doubled the s ize of Leetsdale Industr ia l Park to over two mi l l ion square feet, renovat-ing a l l of the older heavy industr ia l bui ld ings and bui ld ing roughly 100,000 square feet of new Class A space every year.

By 2006, the success of Leetsdale Industr ia l Park presented Chapman with a problem: they were running out of inventory.

“At that point we were at 90 per-cent occupancy. We had plans to bui ld one more 50,000 square foot bui ld ing” expla ins Thomas “after which there was no further land avai lable for development. So we acquired the 300 acre parcel out at the a i rport that became Chap-man Westport . Of course, we had no idea what was about to happen from 2008 through 2011.”

Whi le Chapman was running out of inventory, Tony Rosenberger was fac ing ser ious health issues. “ I got a very bad prognosis so I sold my business and my wife and I decided to s impl i fy our l ives and con-sol idate our propert ies,” he says. “Then I got through the health issues against a l l odds and Steve cal led.

“I actual ly ca l led Tony to see i f he could recommend someone for the construct ion and property man-agement posit ion I was try ing to f i l l ,” Thomas says. Rosenberger seemed to have had something else in mind. “I only interv iewed one guy!”

What Thomas had in mind was a change in culture for Chapman Propert ies. His bus iness phi losophy is that tenants are customers f i rst , and that keeping them happy is the best way to ensure ongoing suc-cess. The tenant/ landlord re lat ion-ship can be an adversar ia l one, where the object ive is for one s ide to make money by squeezing the other s ide. Thomas bel ieves that serv ing tenants wel l and keeping them happy is the best bus iness strategy, and much more product ive than constant ly having to seek new tenants.

Chapman had always pushed for innovat ion in their new bui ld ings,

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making them more eff ic ient and offer ing “state of the art” bui ld ing features. Thomas wanted to make sure Chapman’s att itude towards the customer was the same, includ-ing when they were offering some-thing less than Class A product. He was counting on Rosenberger for that.

“The r ight people were here. They just needed to be given some direc-t ion,” expla ins Rosenberger. “ I t has a lot to do with gett ing our outs ide staff to look at customers as the people who are putt ing food on the table, not as someone who is their problem, or who is a lways bother-ing us. We teach our people that i t ’s a good thing i f the customer’s to i let breaks. I t g ives us a chance to go over there and see how they are doing, to see i f they need any-thing else." Thomas jokes “I te l l them that this guy may be a pain in

the neck, but he’s our pain in the neck. Go give him a hug.”

One of those ‘ r ight people’ was chief f inancia l off icer Kevin With-ers. He jo ined Chapman in 2001 after e ight years with J . J . Gumberg, and brought a disc ip l ine that the company hadn’t prev ious ly had. Dur ing his f i rst few years at Chap-man, Withers’ controls and f inan-c ia l project ions weren’t being ful ly integrated into the business. But by 2007, Rosenberger and Thomas agreed to implement the neces-sary changes internal ly to a l low everyone to get the ful l benef i t of a controls and f inancia l information system that keeps the management team on top of the business.

“Kevin’s cont inual rev iew of our tenants, bui ld ing maintenance costs and histor ica l ly supported input from our job cost ing system

provides us the tools to f inancia l ly manage al l aspects of operat ions,” says Rosenberger. “Our cash management system gives a l l of our vendors a comfort level about t imely payments. I t g ives us a c lear picture of the current status as wel l as future planning.”

Having a responsive maintenance and management team helps keep tenants in place. Whi le Rosen-berger ta lks about i t in terms that may seem ideal ist ic , there is a lso a pract ica l s ide to Chapman’s atten-t ion to serv ice. Management’s be-l ief that attract ing and bui ld ing for new tenants is much more cost ly than what i t takes to stay ahead of ex ist ing tenants’ needs is a phi-losophy that dr ives their decis ions about new construct ion as wel l , r ight down to landscaping.

The new construction at Leetsdale and Westport is Class A, high-bay space.


“People l ike to work in comfort-able, attract ive, c lean environ-ments,” says Thomas. “We make a s ignif icant investment in landscap-ing and property maintenance, but in the long run i t pays for i tse l f . I t real ly does.”

Comfortable, attractive environ-ments are a big part of the Chap-man Westport plan of course. The project wil l eventual ly be larger than Leetsdale Industr ial Park, with 2.6 mil l ion square feet of Class A ware-house, manufacturing, off ice and retai l space planned on a 300-acre s ite. Chapman Westport l ies along I-576, the Findlay Connector, just 3 minutes from the airport, and is s it-uated in a sweet spot for its planned use and the region’s growth.

“It ’s a better s i te than Leetsdale, with great access to the a i rport ,”

Thomas says. “One hot button for logist ics bus i-nesses is to be r ight on an interstate so truck dr iv-ers don’t waste t ime and fuel wander ing around local roads. I t ’s hard to f ind that in P i t tsburgh." He sees Westport as a hub for that part of the region. “It may not become Tyson’s Corner in my l i fet ime, but i f P i t tsburgh cont inues to grow, the place i t ’s going to grow is in and around the a i rport .”

Thomas acknowledges that P i t tsburgh has not quite yet returned to a spec development market, but he expects to be under construct ion on the f i rst bui ld-ing at Chapman Westport later th is year or in ear ly 2014. I t i s p lanned as a ten-year project , one that wi l l take Thomas into what should be a ret i rement. He chuckles when asked why he’s taking on a new chal lenge at this point.

“I ’m a deal junkie. There’s no doubt about that, but I ’m a caut ious one at th is point. You ask why I am st i l l doing this at th is stage of my career. As long as I stay healthy and cont inue to enjoy the business, I ’ l l be here. This p lace and these people are why. We are real ly having a lot of fun.” DP

Chapman had a lways pushed fo r innova t ion in the i r new bu i ld ings , mak ing them more e f f i c i en t and o f f e r ing “ s t a te o f the a r t ” bu i ld ing f ea tu res .

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The Expansion of the Panama

Canal Will Revolutionize

Logistics

F or more than f ive years, con-struct ion has been underway on the expan-s ion of the

Panama Canal in order to accom-modate the larger and larger ships moving goods from the Pacif ic to the At lant ic and v ice versa. The project i s expected to cost $5.25 bi l l ion upon complet ion, which has been delayed unt i l fa l l 2015. I t has only been recent ly, however, that experts in logist ics have been mak-ing noise about the effects of the

expansion on transportat ion and distr ibut ion for regions that are far removed from Centra l America, p laces l ike P i t tsburgh.

The project sets up several scenar i -os that descr ibe a perfect marr iage that wi l l create more than double the volume of goods being cur-rent ly t ransported by truck and ra i l f rom the East Coast ports within a few years. Adding to that incoming fre ight is the yet unknown volume of shipping needed to move natural gas products from the Marcel lus/Ut ica f ie lds to the Pacif ic R im. But against th is burgeoning oppor-tunity there are a lso factors that could blunt the need for infrastruc-ture growth and render the canal expansion a non-event for the East Coast.

I t ’s helpful to start with a look at what experts see as the change in trade f low that wi l l result f rom the improved canal .

The Panama Canal connects the At lant ic and Pacif ic oceans and is used by as many as 14,000 vessels a year, handl ing about f ive percent of the world’s t rade. Those ves-se ls are, by necess i ty not the s ize that move most of today’s f re ight because the current canal capac-i ty does not accommodate the state-of-the-art ship, referred to as post-Panamax. Once complete, the expansion project wi l l cut voyage t imes and costs for these bigger ships. I t wi l l open up new trade routes for energy fuels and manu-factured goods.

I t i s the s ize of the post-Panamax ships that is dr iv ing the changes. According to global shipping expert John Vickerman, demand for cargo moved over water in container ships wi l l grow by 260 percent by 2025 compared to 2009. V irtu-al ly a l l of that growth is coming from Asia and most of the world’s shippers prefer to bypass the North

A rendering of the canal’s wider third lane after construction is completed. Source: Vickerman and Associates.

Developing Trend


American ports a l together because they don’t meet modern standards and are therefore too expensive.

Because of U. S. demand, however, g lobal shipping st i l l moves act ive ly to the ports on the West Coast and another sea change is a motive for making better access to the East Coast. The cont inued maturat ion of the markets in the southeastern U. S. , in combinat ion with the on-going spread of the major eastern and midwestern c i t ies , i s creat ing a mass ive consumption zone stretch-ing from Atlanta to Chicago and

northeast . By 2050, this zone wi l l consume more than 60 percent of the goods in North America and shippers wi l l need to get to the hubs of that consumption zone as quickly as poss ib le, meaning that the East Coast ports wi l l s t i l l have value.

Because of the dim v iew of North American ports and the conf l ict ing need for shipping access to those markets, the government of Pana-ma real ized that the canal was at r i sk of los ing i ts va lue but that en-abl ing better access could actual ly

increase the volume of trade. The Panama Canal project represents an investment equal to 16 percent of the nat ion’s GDP. Panama is bett ing that enabl ing trans i t wi l l attract shippers even i f the North Ameri-can ports aren’t as des i rable. The success of that bet holds the key to the logist ica l changes that may fol low.

“Their investment suggests that Panama wants to be the S ingapore of the Western Hemisphere,” says V ickerman. He points out that i f Panama bases i ts to l l s on volume – the tol l st ructure has not yet been announced – and there is l i t t le or no compet i t ive pr ice cutt ing by

e i ther the Suez Canal or the ra i l -roads – which re l ieve the congested West Coast ports – that increased volume wi l l fo l low. “Pacif ic ship-pers wi l l want to ram as much cargo through the Panama Canal as poss ib le.”

Those increases may be more strategic to the regional economy than s imply the doubled volume that is predicted. Because of the accelerated growth of U. S. manu-factur ing and agr iculture – which is growing at 19 percent annual ly – there wi l l be much higher volumes

of products that or ig inate or run through the Tr i -State area. About 55 percent of dry bulk fre ight l ike grains and fert i l izer current ly moves through the Canal but that is expected to grow to 80 percent of a l l t rade. No crude oi l and only ten percent of l iquid natural gas move through the Canal today but those volumes are est imated to be 42 percent of oi l and 90 percent of LNG by as soon as the 2015 open-ing. The latter opens the door to China and the Pacif ic R im for gas producers in the Gulf and in the shale format ions that move gas through the Gulf porta ls .

Accord ing to g loba l sh ipp ing exper t John V i cker man , demand fo r ca rgo moved over wa te r in conta iner sh ips w i l l g row by 260 percent by 2025 compared to 2009 .

The expanded canal will allow for ships that are more than two-and-half times the size of today’s vessels. Source: Vickerman and Associates.


An economic boom is expected for the North American ports and efforts are being made now by these ports . In order to be ready to accommodate the new generat ion of ships from day one, the Port Au-thor i ty of New York and New Jersey is spending $1 bi l l ion to ra ise the Bayonne Br idge. According to est i -mates from the U.S. Army Corps of Engineers, $6 bi l l ion to $8 bi l l ion a year in federal , local and pr ivate money is being spent by U.S. ports to modernize.

S ince many of the U.S. ports are a l ready deep enough to accom-modate the post-Panamax ships, the pr inc ip le changes are focused on how to deal with the inf lux of addit ional cargo post-Panamax ships wi l l be carry ing. The Port of Miami is spending $607 mi l l ion to bore twin tunnels that wi l l a l low for big-r ig trucks to avoid the busy downtown streets of Miami when the trucks are enter ing and leav-ing the port . In Maryland’s Port of Balt imore, the current tunnel out of the port i s not ta l l enough for double-stacked tra ins and the ra i l -road company, CSX, is p lanning on bui ld ing a new rai l - t ransfer fac i l -i ty that wi l l ass ist double-stacked tra ins ex i t ing the port . Here in P i t tsburgh, CSX is current ly spend-ing more than $20 mi l l ion for a s imi lar tunnel ra is ing in Stat ion Square and is prepar ing to bui ld a $50 mi l l ion cargo terminal a long the Ohio River.

The $842 mi l l ion Nat ional Gateway Project that CSX undertook almost a decade ago is a imed at l inking i ts best ra i l l ines to Chicago from the ports of Wi lmington NC, Norfolk and Balt imore. The Gateway l ines wi l l run through Pittsburgh. More-over, as the real i ty of the merged consumption zones grows c loser in the next decade, there is increased l ike l ihood that P i t tsburgh wi l l be valued as an intermediate logist ics hub between the Harr isburg and Columbus pr imary hubs. I f the ex-pansion of the shale gas extract ion and dist i l lat ion fol lows the game plan the industry has shared, this new inland logist ics infrastructure wi l l have heightened or ig inat ion and dest inat ion demand in South-Western PA.

Global demand for container fre ight moved by ocean wi l l not wane in anyone’s forecast for the future. Container ship technol-ogy is moving towards even larger ships, perhaps double the current capacity again by 2030. Moreover, the costs of shipping by ocean are extremely favorable. Fre ight costs for a s ingle container are $1,000 higher by ra i l compared to ship.

Those cost d i fferences grow even more when fre ight is moved by truck, roughly 6.7 t imes that of ocean transportat ion. One of the other logist ica l considerat ions of the Panama Canal widening is a reconf igurat ion of distr ibut ion fac i l i t ies to l imit the amount of movement from port to dest inat ion. These dynamics are working to make Chicago a super-hub, capita l -iz ing on i ts ra i l capacity and avai l -able nearby land. As an example, WalMart bui l t a 3.4 mi l l ion square foot import distr ibut ion warehouse at the Jol iet , IL ra i l yards to serve the upper Midwest. The cost of the new bui ld ing was ent i re ly offset by the sav ings in moving fre ight by truck to mult ip le warehouses throughout the region.

The economic r ipples go beyond the business opportunit ies for new bui ld ings and infrastructure. Re-gardless of whether or not rev i ta l -ized manufactur ing, agr iculture or

natural gas add to the volume of fre ight in America’s heart land when the Canal project opens in 2015, the enhanced access to growing global markets – at much cheaper rates – wi l l l ike ly be a compet i -t ive st imulus for those businesses to grow. And the sheer volume of goods moving through the U. S. ports in the east wi l l create jobs on a large scale.

Ken Simonson is the pres ident of the Nat ional Associat ion of Busi-ness Economists in 2013. Also the chief economist for the Associate General Contractors, S imonson had the opportunity to br ief the Federal Reserve Board in December 2012 on the impact of the Panama Canal project on domest ic construct ion and the economy. S imonson says the magnitude of the opportunity isn’t lost on the Fed.

“The Chairman asked quest ions that showed he understood the subject and i ts effects very wel l ,” S imonson remembers.

John Vickerman is less reserved in assess ing the opportunit ies. He presents the case for the widening to be what he cal ls a “Y2K event” – Panama decides on higher tol ls , ra i l roads cut rates aggress ive ly or the Suez reacts compet i t ive ly – but i t ’s c lear that he bel ieves that the wider Panama Canal wi l l result in much more trade.

“I personal ly bel ieve the Canal opening wi l l be what leads the U. S. economy into real recovery,” he predicts . DP

Globa l demand fo r conta iner f re igh t moved by ocean w i l l no t wane in anyone ’ s fo recas t fo r the fu ture . Conta iner sh ip techno logy i s mov ing towards even l a rger sh ips , pe rhaps doub le the cur ren t capac i t y aga in by 2030 .

Y ear-end and January/Febru-ary economic data are paint-ing a picture that is s l ight ly

more opt imist ic about the econom-ic recovery shift ing into a growth cyc le, at least in the second half of the year. At the macroeconomic level , however, a few potent ia l potholes st i l l ex ist that could prove the opt imism unfounded.

Start ing with the potholes, the uneven pace of employment growth and the col latera l damage from the pol i t ica l wrangl ing over the budget pose threats to business expansion that could put the economy back in neutra l or even tr igger another recess ion. Corporate earnings and smal l bus iness growth cont inue to be under pressure from global weakness. Europe remains a weak market, which hurts both U. S. and Chinese exports . The Chinese mar-kets should return to higher growth

in 2013 s ince the Chinese govern-ment and regulators seem to be react ing again to growth concerns instead of inf lat ion fears but the out look for Euro zone is for more s luggishness.

The January employment data is perhaps the best reason for op-t imism. Although the est imates of 157,000 new jobs created in January were s l ight ly lower than expected, i t was the f inal rev iew of the 2012 data that was the big story in the January 30 announce-ment. Employers added 335,000 more jobs in 2012 than in i t ia l ly reported, boost ing the monthly average to 181,000 from a pr ior est imate of 153,000, with surpr is-ing f indings for the fourth quarter. The number of new jobs created in December was rev ised to 196,000 from 155,000. November’s f igure was rev ised to 247,000 — the big-gest increase in 10 months — from 161,000.

Consistent gains near the levels exper ienced in 2012 would result in a ros ier employment picture than most have forecasted. On average, 150,000 new jobs must be created each month to keep pace with the growth in populat ion a lone. Gus Faucher, v ice pres ident and senior macroeconomist at PNC F inancia l Serv ices, pointed out in his remarks at the NAIOP Pittsburgh symposium in January that i t i s the ongoing four mi l l ion job shortfa l l in employ-ment that is dragging the recovery. Faucher forecasts that employ-ment wi l l grow by 160,000 jobs per month in 2013 and sees the unem-ployment rate fa l l ing modest ly to 7.4 percent by year’s end.

The Pi t tsburgh region's unemploy-ment rate remained below the nat ional averages in January, at 7.2 percent. The January rate was a reversal of the recent upward trend that saw s l ight increases in unem-ployment dur ing 2012. Payrol l em-ployment in P i t tsburgh cont inued to c l imb in 2012, reaching a new histor ica l h igh of 1,180,000 jobs.

There were other bits of data re leased at the end of January that may have been cause for celebrat ion or gloom but for the unusual c i rcumstances caused by the percept ions of the outcome of the debt l imit haggl ing. Personal income spiked by 2.6 percent in December but the increase is at-tr ibutable to the accelerat ion of div idends paid out pr ior to the change in tax year. In fact , d iv idend income alone was reported at a rate that was 34.3 percent higher than November’s . The Chicago Purchas ing Manager Index – which intends to monitor manufactur ing act iv i ty – jumped from 50 to 55.6 in January, but the increase was more l ike ly the response to the pul lback in government purchas ing and business act iv i ty ahead of the ‘ f i sca l c l i ff ’ solut ion.

Eye on the Economy



That dip in act iv i ty after November is a lso credited for the decl ine in gross domest ic product, which ac-tual ly showed a 0.1 percent decl ine in the last quarter of 2012, after growing 3.1 percent in the third quarter. Because of the unusual decl ine in government act iv i ty most observers were re luctant to even accept the est imate of decl ine unt i l rev is ions are done this spr ing. Economists see the decl ine – i f that data proves to be accurate – as unrelated to the overal l economic trend.

What does concern economists i s the eventual outcome of the bud-get def ic i t batt le. As ide from the psychological impact the uncer-ta inty causes, there are a number of potent ia l measures that could be taken to solve the problem that could be damaging – in the short run – to the economy.

An excel lent example of such measures is the compromise that a l lowed Congress and the pres ident to avoid the f iscal c l i ff in Janu-ary. The income tax increases that were enacted on higher earners are expected to put a $50 bi l l ion hit on the taxpayers’ wal lets ; however, the bigger tax increase – the two percent increase in Socia l Secur i ty tax – is predicted to cost taxpayers double that amount. Although the f i rst data on spending showed that consumers largely shook off the in-crease, experts predict that smal ler paychecks wi l l result in less spend-ing dur ing the f i rst half of 2013.

Of course, the more dangerous out-come from the f iscal negot iat ions would be for the steep budget cuts to occur instead of a more mea-sured approach. These so-cal led ‘sequester’ cuts would result in short-term job losses and unex-pected decl ines in business revenue that are certa in to cause negat ive GDP growth. F iscal conservat ives may f ind the painful medic ine of these cuts more pol i t ica l ly des i r-

able than any compromise, par-t icular ly s ince the White House is not offer ing spending cuts that conservat ives feel are appropr iate in k ind or magnitude. The decis ion to ra ise the debt l imit through May 18 helped avoid the k inds of nega-t ive repercuss ions that occurred in August 2011, but there was noth-ing in that act ion that indicated

that a more reasoned debate or easy compromise on the budget def ic i t and sequestrat ion solut ion is forthcoming. And in the meant ime, there is l ike ly to be the k ind of str ident posit ioning from both s ides that created the uncerta inty among businesses and consumers at year’s end.

With 70 percent of the U. S. econo-my t ied to consumer spending i t ’s important to look at where the consumer s i ts in the f i rst quarter of 2013. By v i r tual ly a l l measures, American consumers have worked through the effects of the mort-gage cr is is and reconci led their personal balance sheets. Debt has been reduced to histor ica l norms. Home pr ices have e i ther recovered or more commonly, the necessary measures have been taken – how-ever painful to the homeowner. And for the near term, consumers appear unl ikely to take equity out of their largest hard asset to f i -nance the purchase of consumable or depreciat ing goods.

The two most watched measures of the consumer are showing a diver-gence in trend that is one source of opt imism about the potent ia l for

What does concer n economis t s i s the eventua l ou tcome o f the budge t de f i c i t ba t t l e . A s ide f rom the psycho log i ca l impac t the uncer t a in ty causes , there a re a number o f po ten t i a l measures tha t cou ld be t aken to so l ve the p rob lem tha t cou ld be damag ing – in the shor t r un – to the economy.

Graph by Integra Realty Resources.


recovery. Consumer sent iment, which leads spending, has been trending upward s ince late 2009 and has now pushed past the readings at the height of the last boom in 2007. Consumer spend-ing, as measured by real personal expenditures, has been more volat i le and less res i l ient to the long-term trend. Spending dipped steeply around the t ime of the debt l imit deal and downgrading of U. S. credit in August 2011, only reaching the levels of the ear ly stages of the recovery in 2010. Personal expenditures re-main more than 20 percent lower than the volume at the peak of the boom.

What can you take away from this data? The glass half fu l l analys is i s that there is s ignif icant room for growth in consumer spending. At the moment, per-sonal expenditures are near ly $2 tr i l l ion less than in 2007. Some of that decl ine is due to delever-aging and part i s due to a steady increase in sav ings rate. Those sav ings are the untapped poten-t ia l . On the other hand, the trend may also indicate that a different consumer has emerged from the recess ion, one that wi l l cont inue to save a larger share of his /her sa lary or cont inue to reduce debt to more tradit ional levels .

The improved consumer balance sheet is one of several key factors indicat ing that the long-awaited housing recovery is imminent. Housing affordabi l i ty, as measured by the rat io of rent or mortgage payment to household income is at 16 percent, a level not seen s ince the 1980’s. Interest rates cont inue to be at a l l - t ime low levels . Home values have stabi l ized and turned higher in 2012, according to the Case Shi l ler Index. And demand for new housing from cont inued household formations has been pent up s ince 2007 and the con-struct ion of new units has been at a pace that is roughly 50 percent of the formation rate.

The condit ions for a housing re-covery are r ipe, which is actual ly a potent ia l concern for the cont inued health of the mult i - fami ly market. Paul Gr i ff i th, managing director for Integra Realty Resources in Wex-ford, put forth his concerns about the mult i - fami ly market at IRR’s annual V iewpoint presentat ion at the Rivers Club on January 24. Cit-ing the affordabi l i ty and the high level of projects in the pipel ine – potent ia l ly adding 4,000 units to the inventory dur ing the next few years – Gr i ff i th ra ised the poss ib i l -i ty that mult i - fami ly demand could soften rather quickly. He a lso ra ised concerns about some fundamental investment problems.

“The r isk with mult i - fami ly with two year construct ion schedules is in their ex i t strategy. [With low rates] the r isk is gett ing a perma-nent loan when they did a deal based on a 6.5 cap rate and in 2015 i t ’s a 7.5 cap rate,” he says. Gr i ff i th expla ins that the art i f ic ia l ly low rates are disguis ing potent ia l problems with income. “You have to maintain a 4.8 percent net oper-at ing income growth each year to maintain the same value as today in 2017, i f you assume that the cap rate is 7.25 then.”

A commercia l property type with investment fundamentals t rend-ing in the opposite direct ion is the off ice bui ld ing. With vacancy rates fa l l ing, especia l ly in the key submarket areas, the market for new off ice product is t ight and

“The r i sk w i th mu l t i -f ami l y w i th two yea r cons t r uc t ion schedu les i s in the i r ex i t s t r a tegy. [Wi th low ra tes ] the r i sk i s ge t t ing a per manent loan when they d id a dea l based on a 6 .5 cap r a te and in 2015 i t ’ s a 7 . 5 cap r a te , ” he says . Gr i f f i th exp l a ins tha t the a r t i f i c i a l l y low ra tes a re d i sgu i s ing po ten t i a l p rob lems w i th income. “ You have to ma in ta in a 4 .8 percent ne t opera t ing income g rowth each yea r to ma in ta in the same va lue a s today in 2017 , i f you a s sume tha t the cap r a te i s 7 . 25 then . ”


the environment is very favorable for rent increases. In addit ion to spurr ing development projects , the upward trend in rents has a lso attracted the attent ion of nat ional and global investors, leading to higher volume in transact ions and sales pr ices that are wel l above the norm. The sa les of PPG Place and 11 Stanwix set the bar higher in 2011 and last year’s larger commer-c ia l sa les showed a cont inuat ion of the trend, with the DelMonte Bui ld-ing changing hands for $194.40/square foot and the EQT Bui ld ing trading at $155.60 with a ground lease.

CBRE’s incoming managing director Jeffrey Ackerman says the investor interest has everything to do with the trend in rents.

“It has been hard to get inst i tu-t ional investors interested in this market. Their b ig object ion was that the rents never go up and i f you look at the per iod from 1995 to 2005 there was no growth in rent,” he expla ins. “ Inst i tut ional

investors need an ex i t strategy and they are looking for an internal rate of return that is in the high double digits . When we had stable occupancy and stable rents, with the ongoing operat ing expenses of the bui ld ing i t was hard to get internal return or an ex i t strategy.”

Pittsburgh’s t ightening supply means the l ike l ihood of r is ing rents for the next three-to-f ive years. Integra’s mid-range forecast was for rents in Oakland and Downtown to reach the mid-to-high $30’s and suburban rents to reach as high as $26/square foot for Class A space. With a suburban off ice vacancy rate that is the lowest of the 61 top U. S. markets, P i t ts-burgh should cont inue to stay on the radar of investors from around the globe.

Global weakness, uncerta in U. S. pol icy direct ion and somewhat smal ler consumer paychecks are l ike ly to keep the economy from a marked upturn dur ing the f i rst s ix months of 2013. The gather ing

momentum in employment – espe-c ia l ly g iven the potent ia l for a more robust housing recovery – should begin to support better condit ions for GDP growth beyond three per-cent. For the most part , the mac-roeconomic condit ions point to the return to growth in 2014, making this coming year a t ime for ident i -fy ing key indicators of growth and posit ioning assets for growth.

For the commercia l real estate mar-ket in Western PA, the economic growth cyc le is a l ready underway but the vulnerabi l i ty to unexpected global events remains, at least unt i l the expected boom from the natural gas downstream industr ies occurs. The next step towards that real i ty – the green l ight from Shel l for i ts cracker plant – is expected in the f i rst part of 2013. DP

Innovation RidgeMarshall Township, PA

Located off I-79 Near the interchange with Rt 19 and the PA Turnpike

Advanced technology and office parkEight pad-ready parcels ranging from 3.4 to 21.8 acresOne hotel parcel of 5.7 acres

• Join development opportunities in this vibrant market• RIDC offers build-to-suit services• PennDOT off-site work ongoing - Phase I nearly complete• Potential grant funds available for land improvements

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For more information, contactTim White, Vice President, Development

[email protected] • 412.315.6447

Residential development

Keystone Summit Corporate Park

BayerMedrad

Hotel Parcel

I-79

P i t tsburgh 2012 OFFICE ReviewNamed by the Brookings In-st i tute as one of only three

metros in the nat ion to recover from the Great Recess ion, the P i t ts-burgh off ice market c losed 2012 on a posit ive note. Vacancy rates maintained a downward trend, dropping 150 bas is points from the end of 2011 rest ing at 14.1%; year-to-date absorpt ion was posi-t ive, h i t t ing a respectable 699,107 square feet; weighted asking rental rates c l imbed to a histor ica l h igh of $20.38 per square foot and the marketplace exper ienced a f lurry of property sa les.

Class A product cont inued to break records. Weighted average asking rental rates reached an unprec-edented $23.63 per square foot, up $1.26 from a year ago. This i s

quite an increase consider ing the previous year-over-year increase was a mere $0.34 per square foot. Vacancy levels for premium space

bottomed out at 8.2% which is a decl ine of 220 bas is points from year-end 2011. Certa in ly the dwindl ing supply of Class A space and the impact on asking rents speaks to the strength of the re-gion. However, th is same strength has caused head-aches for many tenants looking to renew, expand and/or re locate – pr imar i ly those in search of larger blocks of space 25,000 square feet and greater.

CentralBusinessDistrict

Maintaining a trend that began a few years ago, the Centra l Bus iness Distr ict (CBD) was once again in the spot l ight in 2012.

Development news was plent i fu l dur ing the year. PNC Bank was responsible for the last completed

off ice tower in the CBD and cont in-ued to feed the construct ion pipe-l ine as i t demol ished the future s i te

Office Market Update



of i ts 800,000-square-foot head-quarters bui ld ing. This wi l l be an owner-occupied bui ld ing that wi l l not have compet i t ive space to lease to third party tenants. However, i ts construct ion may impact the com-pet i t ive marketplace as PNC may pul l operat ions from leased space in several submarkets, inc luding the CBD. Further, PNC purchased the vacant 120,000-square-foot Lord & Taylor bui ld ing with plans to renovate the former department store to house 800 PNC employees. Across the street from this property, Oxford Development announced plans to e i ther demol ish the ex ist-ing 441 Smithf ie ld Street bui ld ing to make way for a new, 33-story, 772,000-square-foot off ice tower or renovate the ex ist ing property into 180,000 square feet of Class A off ice product. In Market Square, Mi l lcraft Industr ies began moving dirt to make way for The Gardens. The new development wi l l inc lude 120,000 square feet of off ice space, 22,500 square feet of reta i l and a 175-room hotel .

Unfortunately, these new projects wi l l do l i t t le to a l lev iate the cur-

Clas s A p roduc t cont inued to b reak records . We igh ted ave rage a sk ing ren ta l r a te s reached an unprecedented $23 .63 per square foo t , up $1 .26 f rom a yea r ago. Th i s i s qu i te an inc rease cons ider ing the p rev ious yea r-over- yea r inc rease was a mere $0 .34 per square foo t .

PLEASE CONTACTJason Stewart, Jones Lang LaSalle412-208-1400 [email protected]

OR VISITwww.cranberrybusinesspark.comwww.property.jll.com/PIBP


rent demand for Class A product in the CBD. The avai labi l i ty of Class A space cont inued to spira l down-ward, with year-end 2012 vacancy sett l ing at 5.6% - a level not ex-per ienced in over 30 years. Fur-ther, weighted asking rental rates spiked, reaching $27.60 per square foot. Comparat ive ly, rates c losed 2011 at $25.90 per square foot. L imited Class A opportunit ies wi l l push users to consider Class B and C product to sat isfy their immedi-ate needs. However, whi le space is p lent i fu l in these product Classes, tenants may have to wrest le with the associated consequences result-ing from the chal lenges plaguing some of these propert ies. Further, an ant ic ipated reduct ion in off ice avai labi l i t ies due to use redevelop-ment in a few of these bui ld ings could create another obstac le for tenants in search of larger blocks of ex ist ing space in the CBD.

Notable tenant lease commitments in the CBD in 2012 inc luded renew-als by Cit izens Bank at Three Mel-lon Center for 141,000 square feet, Koppers Inc. for 70,000 square feet at the Koppers Bui ld ing and Ernst & Young for 45,000 square feet

at One PPG Place, whi le Gateway Health P lan departed USX Tower leas ing 100,000 square feet at Four Gateway Center and Highmark took occupancy of 57,248 square feet at 6 PPG Place.

Investors turned to P i t tsburgh once again in 2012 to sat isfy their appet i te, with several sa les occur-r ing in the CBD. Some of the larger trades inc luded the acquis i t ion of the 557,559-square-foot Penn Avenue Place by Healthcare Trust of America. The property traded for $97 per square foot. Adding to their newly establ ished high-prof i le CBD portfol io, Highwoods Propert ies purchased one of the market’s premiere CBD proper-t ies – the 32-story EQT Tower – for $161 per square foot. In the fa l l of 2011, Highwoods purchased the trophy 1.5 mi l l ion-square-foot PPG Place complex. Local owner/developer E lmhurst Group paid $7.35 mi l l ion or $57 per square foot for the F iserv Center bui ld ing. PMC Property Group scooped the 361,576-square-foot Regional En-terpr ise Tower, which a lso inc luded the Harvard Yale Pr inceton Club and a vacant bui ld ing, for $7 mi l -l ion. They a lso acquired the James H. Reed bui ld ing for $30 per square foot and were the winning bidder in an auct ion for the distressed

23-story Clark Bui ld ing, with a bid of $7 mi l l ion. Character ist ic of PMC is the convers ion of of-f ice propert ies into a res ident ia l or part ia l res ident ia l use. Should they maintain this bus iness strategy, they could further deplete off ice inventory whi le cont inuing to fuel the CBD housing market.

In the Souths ide sector of the CBD/ Fr inge, the Univers i ty of P i t tsburgh Medical Center (UPMC) exerc ised their opt ion to purchase the 160,000-square-foot Quantum I f rom the Soffer Organizat ion and Rugby Realty obtained the seven-story Birmingham Towers through a ‘deed- in- l ieu-of-foreclosure’ t rans-act ion.

Suburbs

While property sa les were plent i fu l in the CBD, the suburban markets were not left out in the cold. 2012 trades inc luded Cranberry Woods Bui ld ing 4 in the North submar-ket by CG Net Lease Investors LLC for $307.00 per square foot - the highest sa le of the year for an of-f ice property; the 207,000-square-foot Park P lace Corporate Center was acquired by USAA Real Estate for $18.2 mi l l ion in the Parkway West submarket; Starwood Capi-ta l Group made i ts debut in the

The trends for rents and vacancy rate in metro Pittsburgh since the peak of the last cycle.


marketplace with the acquis i t ion of the 235,902-square-foot 2000 Park Lane, and Rugby Realty Co. Inc. , acquired mortgages total ing $9.3 mi l l ion for two bui ld ings total ing near ly 120,000 square feet in Penn Center West

Several segments of the suburban submarkets exper ienced an increase to a l ready-high occupancy levels dur ing 2012. The northwest cor-r idor in the North, the Southpointe region of the South and the Oak-land/East-End submarkets held their pos i t ion as the t ightest locat ions in the P i t tsburgh marketplace. Tenants in search of 10,000 square feet or greater seeking qual i ty space a l ter-nat ives in these market segments faced a dual i ty of few opt ions and compet i t ion with other us-ers . Conversely, tenants seeking occupancy in the East submarket were greeted with an abundance of opportunit ies. Vacancy in the East ended the year at 26.5% - over 11 percentage points higher than any other submarket in the marketplace.

Construct ion del iver ies through-out the suburbs in 2012 only to-ta led 180,500 square feet. Market absorpt ion was such that half was committed, doing l i t t le to a l le-v iate the demand from Class A users. Str ict lending standards es-tabl ished in the wake of the Great Recess ion have made i t near ly imposs ib le to f inance pure specu-lat ive construct ion. However, several owners and developers in the most constra ined submarkets announced plans to br ing new inventory to the market place; a l l with some level of tenant com-mitments. Chaska Property Advi-sors and Cont inental Real Estate Company began development of P i t tsburgh Internat ional Corporate Center – a 360,000-square-foot project in the Parkway West sub-market. In the East L iberty corr idor of the Oakland/East End submar-ket, Walnut Capita l p lans to be-gin construct ion of Bakery Square 2.0, a mixed use project that wi l l inc lude 400,000 square feet of off ice space that is expected to complete in 2014. Further, the Regional Industr ia l Development Corp of Southwestern Pennsylvania

(R IDC), owners of the 178-acre for-mer LTV Steel p lant in Hazelwood, divulged plans to begin infrastruc-ture improvements in the hopes of attract ing developers for housing, l ight industr ia l and off ice space.

The Parkway West and South sub-markets were home to the largest suburban lease transact ions dur-ing the year. S izeable transact ions inc luded The Wi l l iams Companies who inked a deal for 112,394 square feet at Park P lace Corpo-rate Center in the Parkway West submarket, whi le Chevron leased 66,713 square feet in Bui ld ing 600 at Cherr ington Corporate Center. Also in this submarket, Serv iceL ink

s igned a lease for 106,000 square feet at P i t tsburgh Internat ional Bus iness Park. Serv iceL ink wi l l va-cate their ex ist ing home in Airport Off ice Park and wi l l re locate into two 53,000-square-foot bui ld ings sometime in the fa l l of 2013. In the Southpointe I I segment of the South submarket, Ansys commit-ted to a new 186,000-square-foot headquarters bui ld ing, accompa-nying Mylan who announced the construct ion of a 280,000-square-foot, 5-story headquarters bui ld ing

that is expected to be completed in 2013. Both companies have out-grown their ex ist ing bui ld ings in Southpointe I .

The impact of unstable economic condit ions plaguing the nat ion over the past few years has been less-volat i le for the P i t tsburgh region. A lack of overbui ld ing within the compet i t ive off ice market combined with demand from the energy, healthcare, f inancia l and profes-s ional serv ices, technology and educat ion sectors have helped the P i t tsburgh commercia l marketplace endure uncerta in t imes. However, i f P i t tsburgh is to sat isfy demand and foster growth, new product is needed, desperately so in certa in segments of the marketplace. There is current ly 1.5 mi l l ion square feet of space under construct ion prompted by the growth of ex ist-ing tenants, with a l l but 13 percent committed. As tenants vacate their current locat ions to take occupancy of their newly constructed prem-ises, the market may exper ience some loosening. St i l l , we ant ic ipate that this space may diss ipate rap-id ly due to cont inued growth and pent-up demand.

For information about off ice leas-ing, contact Gerard McLaughl in, execut ive managing director at 412/434-1036 or GMcLaughl [email protected]

Pamela Lowery is v ice pres ident of research and market ing for the P i t tsburgh off ice of Newmark Grubb Knight Frank. DP

Gerry McLaughlin

Inves to r s tu r ned to P i t t sburgh once aga in in 2012 to s a t i s f y the i r appe t i t e , w i th severa l s a l e s occur r ing in the CBD. Some o f the l a rge r t r ades inc luded the acqu i s i t ion o f the 557 ,559 - square - foo t Penn Avenue P l ace by Hea l thca re Tr us t o f Amer i ca . The proper t y t r aded fo r $97 per square foo t .

A ct iv i ty in the P i t tsburgh Industr ia l market s lowed dur ing the fourth quarter

due to pol i t ica l uncerta inty and the looming f iscal c l i ff . Fortunately, vacancy rates cont inued to decl ine and absorpt ion has remained posi-t ive.

For the ful l year 2012 the vacancy rate fe l l to 8.2 percent, down from 8.9 percent at the end of 2011. As a result , the average rent moved up

to $5.22/square foot, an increase of 6.5 percent from the fourth quarter of 2011. At the end of 2012 the total s ize of the P i t ts-burgh industr ia l market was 168.3 mi l l ion square feet, with 13.8 mi l l ion square feet avai lable for lease. Net absorpt ion for the year was 388,068 square feet. Industr ia l space total ing 174,000 square feet was del ivered into the market in 2012 and another 146,313 square feet of space was under construc-t ion at year’s end.

Signif icant lease transact ions in the quarter inc luded the fol lowing:

Carter Lumber leas ing 160,000 SF at 615 East But ler Road in But ler, PA

Protoco PPI LLC leas ing 151,000 SF at Jackson’s Pointe Commerce Park in Evans City, PA

Comtech leas ing approximately 100,000 SF to occupy the re-mainder of 135 Meadow Lane in Canonsburg, PA

Industrial Market Update



The lack of ex ist ing product and absorpt ion of older ineff ic ient prod-uct by companies aff i l iated with the Marcel lus Shale cont inues to cause a r ise in rental rates. More spe-c i f ica l ly, the market is in a posit ion where demand is outpacing sup-ply. A good example is the Buncher Company’s most recent development in Evans City, PA, Jackson’s Pointe Commerce Park. Construct ion of a 69,000 SF speculat ive bui ld ing com-menced in the f i rst quarter of 2012 and by the end of the fourth quar-ter 50,000 SF of the spec bui ld ing had been leased plus an addit ional 200,000 SF of warehouse space that had yet to be constructed.

A unique rev iva l of the manufac-tur ing industry is start ing to oc-cur in Southwestern Pennsylvania. This has been seen in both heavy and l ight manufactur ing. Examples inc lude ATI-Al legheny Ludlum’s cont inued expansion in Bracken-r idge, Holtec’s expansion into an addit ional 200,000 SF at R IDC’S Keystone Commons in Turt le Creek and Aquion Energy’s lease of over

A un ique rev i va l o f the manufac tur ing indus t r y i s s t a r t ing to occur in Southwes te r n Pennsy l van i a . Th i s has been seen in bo th heavy and l i gh t manufac tur ing .


315,000 SF in the former Sony P lant (2nd Quarter 2012) in Westmoreland County. The manufactur ing rev iva l has occurred in part due to the ex ist ing ra i l infrastructure, the r iver network and

access to a sk i l led work-force in the region.

User act iv i ty wi l l cont inue to outpace supply. Compa-nies wi l l exhaust a l l op-t ions in order to be more eff ic ient and reduce the cost to the end user. In the P i t tsburgh market this could lead to more bui l t -to-suit t ransact ions versus users sett l ing for ineff i -c ient space. P i t tsburgh wi l l cont inue to be considered for internat ional manufac-tur ing s i te searches due to the avai lable infrastructure and labor. I t wi l l l ike ly see greater growth of compa-nies involved in the new high tech manufactur ing – i .e. robot ic enhanced pro-duct ion due to the region's foster ing of tech re lated businesses and proximity to Carnegie Mel lon Univers i ty.

Amy Brocato is a broker specia l iz ing in industr ia l and off ice propert ies at Langholz Wi lson El l i s . She can be reached at [email protected] or 412-261-7115. DP

Amy Brocato

Matthew VirginPrincipal, Langholz Wilson Ellis

I n a sea of insta-bi l i ty, once again Pittsburgh stands out as a bast ion of stabi l i ty. The Pittsburgh region

has f lour ished and came out of the recess ion unscathed and stronger than ever before. Countless retai l -ers and developers have f locked to Pittsburgh seeking opportunity, growth and prosperity. They have not and wi l l not be disappointed.

Any d i scuss ion of P i t t sburgh , needs to beg in w i th the success and repos i t ion ing of the Cent ra l Bus iness D i s t r i c t (CBD) . The CBD has seen deve lopment a f te r deve l -opment in the l a s t severa l year s approach ing $5 .5 b i l l i on do l l a r s in cons t ruc t ion cos t s . W i th c ranes in the a i r bu i ld ing new mixed-use deve lopments such as P ia t t P lace , Market Square P lace and Three PNC P laza and thus reshap ing the hear t and sou l o f the u rban core . The downtown and sur round-ing a rea i s unrecogn izab le ve r sus year s and decades pas t . Over 25 new res taurants , severa l new ho-te l s and thousands o f new mul t i -fami l y apar tments and condomin i -ums have t rans formed the CBD in to a bus t l ing , v ib rant and v i ta l

“ne ighborhood” that anchors the reg ion .

The success of downtown mirrors the success of the region. Retai l -ers no longer v iew Pittsburgh as an emerging market, but rather one that has emerged. Virtual ly every retai ler, both on the high end and the low end have embarked on an expansion program unl ike anything Pittsburgh has ever experienced. As a result , retai lers and restaurants such as Nordstrom, Cheesecake Factory, L.L. Bean, lululemon, The Capital Gri l le and Crate & Barrel have either entered or expanded their presence in the market. The total i ty of this growth is that the net absorpt ion in the region has surpassed over 250,000 square feet in the last year, whi le at the same t ime rents have increased to levels that have never been seen. Thus, the avai labi l i ty rate throughout the region is approximately 9.5% and should drop below 9% by year end. In many regional markets, the avai l -abi l i ty rates are 5% or less with tre-mendous upward pressure on rents. This demand on the present retai l supply bodes wel l for landlords and creates some expansion chal lenges for retai lers given the lack of pr ime retai l space. (See chart) .

For many years, retai lers v iewed Pittsburgh as a secondary or tert ia-ry market with many opting not to enter the market. This has changed dramatical ly. Now, the region is experiencing grocery wars with gro-cers such as Whole Foods, Giant Ea-gle, Trader Joe’s, Fresh Market (un-der construct ion), Market Distr ict , Aldi , and Bottom Dol lar al l compet-ing for market share. Addit ional ly, v i rtual ly every mid-s ize and big box in the region has been f i l led with credit retai lers such as Ross Dress for Less, Marshal l ’s , TJ Maxx, Dick’s, HomeGoods, Hobby Lobby and LA Fitness. Last ly, new-to- market ful l serv ice and quick casual restaurants such as Bonefish, Texas de Brazi l (coming soon), Burgatory, Noodles & Company, Cal i fornia Pizza Kitch-en and Anthony’s Coal F ired Pizza have given diners plenty of qual i ty seats to f i l l for years to come. As discussed previously, there are more retai lers and restaurants looking for space to grow than there are actu-al ly avai lable pr ime spaces.

Al l of this growth has led to new retai l and mixed-use developments throughout the region. McCandless Crossing and Cranberry Crossroads (North), Blue Spruce Shoppes (East) , and The Gardens (CBD) and Conti-

Retail Market Update


Pittsburgh Retail Forecast Summary: 2013. Source CB-Richard Ellis.


nental North Shore (North Shore) are just a few of the new develop-ments underway. These develop-ments are under construct ion and experiencing rental rates higher than ever seen before.

So why Pittsburgh? Pittsburgh has emerged as a top t ier market and benefitted great ly from strong job growth in fair ly recess ion proof sectors such as the Meds and The Eds (hospitals and the univers it ies) and other heavy growth industr ies such as high-tech and f inancial serv ices. Addit ional ly, the region is the hot bed of growth for those searching for Marcel lus and Utica Shale. These overal l factors have led to the total employment in the Pittsburgh area growing 1.2% versus nat ional averages of 0.6%.

The growth in employment has led to an overal l unemployment rate of approximately 5% throughout the region.

As a market that has histor ical ly been viewed as secondary or ter-t iary Pittsburgh has now emerged as a City of the future. The outlook for the Pittsburgh market is noth-ing but posit ive. With tremendous retai l and res identia l growth, strong posit ive absorpt ion, new develop-ment heating up, low vacancy rates and dramatic rental rate increases Pittsburgh is wel l posit ioned for the present and the future.

Herky Pol lock | Executive Vice President & Northeast Director Retai ler Services Group CBRE, Inc.

600 Grant Street, Suite 4800 P ittsburgh, PA 15219-6115 T 412 394 9840 | F 412 918 5638 Herky.Pol [email protected] | www.cbre.com/retai l24-7 DP

Herky Pollock

412-394-5400 | www.babstcalland.comPittsburgh, PA | State College, PA | Charleston, WV | Akron, OH | Sewell, NJ

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T he U.S. pres i -dent ia l e lec-t ion, looming “f iscal c l i ff” and tepid economic re-

covery in many metropol i tan areas resulted in a s luggish real estate recovery in 2012.

Large U.S. c i t ies that are home to c lusters of energy or tech f i rms, a long with “gateway” metropol i tan areas with port fac i l i t ies , general ly enjoyed posit ive growth in 2012. The U.S. unemployment rate hit a four-year low of 7.7 percent in No-vember 2012, after beginning 2012 at 8.3 percent, thanks to increased employment in the reta i l , profes-s ional and business serv ices and healthcare sectors.

Among the major U.S. metropol i -tan areas, New York (+128,000), Houston (+95,800) and Los Ange-les (+78,300) have added the most jobs s ince 2011. Whi le recent job-creat ion f igures are encouraging, susta ined employment growth is required to have a meaningful and posit ive impact. With ear ly 2013 expected to look much l ike 2012, this t rend wi l l have to cont inue in earnest for a ful l economic recov-ery to gain tract ion. Look for the adapt ive re-use and renovat ion of obsolete propert ies in a l l asset c lasses in l ieu of new construct ion.

The 10.2-bi l l ion square feet U.S. off ice market registered an overal l vacancy rate of 12.1 percent as year-end 2012 approached, ref lect-ing a s l ight improvement compared with 2011. Tenants cont inued to enjoy favorable condit ions with tech- and energy-dr iven markets exper iencing the greatest levels of pos i t ive absorpt ion. Class A prop-ert ies accounted for two-thirds of the 47.4 mi l l ion square feet of net absorpt ion achieved through third-quarter 2012 as tenants cont inued to seek new improved space and lock in favorable rental rates. As a result , c lass A vacancy decl ined 50 bps to 13.6 percent from 14.1 percent at the end of 2011.

The 17 U.S. markets Avison Young tracked for this report comprise 2.8 bi l l ion square feet with an overal l vacancy rate of 15.1 percent, down s l ight ly f rom that of year-end 2011. A major i ty of Avison Young mar-kets are ant ic ipat ing further, a lbeit modest, vacancy improvement in 2013; however, vacancy in the U.S. markets wi l l l ike ly remain e levated, when compared with Canada, as caut ious businesses cont inue to defer occupancy decis ions in the wake of a s low recovery. Many ten-ants demonstrated a preference for urban l ive-work-play environments with cultural d ivers i ty, new prop-ert ies and amenity-r ich locat ions when they re located.

Among the Avison Young markets, New Jersey recorded the highest 2012 vacancy (25.5 percent) , with f lat market condit ions expected in 2013. The lowest vacancy rates were recorded in P i t tsburgh (8.1 percent) , where rents have r isen to new levels ; and San Francisco (9.9 percent) , where large-tenant movement is dr iv ing the market. Only four markets expect to see increased vacancy in 2013, with the largest increase being in Washing-ton, DC (+60 bps) where there are threats of federal spending cut-backs and where 4 mi l l ion square feet of off ice space is set to be del ivered this year.

U.S. reta i l markets held steady with an average vacancy of 6.9 percent - unchanged for four quarters - and were kept in check by a dearth of new supply. Del ivery of new retai l product has fa l len each year s ince 2008 and, in 2012, 46 mi l l ion square feet was del ivered. Power centers are outperforming reta i l as a whole and posted a 6.2 percent vacancy rate nat ionwide. Many Avison Young markets are report-ing the expansion of discount and big-box reta i lers . Select submarkets in Char leston and Houston have improving reta i l condit ions due to populat ion increases; Boston is see-ing further stabi l izat ion; San Fran-c isco is report ing a steady reta i l comeback and l imited construct ion;

National Market Update



and New Jersey welcomed several new retai lers and substant ia l development.

Avison Young industr ia l markets totaled 6.6 bi l l ion square feet with an average vacancy rate of 8.8 percent as of thi rd-quarter 2012, near ly double the vacancy found in Avison Young’s Canadian markets. Chicago (1.2 bi l l ion square feet) and Los Angeles (1.1 bi l l ion square feet) are the largest U.S. industr ia l markets with vacancy rates of 9.6 percent

and 4.5 percent, respect ive ly. Al l but two U.S. markets are expect-ing further decl ines in vacancy dur ing 2013. Dal las (+10 bps) i s exper iencing growth of warehouse/distr ibut ion space around the c i ty ’s in land port and, in the Houston market (+30 bps) , dr i l l ing act iv-i ty i s fuel ing manufactur ing and the Port of Houston’s expansion. The ant ic ipated expansion of the Panama Canal i s spurr ing specula-t ive development and aggress ive land acquis i t ions in South F lor ida, whi le in Detroit , industr ia l rents are pr imed to r ise fol lowing four quarters of posi t ive absorpt ion.

Through third-quarter 2012, total investment volume for mult i - res i -dent ia l , off ice, industr ia l and reta i l propert ies topped $163 bi l l ion, demonstrat ing stabi l izat ion after second-quarter sa les volumes for

a l l property types except mult i - res-ident ia l fe l l year-over-year. Demand for core assets with stable cash f low exceeded the avai lable prod-uct in many U.S. markets. Manhat-tan led the country in off ice sa les with $7.8 bi l l ion, fo l lowed by San Francisco with $3.9 bi l l ion and Los Angeles with $3.1 bi l l ion. Capita l f low into the U.S. cont inued in 2012 as cross-border investors ac-counted for $20.3 bi l l ion in sa les by mid-December.

Duke Kingsley can be contacted at duke.k [email protected] or 412-944-2131. DP

The an t i c ipa ted expans ion o f the Panama Cana l i s spur r ing specu la t i ve deve lopment and aggres s i ve l and acqu i s i t ions in South F lo r ida , wh i l e in Det ro i t , i ndus t r i a l r en t s a re p r imed to r i se fo l low ing four quar te r s o f pos i t i ve absorp t ion .

Margaret Donkerbrook, vice president U. S. research

Duke Kingsley, principal and manager director, Avison Young Pittsburgh

DeveloperoftheYearChaskaPropertyAdvisors

2012 was yet another produc-tive year for Chaska Property Advisors as they added to their inventory of Class A office and flex product in Cranberry Busi-ness Park and also took their development concept to a new submarket in Moon Township.

In March of 2012, Chaska de-l ivered its seventh speculative venture in Cranberry Business Park and the project's f irst ten-ant took occupancy of 20,000 of the building's 53,000 square feet. 300 Cranberry Business

Park brings Chaska's development portfol io in the park to 560,000 square feet and, in 2013, Chaska wil l sub-mit an additional 120,000 square feet of construction projects to Cranberry Township for entit lements and ap-provals. Chaska's portfol io of space in the park is over 90 percent leased presently.

In January of 2012, Chaska announced a joint venture with Continental Real Estate Companies to develop 40 acres of land in Moon Township. The relationship with Chaska and Continental runs deep, as Continental's Building Systems division acted as general contractor for the bulk of Cranberry Business Park's base building and tenant improvement work over the past decade. Through an option agreement for land leasing with the Allegheny County Airport Authority, Chaska and its partners received master plan approval for more than 300,000 square feet of development from Moon Town-ship and immediately commenced pre-development work for what wil l be known as Pittsburgh International Business Park. Just before groundbreaking on a specu-lative project for 53,000 square feet of Class A single story office space, Chaska and Continental secured a lease for two buildings from Service Link, forcing the project to double its construction activity for 2012. Shell construction is well underway for both buildings and Service Link wil l take occupancy at Pittsburgh Inter-national Business Park in August.

Chaska Property Advisors' reputation and professional-ism is one of the finest in the industry. Its vis ion and commitment to real estate development in Western Pennsylvania is worthy of recognition.

SupporterofDevelopmentSallyHaas

Sally Haas was the chief executive officer of the Pittsburgh Airport Area Chamber of Commerce from October 1998 until her untimely death on December 27, 2012. She first joined the organization as membership director in March 1998 and assumed the duties of Acting Executive Director in July 1998. Dur-ing her time as President, the Cham-ber grew from 800 members to the current 1,100 members. Haas teamed with the 911th and 99th Regional Readiness Command to develop the Honorary Command-

ers Association, whose aim is to get the word out to the community-at-large about the vital role and economic impact the military has in this region's economy. Haas participated with the Pittsburgh Regional All iance on business investment missions to Sheffield and Manchester, England, which resulted in recruitment of a company from the United Kingdom to the United States which was located for a time in the Chamber offices. As part of the Chamber's ongo-ing efforts to create global outreach opportunities, Haas led several outreach missions to China, with close to 200 people on the tours over the last four years. To help local entrepreneurs, Haas became a certified Fast Trac Instructor and served as a mentor of the entrepreneur round table known as E.L.I.T.E., which targets support for start-up companies. In 2008, Haas completed a Regionalism & Sustain-able Development Fellowship with the Ford Foundation and the American Chamber of Commerce Executives (ACCE) association under a grant awarded by the Hillman Foundation. Not limiting her work to businesses, however, but to the entire community, Haas brought the Choices program to the airport corridor and the Chamber currently offers that program in ten school districts in the Chamber footprint. The program uses a hands-on approach to make middle school students realize that there are long-term effects to the choices they make now. Haas was selected by SBN as one of the first recipients of the Pittsburgh Pacesetter Awards, recognizing her for her efforts on behalf of transportation and growth in the Pittsburgh region. She also served on County Executive Dan Onorato's transportation task force, and chaired the SPC Public Partici-pation Panel. Haas served as the board Chair of the PA Association of Chamber Professionals, and headed the Southwestern PA Chamber Executives division.


Chaska CEO Dick Donley Sally Haas

NAIOP AWARDS


LifetimeAchievementAwardMarkSchneider

The region lost one of its best and brightest individuals with Mark’s tragic passing in July 2012 at the age of 55. While he was only in Pittsburgh for thirty plus years, his contribu-tions to our region, community and industry wil l be a legacy for generations that fol low us.

Mark Schneider was born in Pittsburgh but moved to To-ledo, Ohio very early in his l ife and was educated at St John’s Jesuit High School and gradu-ated from Miami University of

Ohio in 1978. Following college, Mark volunteered as an AmeriCorps VISTA volunteer and relocated to Pitts-burgh, PA where he would start his successful career as a community organizer, real estate developer and public servant.

Mark’s f irst posit ion was with the Northside Civic De-velopment where he was involved in numerous projects in Germantown and the East Ohio Street commercial distr ict. While with the NCD, he met Dick Rubinoff, who was forming his own development company in the mid 1980’s. Rubinoff later hired Mark to be president of Rubinoff Co. During Mark’s tenure at Rubinoff the company developed a number of signif icant urban projects, including the 32nd Street Business Center, the 100,000 square foot 51st Street Business Center and the Alcoa Services Operations Center on the North Side.

Perhaps Mark’s most lasting projects are the urban mixed-use projects that converted brownfield waste-lands into the successful Summerset at Frick Park resi-dential community in Squirrel Hil l and the award-win-ning Washington’s Landing. That project, which turned an environmentally contaminated rendering plant into a world class mixed-use residential, commercial office and recreational community was recognized by NAIOP as Public-Private Project of the Year in 1997.

After starting Fourth River Development with business partner John Watson, Mark’s focus shifted toward his passion of urban residential projects. His most recent projects include Columbus Square in the city’s Man-chester neighborhood and Union Square, a major town home community being built in downtown Erie, PA.

In addition to his contributions in real estate develop-ment, Mark served as Chairman of the Stadium Au-thority starting in 1993 and continued in various roles through the development of PNC Park and Heinz Field. Mark also served as Chairman of the Allegheny County Sports and Exhibit ion Authority and was involved in the successful tr ipl ing of the capacity of the David L. Lawrence Convention Center, home of the NAIOP Awards Banquet.

One other project close to Mark’s heart is the World War I I memorial being planned for the North Shore. Mark was a di l igent fundraiser for the project, which is scheduled to start in spring of 2013.

HallofFameInducteeWilliamE.Hunt

Mr. Hunt is President and CEO of the Elmhurst Corporation, a private equity fund located in Pittsburgh, PA. Elmhurst invests in commercial real estate and private operating businesses. Elmhurst’s real es-tate holdings include over 2.5 mil l ion square feet of office, f lex and distr ibution space in the Pittsburgh region. Specif ic holdings include the RAND Building, Airside Business Park, Pittsburgh Airport Busi-ness Park, McClaren Woods Business Park, Cranberry

Crossroads and, downtown, One North Shore Center and 912 Ft. Duquesne Boulevard. Elmhurst’s non-real-estate investments include the Doubletree Hotel in downtown Pittsburgh, Metis Secure Systems, Prospera Hospital ity Management, and ADS Security located in Nashvil le, Tennessee.

Bi l l is actively involved in community affairs and charitable organizations, including the Duke University Graduate School of Visitors (past Chair), the Carnegie Museum of Art (former Chair), Pittsburgh Downtown Partnership (former Chair), Pittsburgh Public Theater (former Chair), as well as a Board member of The Pitts-burgh Foundation and the Pittsburgh Cultural Trust.

He served as NAIOP Pittsburgh board president in 2001 and was national chairman of NAIOP Corporate in 2012.

Mark Schneider

Bi l l Hunt

NAIOP Pittsburgh Officers Daniel Puntil, PresidentGrandbridge Real Estate Capital

Jerry Bunda, Vice PresidentImperial Land Corporation

Lou Oliva, SecretaryNewmark Grubb Knight Frank

Christine Vann, TreasurerAlpern Rosenthal Lynn DeLorenzo, Past PresidentPWC Property Solutions Domenic Dozzi, National BoardJendoco Real Estate

Gregory Quatchak, National CommitteeCivil & Environmental Consultants DeWitt Peart, National CommitteePittsburgh Regional Alliance Board of Directors At Large Michael BelskyColumbia Gas of Pennsylvania W. Scott Caplan Linda FisherDollar Bank Wm Randell ForisterAllegheny County Airport Authority Grant MasonOxford Devemopment Corp. Brian WalkerMillcraft Investments Donald Smith Jr.Regional Industrial Development Corp. Michael SwisherHorizon Properties Group David WeisbergThe Huntington National Bank

Tyler Noland, DL RepresentativePenTrust Real Estate Advisory Svcs.

Patricia Farrell, Legal CouncilMeyer Unkovic & Scott

Committee ChairsJerry Bunda, Imperial Land CorporationTransportationMaureen Ford, ALCOAMarketing/CommunicationDavid Weisberg, The Huntington National BankProgrammingCarl Belli, Continental Building SystemsMembershipJamie White, LLI Engineering Inc.Economic DevelopmentMike Embrescia, Class-G.orgDeveloping Leaders

NAIOP, the Commercial Real Estate Development

Association, is the leading organization for developers,

owners and related professionals in office, industrial

and mixed-use real estate. NAIOP provides

unparalleled industry networking and education, and

advocates for effective legislation on behalf of our

members. NAIOP advances responsible, sustainable

development that creates jobs and benefits the

communities in which our members work and live.

Learn more about NAIOP in the western

Pennsylvania tri-state region at naioppittsburgh.com

or 412-928-8303.

For more information on how you can develop connections with commercial real estate through NAIOP, visit us online at www.naiop.org or call 800-456-4144.

Congratulations

Est. 1922 The Good Business Bank

to

Build To Suit - IndustrialGardner Denver Nash

100,000 sq ft Divisional Global Headquarters and

North American Manufacturing & Distribution Facility

WashingtonCounty

Commissioners


SpeculativeOffice

Embassy Park at 6000 Town Center, Southpointe

Completed in June 2012, the project was 132,000 square feet of new construction.

DEVELOPER: Horizon Properties

ARCHITECT: TKA Architects

CONTRACTOR: Rycon Construction

Renovation,Industrial

Building 33, Impact Guard Renovation

Completed in May 2012, the project was a 133,349 square foot renovation.

DEVELOPER: Chapman Properties

ARCHITECT: NEXT Architecture

CONTRACTOR: Springer Construction

Build-to-SuitIndustrial

Gardner Denver Nash New Divisional Headquarters, Alta Vista Business Park

Completed in January 2012, the project was 100,539 square feet of new construction.

DEVELOPER: LaCarte Development Inc.

ARCHITECT/CONTRACTOR: Al Neyer Inc.

Dodd Frank And

Commercial Real Estate - Where It All

StandsByJonathanW.Hugg,Esq.andLaurenD.Rushak,Esq.

I t has been over two and one half years s ince the passage of

the Dodd-Frank Wal l Street Reform and Consumer Pro-tect ion Act (“Dodd Frank”). After Dodd Frank’s passage, we attempted to predict some of the poss ib le impl i -cat ions that the daunt ing legis lat ion would have on the commercia l real estate (“CRE”) market. Needless to say, many quest ions were unanswered at that t ime. Not surpr is ingly, many ques-t ions remain unanswered today. T ime, however, has brought about some bits of c lar i ty regarding the way in which Dodd Frank has impacted and wi l l cont inue to impact CRE in the future. This art ic le wi l l attempt to highl ight some of the developments of the past two and a half years with respect to Dodd Frank and CRE.

Dodd Frank – and i ts 848 pages of legis lat ion – re-quired that 398 sets of ru les be implemented. As of February 1, 2013, reports show that a total of about 279 Dodd Frank rulemaking

deadl ines have passed. Of these, 176 (63.1%) have been missed and 103 (36.9%) have been met with f inal ized rules. Addit ional ly, about 129 rulemaking requirements have not yet even been proposed. Let’s just say that the process is not moving exact ly as planned.

Who (or what) i s responsible for the delay? Among those targeted are the banking regulators, who have been accused of “lagging” on their duty to complete v i ta l e le-ments of Dodd Frank. For example, they are charged with craft ing the rule that requires lenders to reta in some of the credit r i sk on mort-gages that are sold off and bundled into secur i t ies . Specif ica l ly, th is e lement of Dodd Frank requires that banks who issue commercia l mortgage-backed secur i t ies have what is referred to as a f ive per-cent “skin in the game.” Lenders secur i t iz ing loans, thus, must reta in ownership of f ive percent of each pool of the commercia l mortgage-backed secur i t ies (CMBS) loans that they create. (Certa in carve outs for commercia l real estate mortgages ex ist . ) By requir ing lenders to reta in an economic interest in the assets that they secur i t ize, th is pro-v is ion of Dodd Frank is touted as seeking to better a l ign the interests of lenders with investors. This wi l l , seemingly, a lso better safeguard bondholders.

Some are not complaining about the lag t ime in implementing the “skin in the game” requirement. Some bel ieve that the measure wi l l only serve to restr ict credit avai l -able to the CRE market. Whether i t does or not, and on what level remains to be seen. What we do know is that the new regulat ions for CMBS are not est imated to actual ly be implemented and take effect unt i l later th is year.

The SEC, who is responsible for more Dodd Frank regulat ions than any other agency, has a lso been

Legal/Legislative Outlook



heavi ly cr i t ic ized for lagging on i ts dut ies. The SEC is charged with f inal iz ing, for example, key regu-lat ions involv ing new controls on credit rat ings and the c law back of execut ive pay. The agency has reportedly f inal ized only 33 of the 95 rules for which i t i s responsible. Obviously, the SEC has much work ahead of i t .

In ear ly 2013, the “react ion” to Dodd Frank st i l l appears to be mixed from a CRE market perspec-t ive. Commercia l real estate lend-ers’ concerns over the legis lat ion appear to be, on some level , fading with the passage of t ime. However, th is seems to be (at least in some part ) at the lenders’ own doing, rather than due to any specif ic “regulatory” act ion imposed by Dodd Frank. Many CRE lenders and other capita l market part ic i -pants, ant ic ipat ing the onslaught of government regulat ion under Dodd Frank, acted preemptively and self-pol iced their own pol i -c ies and procedures. They did so to a l low investors to understand new investments, better meet market demands and try to “f ix” problem-at ic ways of the past . As a result , some transact ions have reportedly become s impler, pract ices eas ier to understand and standardized docu-ments and loan packages eas ier to compare. Al l of these things being posit ive steps for CRE in the wake of Dodd Frank.

However, there remains a large camp of market part ic ipants who dispute any long-term “posit ive” impact by Dodd Frank on CRE. They c i te, pr imar i ly, to what they bel ieve wi l l be very str ingent underwrit-ing standards and much more t ime required to screen loans once Dodd Frank’s r i sk retent ion requirements are f inal ly completed and imple-mented. Undoubtedly, tougher reg-ulat ions (and increased process ing t ime) could direct ly and unfavor-ably impact how CMBS are issued and pr iced. This could a lso then

result in ( i ) h igher lending costs to a l l and ( i i ) h igher r isk borrow-ers having more diff iculty secur ing CMBS f inancing. And, ult imately, i t remains quite poss ib le that imple-mentat ion of the r isk retent ion requirements wi l l result in banks having less capita l avai lable; not to ment ion more complexity on how it i s leveraged and more str ict and compl icated packages. Natural ly, negat ive steps for CRE.

Despite the ongoing speculat ion and uncerta inty regarding the ult i -mate, long-term impact that Dodd Frank wi l l have on CRE, the real i ty appears to be that many banks are and remain hes i tant to make loans. One c i ted reason is that under Dodd Frank’s regulatory scheme, an inst i tut ion with assets ranging between $10 bi l l ion and $50 bi l l ion is required to have certa in internal

“stress test ing” performed. The Off ice of the Comptrol ler of the Currency (“OCC”) recent ly pub-l i shed i ts f inal stress test ing rules. The OCC wi l l provide a set of “Base l ine,” “Adverse” and “Severely Ad-verse” scenar ios to banks to input into the test ing.

Per Dodd Frank, and part and parcel to this stress test ing, banks over the $10 bi l l ion threshold are a lso required to have and have had reappraisa ls of their products done year ly. Such examinat ions have reportedly led to the overr id ing of appraisa ls and loans being s lated as “nonaccrual” loans – even where borrowers have not missed a pay-ment. This has caused many banks across the country to write down s ignif icant capita l amounts because of the rat io of lending to capita l . In turn, fear ing addit ional capita l investment write-offs , the dis incen-t ive for banks to make addit ional loans heightened.

For banks with assets less than $10 bi l l ion, there are no current bank-wide “stress test ing” requirements within Dodd Frank. Thus, many local community banks are not subject to the same test ing regula-t ions. Yet, many community banks – with smal ler compl iance funct ions – f ind themselves spending s ignif i -cant t ime and costs determining what aspects of Dodd Frank may or may not apply to them, what wi l l or wi l l not impact them, and how they wi l l meet any demands that may be placed on them. One report est imated that addit ional compl i -ance costs due to Dodd Frank could be in the range of $700,000 to $1.2 mi l l ion for local community banks a lone. Thus, the community banks f ind themselves try ing to balance the need of ensur ing that they have effect ive r isk manage-ment techniques in place on the one hand whi le, on the other hand, ensur ing that they are not stopping good CRE lending from happening altogether. Faced with these con-

Many CRE l enders and o ther cap i t a l marke t pa r t i c ipan t s , an t i c ipa t ing the ons l aught o f gover nment regu la t ion under Dodd Frank , ac ted preempt i ve l y and se l f -po l i ced the i r own po l i c i e s and procedures . They d id so to a l low inves to r s to unders t and new inves tments , be t te r meet marke t demands and t r y to “ f i x ” p rob lemat i c ways o f the pas t .


cerns and what could be unintend-ed consequences of Dodd Frank’s mass ive regulat ions on local banks, some predict that within the next f ive years, “regional” or “com-munity” banks wi l l fade away and be replaced by “super” or “mega” banks – banks that are supposedly equipped to handle Dodd Frank’s regime.

But, even the “super” or “mega” banks themselves are feel ing the impact of Dodd Frank now. They c i te mainly to ( i ) increased compl i -ance costs imposed by Dodd Frank (costs that inevitably wi l l pass increased costs onto borrowers) and ( i i ) more r igorous underwrit-ing standards imposed by Dodd Frank, as putt ing the “chi l l” on addit ional lending and CRE i tse l f . The latter i s important because t ightened underwrit ing standards could undoubtedly result in, among other things, lenders demanding addit ional equity from borrowers seeking to ref inance. Commercia l borrowers seeking to ref inance, however, wi l l l ike ly be unable to take on more debt i f they are f i -nancing propert ies that are a l ready in trouble. In fact , one report has predicted that by 2020, hundreds of bi l l ions of dol lars of commer-c ia l mortgages – or more – wi l l not qual i fy for ref inancing. I f accurate, th is could have a stammering im-pact on CRE for years to come.

Yet another aspect of Dodd Frank that could have bear ing on the CRE and CMBS markets is the require-ment that federal agencies more careful ly scrut in ize any inst i tut ion whose act iv i t ies could pose a sys-temic r isk to the f inancia l markets (“Too Big � to Fai l”) . The col lapses or near-col lapses of major f inancia l companies (major nonbank com-panies in part icular ) in the days leading up to Dodd Frank certa in ly h ighl ighted the lack of any effec-t ive framework for superv is ing and regulat ing important f inancia l inst i tut ions. Dodd Frank is sup-posed to change that. I t created the F inancia l Stabi l i ty Overs ight Counci l to establ ish a framework for des ignat ing nonbank f inancia l companies who should be subject to superv is ion by the Federal Re-serve and the enhanced prudent ia l

standards of t i t le I of the legis la-t ion ( i .e . , enhanced r isk-based capita l and leverage requirements, l iquidity requirements, s ingle-coun-terparty credit l imits , stress test ing, r i sk-management requirements, an ear ly remediat ion regime, and resolut ion-planning requirements) . The f inal f ramework for the regula-t ion/superv is ion of nonbank f inan-c ia l companies who could pose a systematic r isk to the f inancia l mar-kets has yet to be completed. This has caused much uncerta inty in the market and has been v iewed as impeding the CMBS market growth. A recent ly proposed amendment to the f inal law – requir ing that the unique character ist ics of the CMBS market be looked at – may help counterbalance the uncerta inty.

Other Dodd Frank measures that CRE part ic ipants are c losely watch-ing inc lude:

TheInvestment AdvisersAct

This component of Dodd Frank has been enacted. I t requires pr ivate funds with real estate assets to register as “investment manag-ers” and be regulated accordingly. Thus, funds under the c lass i f ica-t ion must fol low SEC laws, which mean increased operat ion costs , among other things. Addit ional ly, compensat ion structures for those in charge of the pr ivate funds wi l l be changed s ignif icant ly – causing much concern among CRE part ic i -pants. Specif ica l ly, performance-based compensat ion (a “carr ied interest” l inked to project comple-t ion) wi l l be l imited for “manag-ers” of funds whose c l ients have invested less than $1 mi l l ion or have a net worth less than $2 mi l -l ion. This could be a real d is incen-t ive to investors who previously took r isks on new bui ld ings and projects with the goal of mak-ing a large carr ied interest payout once completed. However, l ike many other parts of Dodd Frank, i t remains unclear what companies are or wi l l be deemed “funds” that must comply with this p iece of the legis lat ion.

VolckerRule

This ru le is des igned to prevent banks from making speculat ive bets. In essence, the rule prohib-i ts banks from invest ing their own capita l in funds that they operate, the goal being to e l iminate some of the r isk iest t rading and prevent ing banks from becoming “Too Big to Fai l .” This could mean, however, that many pr ivate equity and hedge funds that invest in real estate funds operated by the banks wi l l need to be sold. As of ear ly 2013, the rule has not been f inal ized.

CapitalRulesImplicatingConstructionLoans

A big t icket area of concern for CRE part ic ipants involves Dodd Frank’s impact on construct ion lending. Dodd Frank restr icts “high volat i l i ty commercia l real estate loans.” Experts bel ieve that this could be interpreted to inc lude cer-ta in construct ion loans. The def in i -t ions are not yet sett led, but what is sett led is that reserve banks wi l l u l t imately be required to hold 12 percent instead of 8 percent on their books for each loan that they issue. Capita l restr ict ions could result , hurt ing not only real estate developers but many community banks whose bulk of lending con-s ists of construct ion loans.

Bottom l ine: As we approach three years, Dodd Frank cont inues to unfold, and the abi l i ty to ac-cess l iquidity for CRE projects and the legis lat ion’s complete impact on the CRE market i tse l f remain quest ionable and not ful ly known. We wi l l need to keep a c lose watch as the regulat ions cont inue to take shape, are debated and are imple-mented. Let ’s just hope that i t i s not another three years before any real progress has been made or im-portant quest ions answered.

Jonathan W. Hugg, Esq. and Lauren D. Rushak, Esq. are Partners in the Commercia l & Corporate L i t igat ion Pract ice Group of Thorp Reed & Armstrong, LLP. DP

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Is Green Building Growing

Without LEED?

A s green bui ld ing was gett ing a f i rm foot-hold in the middle of the

last decade – when the number of LEED-cert i f ied bui ld ings in the region was in the dozens – the conversat ion about commercia l bui ld ings being LEED-cert i f ied went something along the l ines of “my c l ients would love to be in a LEED bui ld ing but they don’t want to pay the extra rent.” Within a few years the conversat ion had changed to something l ike, “my c l ient’s susta inabi l i ty pol icy wi l l only let them rent in a LEED bui ld-ing.”

Now, however, there is a grow-ing cur ios i ty about the necess i ty of LEED cert i f icat ion. I t i s unfair to character ize i t as a backlash because the quest ions are coming from developers who have been bui ld ing LEED-cert i f ied projects for a number of years and who plan to cont inue to bui ld those k inds of bui ld ings. Developers have for the most part embraced the value of energy eff ic ient, l ight and healthy bui ld ings, i f not for the sake of the environment then certa in ly as a response to the marketplace. The quest ion seems to be, i f I bui l t my last two projects as LEED-Gold and I bui ld the next one the same way, why do I need to get i t cert i f ied?

It ’s not only developers who are feel ing what is being cal led ‘green fat igue. ’ Even architects , who were ear ly green bui ld ing proponents, are seeing res istance from within their f i rms to take the steps to cer-t i fy a project . There is no res istance to des igning more susta inably –

quite the opposite – but re luctance to document the process is there.

“The term that is being used is LEED cert i f iable,” says Aurora Sharrard, v ice pres ident of innova-t ion for the Green Bui ld ing Al l i -ance. Sharrard conf i rms that ques-t ions about the necess i ty of LEED cert i f icat ion is a nat ional t rend and one that susta inabi l i ty advocates are not surpr ised to see occurr ing.

“What we are hear ing is ‘LEED-l ike. ’ I t ’s what a lot of our pros-pects and customers are asking for,” says J im Scalo, CEO of Burns & Scalo Real Estate Serv ices. “Make no mistake. Susta inabi l i ty i s abso-lute ly as important as ever. I t ’s just that LEED doesn’t seem to be.”

Leadership in Energy and En-v i ronmental Des ign (LEED) was developed in the late 1990’s by the United States Green Bui ld ing

Counci l (USGBC) as a voluntary, th i rd-party cert i f icat ion that would encourage susta inable des ign and establ ish a set of uniform cr i ter ia for architects and owners to fol low. Dur ing the 15 years s ince LEED has been in the market the USGBC has regular ly updated i t standards for cert i f icat ion, adding higher levels of achievement and strat i fy ing the cert i f icat ion standards to serve the ful l spectrum of construct ion.

The success of the LEED program is ev idenced by the more than 15,000 cert i f ied projects current ly l i s ted on the USGBC’s directory. But for commercia l real estate the case isn’t going to be made by the sheer volume of LEED-cert i f ied projects . In the end, the argument wi l l come down to what adds the most value to the property.

What changed the t ide for com-mercia l property a few years ago

Benchmarks


was demand from corporat ions who began to inc lude a LEED-cert i f ied bui ld ing on their l i s t of requirements, but there remains a difference between whether the corporat ion is leas ing or owning. No corporat ion has done more to advance the idea of corporate susta inabi l i ty than PNC. I t has invested heavi ly in LEED-cert i f ied bui ld ings s ince developing i ts F i rst S ide operat ions center in 2001 and is current ly bui ld ing a bui ld ing that a ims to be the ‘greenest’ in the world. Yet, i ts 300,000-plus square foot space in Al legheny Center was not LEED-cert i f ied when or ig inal ly leased, a l though PNC has s ince renovated and achieved LEED cert i -f icat ion for 80,000 square feet, as wel l as the Eco Bistro restaurant.

“Large corporat ions with mandates in i t iated in the C-suite or even from their board wi l l be more l ike ly to get LEED in an owned bui ld ing but i t ’s tough to do that in the market as a tenant,” notes Brad Totten, senior v ice pres ident and pr inc ipal at Avison Young.

Dan Adamski st i l l sees a difference in demand when higher rents are involved. The managing director for Jones Lang LaSal le’s tenant repre-sentat ion group, Adamski says that c l ients are looking at the susta in-abi l i ty of the potent ia l bui ld ings they occupy. “About 20 percent of the t ime [LEED] is a factor, especia l -ly i f i t ’s a corporate c l ient,” he says. “But I ’d say fewer than ten percent of that number is wi l l ing to pay any extra for i t .”

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I t i s certa in ly not a negat ive that the real estate development com-munity has become fami l iar enough with susta inable des ign that they quest ion whether or not cert i f ica-t ion adds anything to the bui ld ing; in fact , i t i s probably a s ign of suc-cess that energy eff ic iency and envi-ronmental sens i t iv i ty u l t imately get taken for granted. Whi le the cost of construct ion isn’t real ly more for LEED than for non-LEED bui ld ings, the cost of the addit ional p lanning and administrat ion does add a few bucks per foot and for higher levels of LEED, there are costs that add on. For the k inds of bui ld ings that are bui l t in Western PA, any added costs can mean a bit more.

Bi l l Hunt, CEO of the E lmhurst Group, was the NAIOP Corporate board pres ident in 2012. As the nat ional board’s leader he traveled to many c i t ies and heard from other developers about the ‘LEED cert i f i -able’ t rend. Hunt’s feel ing is that there are regional factors that can inf luence development of LEED-cer-t i f ied bui ld ings.

“Whatever the extra costs are for LEED cert i f icat ion, they make up a bigger share of the project costs in a c i ty l ike P i t tsburgh,” he ex-pla ins. “ I f you are doing a project in Manhattan for $400/foot i t ’s not a big deal i f LEED adds a few dol lars a square foot more, but i f you’re doing a bui ld ing in P i t tsburgh for $125 or $150 per square foot those costs mean something.”

Commercia l property is attract ive because i t provides income through rents that covers the costs of f inancing and operat ing the bui ld-ing ( ideal ly anyway), with a return on top of that; and, because the market provides appreciat ion of the property value. A s ignif icant number of the owners – not the major i ty – who are doing susta inable construc-t ion are doing so because i t ’s the r ight thing to do. The same can be sa id for the major i ty of humans who now have more susta inable l i fe-sty les. But the credit-worthiness of a project or the prof i table operat ion of a bui ld ing trumps doing the r ight thing in commercia l real estate. Susta inabi l i ty has to have a credible business case.

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USGBC has devoted resources to re-searching the impact of LEED-cert i -f icat ion on the commercia l market. They have prepared a business case for LEED on their website, l i s t ing f ive main benef i ts to the property owner or developer:

Competitivedifferentiator. Green bui ld ings offer lower operat ing costs and better indoor environ-ments, which meet the needs of corporate tenants, investors and buyers.

Mitigaterisk. The third-party ver i f i -cat ion offers some protect ion from lawsuits over indoor a i r qual i ty or energy sav ings. In many jur isdic-t ions, LEED bui ld ings move more quickly through ent i t lement and permitt ing.

Attracttenants. 21st Century ten-ants are demanding the benef i ts that come from a LEED bui ld ing and many are mandated to lease only in LEED. Rents in Class A LEED-cert i f ied bui ld ings run from average to 20 percent above aver-age.

Costeffective. The cost per square foot for LEED bui ld ings is within the range of those that are not LEED-cert i f ied. A LEED bui ld ing has l i fe cyc le sav ings of 20 percent of the total construct ion costs and bui ld ing sa le pr ices for energy ef-f ic ient bui ld ings are as much as 10 percent higher per square foot than convent ional bui ld ings.

Increaserentalrates. Green bui ld-ings outperform their non-green peer assets in occupancy and rental rates. LEED bui ld ings command rents that are $11.33 per square foot more than their non-LEED peers and have 4.1 percent higher occupancy.

USGBC’s case re l ies on a CoStar report f rom 2008 that looked at values, rents and l i fe cyc le benef i ts of LEED on commercia l propert ies. The report found that there was a $50 to $65 per square foot in-crease in net present value over 20 years for green bui ld ings; however, somewhere between $35 and $50 of that increase was in “product iv-i ty and health value,” two values

that are hard to quant i fy and mea-sure. Moreover, the study looked at bui ld ings constructed in 2006 and 2007. Market condit ions have changed radical ly s ince then and the number of green commercia l bui ld ings – LEED or otherwise – has grown exponent ia l ly.

More to the point, the business case for LEED is a lso the business case for energy eff ic ient, healthy and attract ive bui ld ings in general . That fact seems to be at the crux of the LEED vs. green argument.

P i t tsburgh’s Green Bui ld ing Al l iance (GBA) is the local chapter of the USBGC but their ex istence pre-

dates the nat ional organizat ion and LEED by several years. GBA’s most ambit ious in i t iat ive is the P i t ts-burgh 2030 Distr ict , an effort to br ing the bui ld ings in the CBD to reduce consumption of energy and water by as much as 50 percent by 2030. That effort recent ly achieved the part ic ipat ion level of half the Downtown space. The 2030 Chal-lenge is bui l t upon the real iza-t ion that not a l l owners are going to have the opportunity to LEED cert i fy their propert ies but a l l can s ignif icant ly reduce their consump-t ion. GBA’s advocacy of susta inable des ign and construct ion natural ly inc ludes LEED cert i f icat ion but their goal i s that bui ld ings be better. Aurora Sharrard says that LEED has the same goal .

“LEED isn’t necessar i ly about the cert i f icat ion; i t ’s about the qual i ty of bui ld ing that is bui l t ,” she says.

Sharrard argues that LEED cert i f ica-t ion – or other third-party cert i f ica-t ions l ike EnergyStar, Green Globes of L iv ing Bui ld ing Chal lenge – a l l help ensure that the owner gets the project he/she expects. Docu-menting the steps needed to meet a cert i f icat ion goes a long way towards turning intent ions into ac-t ions. Without the disc ip l ine of the cert i f icat ion process, project sus-ta inabi l i ty goals can erode, espe-c ia l ly when budget concerns ar ise. As one architect answered when asked how LEED cert i f icat ion s l ips away, “One VE at a t ime.” LEED is a lso set up to evolve towards higher standards and more innova-t ive pract ices, something that even owners committed to susta inabi l i ty would have diff iculty achiev ing.

At the end of the day, the best argument for LEED cert i f icat ion may wel l be the accountabi l i ty of which Sharrard speaks. With a l l the pressures that a construct ion project endures, the commitment and disc ip l ine that the cert i f icat ion requires make i t much more l ike ly that green bui ld ing projects wi l l f in ish as green as they start out to be. Without a way to measure the process i t ’s imposs ib le to te l l i f a project i s stay ing on course to meet the goal .

At the end o f the day, the bes t a rgument fo r LEED cer t i f i c a t ion may we l l be the accountab i l i t y o f wh ich Shar ra rd speaks . W i th a l l the p res sures tha t a cons t r uc t ion pro jec t endures , the commi tment and d i sc ip l ine tha t the ce r t i f i c a t ion requ i res make i t much more l i ke l y tha t g reen bu i ld ing p ro jec t s w i l l f i n i sh a s g reen a s they s t a r t ou t to be . W i thout a way to measure the p rocess i t ’ s imposs ib le to te l l i f a p ro jec t i s s t ay ing on course to meet the goa l .


St i l l , the a im of a l l green bui ld ing proponents – be they zealots or novices – is a permanent change in the behavior of the industry.

J im Scalo was looking to change and reward corporate behavior when he helped create Class-G, a se l f - report ing cert i f icat ion system that a l lows owners and tenants to document and communicate their susta inable pract ices in their day-to-day operat ions. Companies get a score based on susta inable cr i ter ia and then can grow that score as their susta inable pract ices grow. L ike the P i t tsburgh 2030 Chal lenge, Class-G is des igned to encourage businesses and property owners who don’t have the cert i f icat ion opportunity to behave more respon-s ib ly and to get credit for i t . But Scalo isn’t among those who ques-t ion the value of LEED cert i f icat ion.

“We are by no means ant i -LEED. We’re doing three bui ld ings at Southpointe and they wi l l be LEED-cert i f ied and Class-G,” Scalo says.

Green bui ld ing has a lways gone against the grain so i t ’s not a sur-pr ise that some developers, contrac-tors or des igners would grow weary of LEED cert i f icat ion. LEED staked out a posit ion when there were few other cert i f icat ion systems in place and has defended i ts pos i t ion in the marketplace. The USGBC also has i ts detractors, as can be expected with any organizat ion that succeeds in interposing i tse l f in an industry. Yet without e i ther, i t ’s unl ikely green bui ld ing would have the share of the market current ly enjoyed. LEED is being expanded to inc lude ex ist-ing bui ld ing operat ions and main-tenance (LEED-EBOM) and the next vers ion of LEED wi l l be more fo-cused on measurable performance. Whether or not LEED loses i ts pos i t ion as the standard by which susta inabi l i ty i s measured remains to be seen but the regular evolut ion of LEED’s standards won’t hurt that cause.

“LEED vers ion 4 is a lot more about performance and especia l ly more about mater ia ls ,” expla ins Sharrard. “ I t should get people to start asking quest ions l ike they did in 1999.” DP 606 Liberty Avenue | Suite 300 | Pittsburgh, PA 15222

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Voices


JosephJohnsonDevelopmentManagerHorizonPropertiesGroupLLC

I d idn’t choose P i t tsburgh. I am not from here. P i t ts-burgh was chosen for me. I t a l l s tarted when I met this teacher in At lanta

in 2001… One big P i t tsburgh wedding (with a cookie table?) , one big baby boy, and 6 years later… When I interv iewed with Hor izon Propert ies in February of 2007, I d idn’t have any idea what was happening in the ‘Burgh. By fa i th, and conf i rmed in prayer and c i rcumstance after c i rcumstance, I was re locat ing my fami ly because i t seemed l ike i t was God’s plan and t iming. I t made perfect sense! Leave a thr iv ing At lanta develop-ment company and market to go to P i t tsburgh ( instead of F lor ida where I am from) for another commercia l real estate development job… in P i t tsburgh. The market here wasn’t looking so good in spr ing of 2007. The past f ive years have shown what I know! Thank God we didn’t do what seemed the obvious choice in 2007 and go to F lor ida, or even stay in At lanta! Both P i t tsburgh’s and Hor izon Propert ies’ incredible prosper i ty in the past 5 years has been a pr ice less bless ing to me and my fami ly. For the foreseeable future, hopeful ly the rest of th is l i fe, there isn’t anywhere in the world that offers more to me and my fami ly than the S.T.E.E.L. (Steel , Technology, Energy, Educat ion, L iv-able) City.

MichaelSharpVicePresident, BusinessDevelopmentContinentalOfficeEnvironments

Having grown up in the P i t tsburgh area (Mur-rysv i l le ) , I had never v iewed Pittsburgh as a c i ty that could cater to young pro-

fess ionals . In my mind, P i t tsburgh was a great place to be ra ised, but then i t was t ime to move away. In fact , in 2005 I moved to New York City to pursue my career in the contract furniture industry. After spending 5 years in Manhattan, I real ized that I wanted to both spend more t ime with my fami ly and eventual ly start a fami ly of my own. I real ized New York City was not the r ight place for me to do i t . In 2010 I moved back to P i t tsburgh. I t wasn’t unt i l I moved back that I real ized the tremendous potent ia l that P i t tsburgh had to offer young profess ionals . Up unt i l th is point, I fe l t l ike I was v iewing Pittsburgh with bl inders on. In those 5 years that I was gone, P i t tsburgh had been completely t ransforming i tse l f (a l l whi le maintaining i ts ’ her i tage and Midwestern values) . We are now on the forefront of the envi-ronmental bui ld ing scene, the oi l & gas industry is booming, and the technology/healthcare sectors are becoming prominent ly known. Major corporat ions such as Apple and Google (many of whom target young ta lented profess ionals ) now have regional off ices here. All of this I probably would have never known if I were not a “boomerang”

myself . Moving forward, I p lan to stay in the P i t tsburgh region and am even looking at the poss ib i l -i ty of buying a condo in the cen-tra l bus iness distr ict (something I used to think was unimaginable as people just d id not l ive down-town whi le I was growing up). The potent ia l that a young profess ional has in this c i ty i s indescr ibable. The market is one of only a few in the nat ion that was not major ly im-pacted by the recess ion. P i t tsburgh is now one of the most l ivable c i t -ies in the country and f l ies on the radar of many prominent l i s ts . We have culture, n ight l i fe, champion-ship sports teams, low cost of l iv-ing, and a plethora of opportunity in major growing business sectors. Al l of these are extremely impor-tant to young profess ionals . P i t ts-burgh can now provide the perfect balance of work and personal l i fe a l l whi le cater ing to the sometimes demanding needs of the younger folks. I am extremely exc i ted to see what the future wi l l br ing to P i t ts-burgh as I know we are heading in the r ight direct ion.

AutumnR.HarrisRelationshipManager, AVP PNCRealEstateBanking

There are three main reasons that I chose P i t tsburgh over other c i t ies now. The f i rst was afford-abi l i ty. One demonstra-t ion of af-fordabi l i ty that led to

my ult imate decis ion is the median sa les pr ice of a home. I t was very

Developing Leaders Answer the Question, "Why Pittsburgh?"


important to me to be able to buy a home and st i l l have disposable income avai lable for travel , food and other act iv i t ies . The median home sales pr ice in P i t tsburgh is $130k, which is $72k under the nat ional average of $202k, in ac-cordance with z i l low.com. This was a huge factor in my determinat ion of where to lay my foundat ion and after a l i t t le analys is I found that I would get much more bang for my buck in the c i ty of P i t tsburgh than most other c i t ies . The second reason for my decis ion was fami ly. As a nat ive from Beaver County and my husband a nat ive of Washington County, i t i s important to me that I am c lose enough for comfort . I don’t want to miss out on shar ing hol idays, new births or t imes when my fami ly needs to be together. The third reason that I chose P i t ts-burgh was the want to be part of a v ibrant community. I purchased a home in Upper St . Cla i r, which l ike many of the communit ies in P i t ts-burgh has a l l the amenit ies to make up a v ibrant community inc luding: parks, community organizat ions, n ice restaurants and convenient shopping. I am very pleased with my decis ion and proud to cal l P i t ts-burgh my home.

TonyRossiVicePresident, Debt &EquityFinanceCBRECapital Markets

As a P i t ts-burgh nat ive, the decis ion to stay in P i t tsburgh to pursue my real es-tate f inance career was an easy one. Enter-ing the industry

as a young profess ional dur ing a t ime of softening f inancia l markets the stronger fundamentals of the P i t tsburgh MSA al lowed me to hit the ground running. Working in the mortgage banking industry I have the dist inct p leasure of te l l -ing the story of our dynamic c i ty

to market part ic ipants from across the country. With s ignif icant ly lower than nat ional unemployment and an array of industr ies dr iv ing the economy (Energy, Technology, Medical , F inance, to name a few) i t i s an easy story to te l l . In fact , so much upside ex ists that i t i s v i r tual ly imposs ib le to capture the story in one conversat ion and st i l l d iscuss the matter at hand. Dur-ing these dai ly conversat ions some people are pleasant ly surpr ised to learn about the health of our c i ty, but many are not surpr ised, there is no doubt that P i t tsburgh is on the nat ional real estate radar screen.

MichaelEmbresciaCo-creatorandDirectorClass-G

Duquesne Univers i ty 's MBA (Sus-ta inabi l i ty ) brought me to P i t ts-burgh in '07. My Cleveland-roots and l i fe long distaste for a l l th ings P i t tsburgh

changed quickly. Instant ly, I was welcomed by neighbors (st i l l won't move from our f i rst Dormont home), became regulars at a l l the cool spots, and i t was c lear within the f i rst fu l l month of l iv ing here --- th is i s home.

Fol lowing grad school , I quickly immersed myself in the business environment. I was lucky to land some pretty cool g igs, and cur-rent ly mentor under a few amazing and prominent f igures. Needless to say, I 'm in the r ight place at the r ight t ime.

The Two-Degree Town: the town is larger than most, but quaint enough to real ize the best of both worlds. Profess ional ly, I can make acquaintances and bui ld re lat ion-ships with folks with re lat ive ease -- i f you don't know a person, a l l you have to do is ask someone in your network. To me, this i s a

great attr ibute to doing business in our region.

More Why?: The neighborhoods, the great univers i t ies and health care that cont inue to explode, a thr iv ing business c l imate, and an exc i t ing startup scene (garner ing nat ional attent ion) - - - in my opin-ion, a s leeping giant.

"Why Pittsburgh now?" My ques-t ion is , why not?!

TylerNolandPortfolioManager/UnderwriterPenTrust RealEstateAdvisoryServices Inc.

F i rst , i t a lways comes down to good people, and Pittsburgh’s people are sa l t of the earth. Sec-ond is the opportunity for career advance-ment. In

P i t tsburgh, young profess ionals swim in a lake rather than an ocean l ike New York City, Chicago, or LA, and the opportunity to be no-t iced is h igher. And third, i t ’s the c l imate. I couldn’t l ive anywhere without four truly dist inct seasons. Four seasons offer four opportuni-t ies for vary ing hobbies and out-door l i fe.

To make sure you’re spending your advertising dollars where your customers and prospects are contact Karen Kukish at:

(412) 837-6971 or [email protected]

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News from the Counties


Armstrong CountyArmstrong County Department of Economic DevelopmentArmsdale Administrat ion Bui lding124 Armsdale Road, Suite 205Kittanning, PA 16201724-548-1500 (T) 724-545-6055 (F)Michael Coonley, Executive [email protected]

The Armstrong County Industr ia l Development Counci l (ACIDC) sold f ive lots consist ing of 21 acres between June 1, 2012 and Decem-

ber 31, 2012. S loan Brothers Company, a fourth generat ion fami ly-owned business located in Northpointe, des igns and bui lds lubr icat ion systems for compressors and other cr i t ica l equipment. S loan outgrew their 20,000 SF fac i l i ty within three years and has recent ly added an addit ional 10,000 SF. To accom-modate their expansion, S loan purchased a port ion of the adjacent lot f rom the ACIDC in December 2012.

The largest of the County’s of-f ice/business parks is located only 35 minutes from down-town Pittsburgh. Northpointe, located along State Route 28 at ex i t 18, was strategical ly developed in the southwest port ion of Armstrong County to capture the off ice and l ight industr ia l markets a long Route 28. Northpointe was des igned with the fol lowing components: industr ia l /bus iness, reta i l and res ident ia l . The 925 acre ful ly permitted fac i l i ty a lso features mult ip le sources of high band-width f iber, an abundance of power, approximately 300 acres of pass ive recreat ion and open


space, inc luding s idewalks, walk ing tra i l s , and profess ional ly manicured storm water ponds. The ACIDC wi l l embark on a major s i te prepara-t ion project in ear ly 2013 to create addit ional pad ready s i tes. The s i te des ign was f inal ized in late 2012 and wi l l result in 43 pad ready acres. Northpointe is current ly home to ten companies, a branch campus of Indiana Univers i ty of Pennsylvania and the Penn State Univers i ty E lectro-Optics Center.

The ACIDC recent ly sold two of the remaining Keystone Opportunity Zone (KOZ) lots in the Manor Town-ship Business Park. Project i le Tube Cleaning, Inc. purchased lot #4 in December 2012 and plans to con-struct a 9,000 SF fac i l i ty to serve as their headquarters and dispatching terminal . Construct ion is expected dur ing the summer of 2013. Pro-ject i le Tube Cleaning manufactures condenser tube c leaning equipment and products inc luding patented mechanical scrapers. In Novem-ber 2012, Steve’s Auto Body & Repair purchased lot #5 and has recent ly completed construct ion on

a 10,000 SF fac i l i ty. Occupancy is expected in February 2013. With KOZ, Project i le Tube Cleaning and Steve’s Auto Body & Repair wi l l receive abatements for 10 years on real estate taxes and certa in state taxes. The Manor Township Busi-ness Park is now ful ly occupied.

In the West Hi l l s Industr ia l Park, the ACIDC sold lot #17 to the ARC Manor Auxi l iary Foundat ion in December 2012. ARC Manor wi l l construct a 35,000 SF medical fac i l -i ty later th is year. The West Hi l l s Industr ia l Park is home to mult ip le medical serv ice providers inc luding one of the County’s largest employ-ers, the Armstrong County Memo-r ia l Hospita l .

The Armstrong County Department of Economic Development is the lead economic development agency within the County. The Department provides staff to the Armstrong County Industr ia l Development Author i ty (ACIDA), a publ ic devel-opment agency and the Armstrong County Industr ia l Development Counci l (ACIDC), a pr ivate non-

prof i t (501c3) economic devel-opment corporat ion. The ACIDC provides a s ingle-point-of-contact serv ice for information perta in-ing to a l l economic development and business re lated resources in Armstrong County. Operat ing four industr ia l parks, a mult i - tenant of-f ice bui ld ing and other propert ies, the ACIDC is tasked with present-ing new or expanding businesses a wide range of opt ions to guide their re locat ion, expansion, or in i -t ia l locat ion decis ions. The ACIDC works direct ly with companies to ident i fy s i tes and ass ist with f i -nancing, permitt ing and workforce development needs

Beaver CountyBeaver County Corporation for Economic Development 250 Insurance Street, Suite 300Beaver, PA 15009724-728-8610 (T) 724-728-3666 (F)James Palmer, [email protected]

In August 2012, the Beaver County Corporat ion for Economic Develop-ment completed a $3 mi l l ion infra-structure project at i ts Al iquippa Industr ia l Park. The project involved construct ion of a road, sanitary sewer serv ice, and storm drainage (water was a l ready in place) to 72 acres of vacant land owned by CED, a l l served by ra i l and approximately 45 of which have frontage on the Ohio River. This second phase of

development comes upon CED com-plet ing the sa le of the 120 acre f i rst phase of the project in ear ly 2012.

Also in August, CED purchased the former Tegrant Divers i f ied Brands fac i l i ty on Blockhouse Run Road in New Br ighton. This 67,000 square foot plant s i ts on over four acres of land. The bui ld ing has been vacant for several years. CED purchased the plant and entered into a long term lease with Creeks ide Spr ings, LLC for the ent i re fac i l i ty. Creek-s ide, with fac i l i t ies in Ambridge, Pennsylvania and Sal ienevi l le , Ohio, i s a pr ivate label bott ler of water and f lavored dr inks. The company has opportunity to expand i ts f la-vored water product ion and was consider ing s i tes both in Ohio and Pennsylvania. The former Tegrant plant was wel l suited to Creeks ide needs, and CED’s purchase and

long term lease with the company insured the investment remained in Pennsylvania. Creeks ide current ly employs approximately 50, and can increase employment to 75 with the new business i t wi l l take on with i ts expanded product ion capacity.

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Butler CountyCommunity Development Corporation of Butler County112 Woody DriveButler, PA 16001724-283-1961 (T) 724-283 3599 (F)Ken Raybuck, Executive [email protected] Yeltrah, LLC purchased the But ler County Economic Development Cor-porat ion’s 14,700 square foot f lex bui ld ing located at 295 Delwood Road in late 2012. The new But ler County business wi l l manufacture components for the automobi le glass industry.

Two parcels in the Victory Road Business Park are a lso under agree-ment and are expected to c lose in the f i rst quarter of 2013. Each parcel i s approximately e ight acres. A manufactur ing bui ld ing cost ing approximately $1,000,000 wi l l be constructed on one parcel and i t i s a lso expected that an addit ional $1,000,000 in equipment wi l l be housed in the bui ld ing. The second parcel wi l l be the new home of a health care fac i l i ty that wi l l employ up to 25 people. Construct ion of this new bui ld ing is expected to be-gin in the Spr ing. Both Victory Road parcels are located in Keystone Op-portunity Zones.

The Tr in i ty Bui ld ing located at 140 Hol lywood Dr ive in the Pul lman Center Business Park Expansion is current ly under a sa les agreement as wel l . The 30,000 square foot f lex/warehouse space is s i tuated on more than f ive acres and wi l l be the new home of an HVAC wholesaler. The bui ld ing wi l l permit i ts new owner to have both showroom and warehouse capabi l i t ies .

The Pul lman Commerce Center wi l l be the new home of a local union as they agreed to purchase 10,000 square feet that wi l l house their off ice. There are 3,600 square feet of f i rst f loor off ice space avai lable for lease in this bui ld ing as wel l as addit ional off ice space that wi l l be avai lable at 124 Woody Dr ive in July, 2013.

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Fay-Penn Economic Development Counci l1040 Eberly Way, Suite 200Lemont Furnace, PA 15456724-437-7913 (T) 724-437-7315 (F)Michael A. Jordan, Jr. , Executive Directormichael [email protected]

Over the past 20 years, Fay-Penn has ass isted numerous companies by providing super ior conf ident ia l bus iness serv ices, such as s i te se lec-t ion ass istance. Fay-Penn has been able to successful ly market Fayette County to new businesses by hav-ing s i tes that are readi ly avai lable, which attracts new pr ivate invest-ment into the area.

One of the most recent attract ions inc luded Calfrac Wel l Serv ices, a Marcel lus re lated company that has establ ished permanent roots in Fayette County. Calfrac has invested over $20 mi l l ion in the development of a new complex at Fay-Penn’s - Fayette Business Park, Georges Township, which wi l l serve as the hub for i ts t r i -state area operat ions. Selected for i ts centra l locat ion in the region, the s i te current ly em-ployees 342 people with an expec-tat ion of reaching 1,000 employees or higher in a few years. Calfrac is committed to becoming part of the Fayette County community and hir-ing local res idents.

Fayette County boasts of several bus iness parks that are home to companies l ike Wi l l iams, Valerus, GHX, BOS Solut ions and many more. With an ever increas ing demand for business s i tes, Fay-Penn has recent ly announced the construct ion of a new business park in Dunbar Town-ship. Ground breaking is p lanned for ear ly 2013 on this new devel-opment area that wi l l inc lude 311 acres with some s i tes having ra i l access that wi l l connect the compa-nies to northeastern United States and Canada. As a region, Pennsyl-vania’s southwestern corner has become the center of the Marcel lus Shale industry attract ing nat ional and internat ional investments.

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Indiana CountyIndiana County Center forEconomic Operations801 Water StreetIndiana, PA 15701724-465-2662 (T) 724-465-3150 (F)Byron G. Stauffer, Jr. , Executive [email protected]. indiana.pa.uswww.indianacountyceo.com

In 2012, relocation, expansion, and recognition were paramount in Indi-ana County. Two national companies selected business parks in the Blairs-vil le/Burrell Township area for new locations. Bayada Home Health Care finalized the transition of their new regional office at the Interchange Center multi-tenant building, located at the Corporate Campus business park. Bayada Home Health Care pro-vides a variety of nursing and per-sonal home care services to people in the comfort of their own homes. The National Center for Defense Machin-ing and Manufacturing (NCDMM) also expanded to Indiana County, mov-ing their national headquarters to the Corporate Campus. The NCDMM delivers optimized manufacturing solutions to the defense industry.

Ralph Resnick, NCDMM President and Executive Director and Acting Director of the National Additive Manufactur-ing Innovation Institute (NAMII) said, “We have found the ideal location and community for NCDMM’s head-quarters. Additionally, we are proud to support the revitalization efforts underway in Indiana County to bring back more industry and business to the region. We look forward to many successful years in Blairsvil le." In Au-gust, NCDMM was awarded manage-ment of the (NAMII), a pilot project for the National Network for Manu-facturing Innovation (NNMI).

H & W Global Industries, Inc., com-pleted a 21,000 square-foot, state-of-the-art expansion project in 2012, and the 46,000-square-foot facil ity is now fully operational at the Corpo-rate Campus business park. H&W Global Industries is an industrial coat-ings company providing processing and finishing for steel and aluminum parts, serving a broad range of indus-tries including aerospace, defense, and medical.

Finally, Environmental Service Labo-ratories, Inc. grew 274%, adding 37 new employees in the past year

and earning the Chairman’s Award for Pittsburgh Impact Companies. Environmental Service Laboratories provides analytical testing, consulting and field sampling services for water and natural gas. Environmental Ser-vice Laboratories and its sister com-pany, Environmental Land Surveying and Solutions, Inc. also received over $30, 000 in job creation tax credits from the state of Pennsylvania.

The Communities at Indian Haven earned the Employer of the Year Award for Indiana County from the Tri-County Workforce Investment Board. Communities at Indiana Haven operates assisted-living facil ities that provide nursing, dietary, and therapy services.

Steady progress in 2013 will surely continue with the past year as an indication of things to come. For more information about opportunities in Indiana County, please contact the Indiana County Center for Economic Operations (www.indianacountyceo.com).

Lawrence CountyLawrence County Economic Development Corporation100 East Reynolds StreetPlaza South, Suite 100New Castle, PA 16101724-658-1488 (T) 724-658-0313 (F)Linda Nitch, Executive [email protected]

Lawrence County is a player in the world of natural gas. SWEPI LP, which is owned by Royal Dutch Shell, and HilCorp Energy Company, Houston, Texas, have emerged as drillers of the Marcellus and Utica Shale throughout the county. As of December, 2012 sixty two (62) permits have been issued according to the DEP Office of Oil and Gas Management. The wells that have been drilled circle the county from the Patterson Farm in Little Beaver Town-ship to the Twentier drilling site in Perry Township.

Most recently, LS Power of St Louis presented plans on Monday, Oct 8, 2012 to build a $750 million gas fired electric generation plant at the New Castle Development site located off Route 551 in North Beaver Township. The Hickory Run Energy Station is the largest investment ever in Lawrence County! The project offers infrastruc-ture improvements including extensions of Aqua Pennsylvania public water supply and North Beaver Township’s municipal sewer to the site. Also of importance is the $15 million electric substation planned adjacent to the new facility. With an anticipated real property assessment of $40 million the school district, county and township will receive a windfall from the ex-pected taxes. The company intends to purchase materials locally and use local contract services whenever possible. The plant will generate a $3 million annual payroll and employ 25 people. Additionally 500 construction workers will be used to build the plant which is

expected to go into operation in 2016 or 2017.

Just 10 miles from the border of Lawrence and Beaver counties is the next BIG energy opportunity for Lawrence County. In mid-March 2012 Royal Dutch Shell announced that the Horsehead site in Monaca had been selected as its preferred site to build an ethane cracker plant. No final decision has been made. But should the plant be built, then the opportunities that this facility will offer Lawrence County are tremendous. From plastics to phar-maceuticals to carpeting and clothing, many plants utilizing ethylene and polyethylene will build in the area to be near that source of raw materials.

With the opportunity of the ethane cracker plant, comes the challenge of being prepared. Lawrence County’s Commissioners and our private sector leaders have taken the lead on prepar-ing shovel-ready sites. There are 100

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Lawrence County (continued)

acres at Millennium Technology Park, 60 acres at Neshannock Business Park and 30 acres at Shenango Commerce Park that are ready to go. In addition, the Lawrence County Economic Devel-opment Corporation is constructing a

50,000 sq ft multi-tenant speculative building in Millennium Technology Park. Not only will sites be needed, but also the necessary infrastructure of water, sewer, electric and gas to make these projects a reality. Our municipal and

private sector leaders must be certain to allocate the necessary financial resourc-es to extend the infrastructure. Law-rence County is working to meet these challenges and be OPEN FOR BUSINESS in the years to come!

Washington County Washington County Economic Development Partnership20 East Beau StreetWashington, PA 15301724-225-3010 (T) 724-228-7337 (F)Jeff Kotula, [email protected]

In the second half of 2012, Washington County continued to attract businesses as its residential housing market contin-ued to increase in activ ity and average sales prices of exist ing homes. Examples of the continuing business development:

Mylan, Inc., a leading generic and specialty pharmaceutical company in

the world, announced in March 2012 its intent to bui ld a new corporate headquarters near its current location in Southpointe I located in Ceci l Township just south of Pittsburgh.

Mylan has more than doubled the num-ber of its employees over the last f ive years and is committed to remaining in the area. Its new corporate headquarters wil l be located along Town Center Bou-levard in Southpointe I I and is expected to be completed in 2013.

The overal l development wil l include an approximate 280,000 square foot, f ive-story, LEED-cert if ied, Class-A off ice bui lding with associated infrastructure and parking.

In September 2012, Ansys Inc., located in Southpointe I and a global provider of engineering simulation software, an-nounced its decis ion to move its head-quarters to a new bui lding in South-pointe I I to be developed by Burns & Scalo/Quattro Partners that is within a mile of its current operation.

Nearly 60 percent bigger than its cur-rent s ite, Ansys plans to expand into its new 186,000 square feet headquarters by consol idating 438 employees from its Southpointe I and Station Square loca-t ions as their leases expire in 2014. It expects to open its new location in the last quarter of 2014.

At Starpointe, the Washington County Counci l for Economic Development

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Westmoreland CountyWestmoreland County IndustrialDevelopment Corporation40 North Pennsylvania Avenue, Suite 520Greensburg, PA 15601724-830-3061 (T) 724-830-3611 (F)Jason W. Rigone, Executive [email protected]

Healthy Business Activity – these are words that could sum up 2012 in Westmoreland based on its aggressive economic development agenda and the numerous activities occurring throughout the county that may very well be in direct rela-tion to a healthy business climate.

Enforcing the terminology were some compelling statistics reported during the last quarter of the year. Data, such as the state’s unemployment rate of 7.9% rising above the national rate of 7.8% with Westmoreland County’s rate reportedly remaining at 0.7% and 0.6% below state and na-tional averages, respectively. In November, foreclosures in the region were declared to be the lowest in a decade, including Westmoreland’s account of 319 predicting that the county would end the year with its lowest number of foreclosures since 2002. The region affirmed its housing starts in the third quarter at 2,396, all of which incorporated Westmoreland County’s figures that were already exceeding 2011 records by 40% and expecting to almost double its total by year end.

“Our local economy is healthy and growing for a number of reasons, but there is no doubt that some of this growth can be attributed to the county’s industrial park system and the opportunities that have been made available there for business,” said Commissioner Chuck Anderson. “Small and medium-sized companies are of particular focus and are the back-bone to our economic vitality."

With the location announcement of Aquion Energy select-ing RIDC Westmoreland for its first full-scale manufacturing facility near New Stanton to many other pronounced county expansions during the second half of the year, Westmoreland County’s business climate appears to be healthy and on the rise. Growing companies are capitalizing on the opportunities in the county, such as Exxon Mobile and Chromoglass locat-ing at the Bushy Run Corporate Park in Export, Yerecic Label and Xodus Medical expanding at the Westmoreland Business & Research Park in Upper Burrell and Washington Townships and the most recent industrial park announcement, Shale-stone Group.

was successful in securing a Redevelopment Assistance Capital Program grant of $1.5 mil l ion to aid the develop-ment of the park’s next phase. Fourth River Development is currently in the planning stages of Flex Bui lding 3, a 60,000 sq. ft. spec bui lding to be bui lt later in 2013.

Washington County (continued)

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Shalestone Group, a subsidiary of Wendell H. Stone Company recently purchased 28 acres at the I-70 Industrial Park located in South Huntingdon Township to construct and market build-ings to businesses in the natural gas industry. Plans call for the company to erect buildings between 10,000 and 21,000 square-feet, complete with “lay-down yards” for outside storage needs and will be leased or sold to private companies locating to the area.

In addition to the 28 acres purchased by Shalestone, another 6 acres has been optioned to EFR Partnership at the Westmo-reland County Airpark in Latrobe. EFR Partnership, a developer of more than 220,000 square-feet of building space within the Airpark, plans to construct yet another 75,000 square-foot flex warehouse. The building will be divisible in 7,000 square-foot leasable increments for light industrial/manufacturing opera-tions.

The total projects, including Shalestone and EFR Partnership, bring the overall acreage sold and/or optioned to almost 70 acres within the county’s industrial park system for 2012. “This is right in line with the county’s average rate of land absorp-tion marketed in the industrial parks,” said Jason Rigone, Executive Director of the county’s Industrial Development Cor-poration. “With an average annual absorption of 45 acres sold in the county’s industrial park system during the last 10 years, future developed sites are a premium as we work to support this demand over the next 10 years,” adds Rigone.

In addition to green-field industrial parks, Westmoreland County extended leases on almost 113,000 square-feet of space within its existing brownfield redeveloped sites. The re-newed leases include space at the Mount Pleasant Glass Cen-tre to Lenox Outlet, Pittsburgh Electric Engines and O’Rourke Cut Crystal, as well as a lease extension to Philips Respironics at the South Greensburg Commons facility located in South Greensburg Borough.

During the third quarter of 2012, the county’s overall vacancy rate for privately-owned industrial space was reported at 11.8%, according to the Pittsburgh Office of Newmark Grubb Knight Frank, one of the largest real estate service firms in the world. “Although this rate appears to be elevated, it should be noted these calculations include the RIDC Westmoreland facility,” said Rigone. “This building caters primarily to the largest projects of 200,000 square-feet and up and removing the 1,500,000 square-feet from the inventory actually reduces the county’s rate to only 6% - one of the lowest in the region and resulting in the need for more Class A industrial space in the 25,000 – 100,000 square-foot range.”

Some of the county’s strategic marketing efforts for 2013 will feature the newly designated Keystone Opportunity Expansion Zone (KOEZ) – New Stanton, which includes both available land parcels for sale for new construction and existing build-ing space for lease opportunities. This site is comprised of Westmoreland Distribution Park North (177 acres) including 3 prime, pad-ready industrial sites and the county’s 2.8 million square-foot RIDC Westmoreland facility divisible in 100,000 square-foot leasable increments (173 acres). DP

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Transactions of Note

T his l i s t inc ludes Al legheny County property transfer data or ig inal ly col-lected from pub-

l ic records by RealSTATs, Inc. (www.RealSTATs.net) and ident i f ied by them as a transfer of non-res ident ia l prop-erty. In i t ia l ly publ ished in the P i t ts-burgh Post Gazette Sunday edit ion’s Real Estate Sect ions, only non-res iden-t ia l t ransfers with a considerat ion or stamp value greater than $1,000,000 were se lected by Tal l T imber Group for research at the Al legheny County Assessor’s Onl ine Database. Property use is determined by the assessor and data shown here (Sale Date, County Total Assessed Value, Pr ior Sale Pr ice/Date, Taxes, etc. ) were col lected from those onl ine records. The value of the sher i ff ’s deeds and the stamp value of nominal t ransact ions are inc luded.

Only transfers f rom the last s ix months of 2012 are inc luded. There’s a total of $406.3 mi l l ion for the 90 transact ions with the City of P i t ts-burgh c la iming near ly $61 mi l l ion and account ing for 15% of the total t rans-fer dol lars in the county.

Shopping centers, part icular ly in Homestead, West Homestead, and Ross Township account for $145,402,863 or near ly 36 percent of tota l t ransfer dol lars in the county. In-dustr ia l uses account for $55,789,709 or near ly 14 percent.

In the f i rst half of 2012, 35 percent of the new owners were from outs ide of Pennsylvania ent i re ly whi le 38% of the second half ’s t ransact ions were from outs ide Pennsylvania.

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Transactions of Note

Property Address Prop Use Sale Price Prior Price Total Assd Val BuyerMunicipality Sale Date Prior Date Taxes Buyer City, State Lot Size300 Waterfront Drive W Theater $49,780,000 $97,743,308 $17,059,900 M & J - Big Waterfront Town Center I LLCWest Homestead 10/3/12 3/2/07 $85,257 Chicago IL 18.09 A

$30,167,3052/18/04

2000 Park Lane Dr Office-Elevator $36,005,184 $29,500,000 $23,500,000 IX WR 2000 Park Lane Dr LP North Fayette Twp 12/14/12 12/28/05 $132,358 Greenwich CT 7.61 A

$846,0314/7/92

680 Waterfront Drive E Discount Store $33,070,000 $16,399,206 $3,897,100 M & J Big Waterfront Amity Square LLC Munhall 10/3/12 3/2/07 $21,731 Chicago IL 4.65 A

$4,112,54611/24/03

E Carson Street Office-Elevator $25,069,000 $347,500 $15,867,300 UPMCPittsburgh, Ward 16 10/11/12 7/28/00 $146,299 Pittsburgh PA 1.39 A100 Papercraft Dr Warehouse $24,415,769 $19,725,000 $14,723,900 Stag O'Hara LLC O'Hara Twp 10/12/12 5/2/07 $82,103 Boston MA 33.38 ASiebert Road Shopping Center $20,050,000 $0 $3,885,000 GRI McKnight Siebert LLCRoss Twp 12/21/12 11/2/12 $24,479.55 Bethesda MD 4.5 A1501 Northway Mall Shopping Center $12,000,000 $1,597 $16,400,000 LRC Northway Mall Acq LLCRoss Twp 11/30/12 5/29/12 $82,469.33 Akron OH 28.79 A

$24,200,00011/29/00

400 Northtowne Sq Neighborhood Shopping Center $10,575,000 $1,450,000 $6,528,600 Northtowne Station LLCRichland Twp 7/13/12 7/1/92 $36,405 Cincinnati OH 16.1 A153, 158, & 172 E Bridge Dr Theater & Retail $7,627,563 $57,527,862 $8,690,600 M & J - Big Waterfront Town Center I LLCHomestead 10/3/12 3/2/07 $51,693 Chicago IL 5.46 A30 Pine Creek Road Retail Structures $6,560,000 $6,620,000 $5,187,500 MM WG McCandless LLCMcCandless 12/28/12 11/7/07 $14,805 Albany NY 3.85 A

$2,000,0005/1/06

350 Waterfront Dr E Department Store $6,400,000 $16,399,206 $7,182,200 M & J Big Waterfront Amity Square LLC Homestead 10/3/12 3/2/07 $40,049 Chicago IL 7.12 A495 East Waterfront Dr Medical Clinics/Offices $6,250,000 $500,000 $4,025,000 WSC Realty Partn LPHomestead 12/31/12 4/16/01 $62,643 Homestead PA 2.0 ASR 22 Industrial $5,865,000 Industrial Scientific CorporationRobinson Twp 12/12/12185 Waterfront Drive W Restaurant, Café and/or $5,660,000 $16,399,206 $1,682,100 M & J Big Waterfront Amity Square LLC Homestead Bar 10/3/12 3/2/07 $9,380 Chicago IL 1.82 A

$1,610,64111/24/03

1427 Cook School Road Agricultural $5,600,000 $1 $212,400 Bedner Estates LPUpper St. Clair Twp 10/2/12 6/6/79 $1,767 Pittsburgh PA 112.5 A405 Sixth Avenue Office-Elevator $5,500,000 $6,500,000 $4,600,000 PMC 600 William Penn Place Assoc LPPittsburgh Ward 2 10/22/12 10/15/08 $25,495 Philadelphia PA 40,800 sf

$5,826,2501/4/84

324 -338 Amity Street Small Detached Retail $5,100,000 $5,350,000 $1,792,100 M& J Big Waterfront Amity Square LLC Homestead 10/3/12 7/27/07 $9,993 Chicago IL 1.45 A

$850,0001/7/02

400 Oxford Drive Office-Elevator $5,040,000 $0 $4,560,000 UPMCMonroeville 12/3/12 1/5/09 $21,955 Pittsburgh PA 4.36 A10918 Frankstown Road Independent Living-Seniors $4,825,000 $0 $2,200,000 Penn Arbors Apt LLCPenn Hills 12/31/12 7/29/83 $12,083 Spring Valley NY 3.93 A401 Chestnut Street Commercial Other $4,601,419 $2,799,300 FDG C39 PA Carnegie LLCCarnegie 9/4/12 Woonsocket, RI 1.0158 AWaterfront Drive Discount Store $4,500,000 $3,187,900 M & J Big Waterfront Market LLCMunhall 10/3/12 Chicago IL 3.77 A829 Milton Street Government/Commercial Vacant Land $4,092,861 $3,000,000 $1,154,900 Education Capital Solutions LLC Pittsburgh, Ward 14 7/23/12 6/13/06 $12,422.00 Kansas City MO 30,138 sf6191 Steubenville Pike Auto Sales & Service $4,000,000 $0 $3,000,000 Diehl Of Robinson Realty LLC Robinson Twp 9/20/12 5/5/50 $16,729 Butler PA 9.28 A513 Smithfield Street Department Store $4,000,000 $630,000 $2,165,000 Urban Redevelopment Auth Of Pittsburgh Pittsburgh, Ward 2 12/28/12 8/16/12 $31,039 Pittsburgh PA 22,549 sf610 Alpha Drive Light Manufacturing $3,900,000 $10 $2,750,000 Penhurst Realty 2 LPO'Hara Twp 11/9/12 3/6/96 $21,296 Pittsburgh PA 6.0 A230 N. Craig Street Office/Apartments $3,897,173 $1 $3,997,100 Sherwood Property LPPittsburgh, Ward 4 8/15/12 6/22/10 $23,096.00 Pittsburgh PA 30,014 sf1 Penn Center West Office $3,700,000 $1,566 $5,250,000 PCW Lender Assoc 1 LPRobinson Twp 12/21/12 1/31/12 $34,019.66 Pittsburgh PA 6.63 A

$6,000,00012/23/96

1630 Golden Mile Hwy Warehouse $3,608,280 $1 $869,000 Bridge Pennsylvania LLCMonroeville 12/28/12 9/30/83 $5,643 Monroeville PA 3.41 A211 Beecham Dr Motel & Tourist Cabin $3,427,344 $3,390,000 $1,810,000 G6 Hospitality Property LLCKennedy Twp 11/7/12 9/1/99 $9,794 Carrollton 3.79 A

$615,11410/17/86

228 Semple Street Restaurant $3,500,000 $80,000 $286,500 Comhdan Realty LP


Pittsburgh, Ward 4 12/28/12 12/26/85 3,200 sf2871 Freeport Road Auto Sales & Service $3,000,000 $0 $1,248,200 Shults Ford Harmarville Associates LP Harmar Twp 7/12/12 3/9/73 $6,960 Wexford 2.75 A922 Brush Creek Road Mini Warehouse $2,945,000 $295,000 $2,510,600 Guardian Self Storage Bc LLCMarshall Twp 11/8/12 6/25/98 $13,216 Pittsburgh PA 4.83 A

$169,8466/13/96

2801 Freeport Road Motel & Tourist Cabin $2,600,910 $1 $2,223,000 Red Raven Motel Ltd Harmar Twp 12/31/12 6/3/91 $21,766 Allison Park 4.49 A100 Weyman Road Apartment-40+ units $2,580,055 $0 $8,800,000 Maiden Bridge Limited Partnership Whitehall 8/28/12 8/28/12 $42,833 Pittsburgh PA 2.4 A712 Washington Road Bank $2,422,608 $10 $1,050,000 ARC CMBTLPA001 LLCMt. Lebanon 10/11/12 7/24/07 $5,855 Jenkintown 12,052 sqf

$1,050,00012/3/01

6250 Library Road Service Station $2,320,000 $400,000 $683,300 7 Eleven IncBethel Park 10/16/12 12/29/97 $3,810 Dallas 1.48 A4700 McKnight Road Community $2,125,000 $4,500,000 $1,800,000 4780 McKnight LLCRoss Twp Shopping Center 12/18/12 6/30/06 $18,616 Pittsburgh PA 3.84 A

$260,0005/7/76

4919 William Flynn Hwy Commercial Garage $2,100,000 $325,000 $270,900 BI NT Allisan Park LLCHampton Twp 10/15/12 12/23/11 $1,511 Chicago IL 1.15 A

$245,00011/8/89

3721 William Penn Hwy Auto Sales & Service $2,100,000 $1,540,000 $1,548,600 F& M Real Estate LLC Monroeville 7/24/12 1/19/93 $8,635 Monroeville PA 2.21 A150 Lake Drive Office $2,082,900 $18,000 $1,663,900 Lake Drive Realty Partners LLC Pine Twp 10/2/12 9/15/88 $10,225 Pittsburgh PA 1.14 A45 South 23rd Street Light Manufacturing $2,050,009 $850,000 $1,050,000 RJ Equities LPPittsburgh, Ward 16 10/22/12 2/13/08 $6,428 Pittsburgh PA 31,680sf4695 Campbells Run Road Car Wash $2,000,000 $125,000 $859,200 Snyder Automotive Works Inc Collier Twp 11/15/12 3/25/85 $5,424 Pittsburgh PA 2.11 A2nd Street Vacant Commercial Land $2,000,000 $1 $44,000 Centerside Industrial LPLeetsdale 9/27/12 4/15/99 $261 Leetsdale 1.86 A4775 McKnight Road Auto Service Station $2,000,000 $1,120,000 $531,100 RK McKnight Road LLCRoss Twp 12/31/12 10/8/08 $3,581 Huntington 29,000 sf305 Old Mill Road Residential-Vacant Land $1,985,000 $1 $833,500 Hammock Beach Partners LLCFox Chapel 12/28/12 12/29/99 $1,603 Allison Park 15.86 A

$800,0004/7/95

7001 Jones Street Warehouse $1,950,000 $0 $1,000,000 Eastman Chemical Resins Inc Jefferson Hills 12/31/12 8/30/54 $15,167 West Elizabeth 10.25 A700 Trumbull Drive Office/Warehouse $1,800,000 $0 $1,770,000 Global Links Green Tree 7/3/12 2/1/61 $10,071 Pittsburgh PA 2.26 A645 Alpha Dr Office $1,750,000 $984,000 $1,000,000 West Spruce Realty Holdings LP O'Hara Twp 10/12/12 2/7/92 $5,576 Pittsburgh PA 3.04 A5309 Campbells Run Road Medical Clinics/Offices $1,630,000 $1 $754,000 VCA Real Property Acquisition Corporation Robinson Twp 11/2/12 5/30/01 $6,702 Los Angeles 20,959 sf

$175,0007/11/97

1600 South Braddock Avenue Service Station or Oil Stor $1,620,000 $1 $370,000 7 Eleven Inc Swissvale Stamp value 9/11/12 9/28/07 Dallas TX 13,393 sf

$275,00012/29/97

1801 Murray Avenue Bank $1,605,562 $10 $850,000 ARC CBPBGPA001 LLCPittsburgh, Ward 14 10/11/12 7/24/07 $6,128 Jenkintown 15,043 sf

$850,00012/3/01

2745 Freeport Road Drive-In Rest or Food Service $1,592,253 $0 $1,360,900 PWK Freeport Holdings I LP Harmar Twp 12/31/12 10/16/75 $14,570 Allison Park 2.98 A1615 Golden Mile Hwy Auto Sales & Service $1,566,000 $1,460,000 $1,517,700 Roundhouse Property Holdings LP Monroeville 12/13/12 12/20/07 $7,782 Export 6.15 A1102 Perry Hwy Auto Service Station $1,540,000 $917,000 $547,800 Skytop Investments LLC Ross Twp 12/31/12 9/9/10 $2,885 Covington 32,391 sf

$600,0007/20/09

308 7th Street Office-Elevator $1,530,000 $1 $800,000 Hefren-Tillotson Inc Pittsburgh, Ward 2 8/14/12 6/10/93 $4,053 Pittsburgh PA 2,250 sf3845 Northern Pike Retail Structures $1,525,000 $10 $1,480,000 CE Acquisitions VI LP Monroeville 7/9/12 7/5/12 $8,253 Carnegie 7.04 APark Manor Drive Vacant Commercial Land $1,522,682 $0 $1,130,100 Robinson Manor Hotel Group 2689 LLC Robinson Twp 12/21/12 $6,577 Pittsford 3.15 A201 Corey Ave Warehouse $1,512,810 $0 $623,900 Hox Management LPBraddock 11/9/12 1/8/68 $2,978.71 Warrendale 1.13 A526 Penn Avenue Owned by College/University $1,500,000 $1,651,800 PMC 526 Penn Avenue Assoc LPPittsburgh, Ward 2 12/23/86 $26,426 Pittsburgh PA 8,475 sf7702 McKnight Road Restaurant - Fast Food $1,500,000 McDonald'sRoss Twp 11/14/126325 Penn Avenue Bowling Alleys/Rec Facility $1,454,427 $1,533,930 $1,243,100 Racquetball One Associates Pittsburgh, Ward 11 Stamp value 12/28/12 12/6/79 $6,741 Pittsburgh PA 28,817 sf


$30,167,3052/18/04


$846,0314/7/92


$4,112,54611/24/03


$24,200,00011/29/00


$2,000,0005/1/06


$1,610,64111/24/03


$5,826,2501/4/84


$850,0001/7/02


$6,000,00012/23/96


$615,11410/17/86



$30,167,3052/18/04


$846,0314/7/92


$4,112,54611/24/03


$24,200,00011/29/00


$2,000,0005/1/06


$1,610,64111/24/03


$5,826,2501/4/84


$850,0001/7/02


$6,000,00012/23/96


$615,11410/17/86



Quality, Excellence, IntegritySince 1951

(412) 828-5500www.amartinigc.com

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119 VIP Drive Medical Clinics/Offices $1,400,000 $1,105,000 $1,160,000 NRPD LLC Marshall Twp 12/3/12 9/6/02 $11,449 Pittsburgh PA 3.2 A120 Andrew Drive Community Shopping Center $1,400,000 $442,500 $1,292,700 TK Robinson LLC North Fayette Twp 7/5/12 2/8/96 $7,208 Chicago IL 1.49 A850 Penn Avenue Bank $1,395,686 $10 $652,300 ARC CBTCKPA001 LLCTurtle Creek 10/11/12 7/24/07 $4,058 Jenkintown PA 25,179 sf

$625,00012/3/01

1 Railway Drive Heavy Manufacturing $1,330,000 $625,000 $180,200 Greenville Commercial Properties LP McKees Rocks 7/5/12 3/14/11 $1,025 Pittsburgh PA 36.8 A

$200,00011/29/99

12620 Perry Highway Vacant Commercial Land $1,300,000 $2,225,000 $705,000 LME Enterprises LLC Pine Twp 9/7/12 6/26/08 $3,931 Gibsonia PA 1.05 A

$110,00011/7/83

12680 Perry Highway Vacant Commercial Land $1,300,000 $2,225,000 $795,000 LME Enterprises LLC Pine Twp 9/7/12 6/26/08 $4,433 Gibsonia PA 1.23 A

$290,5001/7/88

555 Epsilon Drive Industrial $1,292,850 $75,900 Bryan P Gentile Family LPO'Hara Twp 10/17/12 Pittsburgh PA 32,496 sf2660 Monroeville Blvd Office $1,236,870 $725,000 $760,000 H & M Holdings LLC Monroeville 10/5/12 11/19/93 $4,238 Monroeville PA 1.07 A310 Saw Mill Run Blvd Small Detached Retail $1,210,000 $600,000 $574,300 DG Saw MillRun LLCBrentwood 12/31/12 3/15/10 $2,813.69 Philadelphia PA 1.24 A

$500,00012/27/85

1215 Brighton Road Discount Store $1,200,000 $0 $376,300 CE Acquisitions VII LP Pittsburgh, Ward 22 9/12/12 1/25/64 $4,665 Carnegie PA 37,256 sf5511 Baum Blvd Nursing Home/Private Housing $1,200,000 $1,808 $1,249,800 TJ Acquisition LLC Pittsburgh, Ward 8 8/31/12 12/17/10 $7,681 Pittsburgh PA 21,700 sf

$1,419,80011/2/06

4761 William Flynn Hwy Bank $1,179,885 $700,000 $700,000 ARC CBALPPA001 LLCHampton Twp 10/12/12 12/3/01 $3,903 Jenkintown PA 1.41 A1130 Ridge Drive Apartment-40+ units $1,147,700 $0 $1,147,700 Triko Holdings Inc Coraopolis 12/20/12 9/15/82 $5,353 Coraopolis PA 1.13 A31 Foster Ave Bank $1,146,075 $330,000 $336,700 ARC CBPBGPA002 LLCCrafton 10/9/12 12/3/01 $1,878 Jenkintown PA 19430 sqf345 East Eighth Avenue Institution $1,120,292 $0 $297,200 ARC CBHSTPA001 LLCHomestead 10/9/12 7/24/07 $1,524 Jenkintown PA 6,600 sf400 Walmart Drive Neighborhood Shopping Center $1,120,000 $0 $500,000 Richland Zamagias Limited Partnership Richland Twp 12/21/12 $3,965 Pittsburgh PA 1.11 A5434 Walnut Street Retail Structures $1,106,680 $208,864 $1,371,300 5436 Walnut Associates Pittsburgh, Ward 7 8/24/12 9/19/97 $9,900 Pittsburgh PA 3,438 sf5501 Campbells Run Road Office/Warehouse $1,100,000 $1,000,000 $1,049,300 Polycycle Industrial Products Inc Robinson Twp 9/13/12 6/8/99 $5,851 Clackamas OR 3.73 A

$420,00010/20/92

141 41st Street Office-Walk Up $1,100,000 $10 $705,000 RA CAT I LP Pittsburgh, Ward 9 7/3/12 8/11/05 $3,598 Pittsburgh PA 21,120 sf6325 Penn Avenue Bowling Alleys/Rec Facility $1,094,945 $0 $935,850 Racquetball One Associates Pittsburgh, Ward 11 Stamp value 12/28/12 9/19/79 $5,971 Pittsburgh PA 1.13 A260 Alpha Drive Office $1,060,000 $1 $635,300 Practical Administrative Solutions LP O'Hara Twp 12/7/12 7/19/93 $3,737 Pittsburgh PA 1.41 A3030 Penn Avenue Retail/Stor Over $1,050,000 $160,000 $700,000 TTPA LLC Pittsburgh, Ward 6 11/27/12 9/3/97 $7,520 Pittsburgh PA 8,400 sfLong Street Vacant Commercial Land $1,000,000 $1,760,000 $47,500 Red Stag Investments LLCElizabeth Township 9/19/12 5/29/12 $220 Scenery Hill PA 2.03 APark Lane Drive Vacant Commercial Land $1,000,000 $100,000 $586,140 IX WR 2000 Park Lane Drive LPNorth Fayette Twp 12/14/12 1/9/07 $3,168.76 Greenwich CT 16.18 A


$30,167,3052/18/04


$846,0314/7/92


$4,112,54611/24/03


$24,200,00011/29/00


$2,000,0005/1/06


$1,610,64111/24/03


$5,826,2501/4/84


$850,0001/7/02


$6,000,00012/23/96


$615,11410/17/86


Pittsburgh, Ward 4 12/28/12 12/26/85 3,200 sf2871 Freeport Road Auto Sales & Service $3,000,000 $0 $1,248,200 Shults Ford Harmarville Associates LP Harmar Twp 7/12/12 3/9/73 $6,960 Wexford 2.75 A922 Brush Creek Road Mini Warehouse $2,945,000 $295,000 $2,510,600 Guardian Self Storage Bc LLCMarshall Twp 11/8/12 6/25/98 $13,216 Pittsburgh PA 4.83 A

$169,8466/13/96

2801 Freeport Road Motel & Tourist Cabin $2,600,910 $1 $2,223,000 Red Raven Motel Ltd Harmar Twp 12/31/12 6/3/91 $21,766 Allison Park 4.49 A100 Weyman Road Apartment-40+ units $2,580,055 $0 $8,800,000 Maiden Bridge Limited Partnership Whitehall 8/28/12 8/28/12 $42,833 Pittsburgh PA 2.4 A712 Washington Road Bank $2,422,608 $10 $1,050,000 ARC CMBTLPA001 LLCMt. Lebanon 10/11/12 7/24/07 $5,855 Jenkintown 12,052 sqf

$1,050,00012/3/01

6250 Library Road Service Station $2,320,000 $400,000 $683,300 7 Eleven IncBethel Park 10/16/12 12/29/97 $3,810 Dallas 1.48 A4700 McKnight Road Community $2,125,000 $4,500,000 $1,800,000 4780 McKnight LLCRoss Twp Shopping Center 12/18/12 6/30/06 $18,616 Pittsburgh PA 3.84 A

$260,0005/7/76

4919 William Flynn Hwy Commercial Garage $2,100,000 $325,000 $270,900 BI NT Allisan Park LLCHampton Twp 10/15/12 12/23/11 $1,511 Chicago IL 1.15 A

$245,00011/8/89

3721 William Penn Hwy Auto Sales & Service $2,100,000 $1,540,000 $1,548,600 F& M Real Estate LLC Monroeville 7/24/12 1/19/93 $8,635 Monroeville PA 2.21 A150 Lake Drive Office $2,082,900 $18,000 $1,663,900 Lake Drive Realty Partners LLC Pine Twp 10/2/12 9/15/88 $10,225 Pittsburgh PA 1.14 A45 South 23rd Street Light Manufacturing $2,050,009 $850,000 $1,050,000 RJ Equities LPPittsburgh, Ward 16 10/22/12 2/13/08 $6,428 Pittsburgh PA 31,680sf4695 Campbells Run Road Car Wash $2,000,000 $125,000 $859,200 Snyder Automotive Works Inc Collier Twp 11/15/12 3/25/85 $5,424 Pittsburgh PA 2.11 A2nd Street Vacant Commercial Land $2,000,000 $1 $44,000 Centerside Industrial LPLeetsdale 9/27/12 4/15/99 $261 Leetsdale 1.86 A4775 McKnight Road Auto Service Station $2,000,000 $1,120,000 $531,100 RK McKnight Road LLCRoss Twp 12/31/12 10/8/08 $3,581 Huntington 29,000 sf305 Old Mill Road Residential-Vacant Land $1,985,000 $1 $833,500 Hammock Beach Partners LLCFox Chapel 12/28/12 12/29/99 $1,603 Allison Park 15.86 A

$800,0004/7/95

7001 Jones Street Warehouse $1,950,000 $0 $1,000,000 Eastman Chemical Resins Inc Jefferson Hills 12/31/12 8/30/54 $15,167 West Elizabeth 10.25 A700 Trumbull Drive Office/Warehouse $1,800,000 $0 $1,770,000 Global Links Green Tree 7/3/12 2/1/61 $10,071 Pittsburgh PA 2.26 A645 Alpha Dr Office $1,750,000 $984,000 $1,000,000 West Spruce Realty Holdings LP O'Hara Twp 10/12/12 2/7/92 $5,576 Pittsburgh PA 3.04 A5309 Campbells Run Road Medical Clinics/Offices $1,630,000 $1 $754,000 VCA Real Property Acquisition Corporation Robinson Twp 11/2/12 5/30/01 $6,702 Los Angeles 20,959 sf

$175,0007/11/97

1600 South Braddock Avenue Service Station or Oil Stor $1,620,000 $1 $370,000 7 Eleven Inc Swissvale Stamp value 9/11/12 9/28/07 Dallas TX 13,393 sf

$275,00012/29/97

1801 Murray Avenue Bank $1,605,562 $10 $850,000 ARC CBPBGPA001 LLCPittsburgh, Ward 14 10/11/12 7/24/07 $6,128 Jenkintown 15,043 sf

$850,00012/3/01

2745 Freeport Road Drive-In Rest or Food Service $1,592,253 $0 $1,360,900 PWK Freeport Holdings I LP Harmar Twp 12/31/12 10/16/75 $14,570 Allison Park 2.98 A1615 Golden Mile Hwy Auto Sales & Service $1,566,000 $1,460,000 $1,517,700 Roundhouse Property Holdings LP Monroeville 12/13/12 12/20/07 $7,782 Export 6.15 A1102 Perry Hwy Auto Service Station $1,540,000 $917,000 $547,800 Skytop Investments LLC Ross Twp 12/31/12 9/9/10 $2,885 Covington 32,391 sf

$600,0007/20/09

308 7th Street Office-Elevator $1,530,000 $1 $800,000 Hefren-Tillotson Inc Pittsburgh, Ward 2 8/14/12 6/10/93 $4,053 Pittsburgh PA 2,250 sf3845 Northern Pike Retail Structures $1,525,000 $10 $1,480,000 CE Acquisitions VI LP Monroeville 7/9/12 7/5/12 $8,253 Carnegie 7.04 APark Manor Drive Vacant Commercial Land $1,522,682 $0 $1,130,100 Robinson Manor Hotel Group 2689 LLC Robinson Twp 12/21/12 $6,577 Pittsford 3.15 A201 Corey Ave Warehouse $1,512,810 $0 $623,900 Hox Management LPBraddock 11/9/12 1/8/68 $2,978.71 Warrendale 1.13 A526 Penn Avenue Owned by College/University $1,500,000 $1,651,800 PMC 526 Penn Avenue Assoc LPPittsburgh, Ward 2 12/23/86 $26,426 Pittsburgh PA 8,475 sf7702 McKnight Road Restaurant - Fast Food $1,500,000 McDonald'sRoss Twp 11/14/126325 Penn Avenue Bowling Alleys/Rec Facility $1,454,427 $1,533,930 $1,243,100 Racquetball One Associates Pittsburgh, Ward 11 Stamp value 12/28/12 12/6/79 $6,741 Pittsburgh PA 28,817 sf

GRANT STREET 7-27-12- FP Full Color.indd 1 8/1/2012 10:54:22 AM

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