As a commercial tenant in a pandemic, what are your options?

The winds are at your back if you are commercial tenant in Pittsburgh. However, if the previous recession is any indication how Pittsburgh will react to an economic downturn, the region has a strong foundation to rebound not only quickly, but come back stronger than before.

Prior to COVID-19, the Pittsburgh market was heading towards a tenant-favorable market due to corporate right-sizing and the downturn in energy. However, since COVID has impacted remote work and forced companies to think strategically about their space needs, vacancy is hitting cyclical highs. While limited leasing activity and corporate right-sizing can be witnessed via increases in direct vacancy, the pandemic is greatly impacting the sublease market as companies are try to dispose of space mid-lease term.

The influx of sublease and “shadow” space entering the market occurs during Pittsburgh's highest level of speculative construction in over a decade. This dynamic, combined with higher levels of difficulty finding project funding from lenders or equity, will negatively affect new construction starts in the short-term. As current projects deliver, the next 24 months will show a surplus of new availabilities and sublease options for tenants.

Pittsburgh is in an economic recession, along with the rest of the world. There is no clear end to the cycle; however, there are indications that demand is still here. New-to-market tenants like Zoom and Mindera have announced plans to expand into Pittsburgh. This reality may continue for Pittsburgh, as the competitive talent pool from the universities and low barriers of entry for companies are draws for the city. The suburbs are anticipated to make a return after years of urban migration. While urban occupiers may not necessarily relocate to the suburbs en masse, there is opportunity for companies to find satellite locations to enable recruiting from more compass points, decrease workforce density, increase overall safety and limit commuting via public transportation.

It is clear we are in uncharted territory. However, our "next normal" still includes the need for office space for collaboration, culture building and sustainable productivity. The following white paper provides greater detail regarding Pittsburgh’s market dynamics going back to the previous recession. By understanding Pittsburgh's diverse economy and history, we can better anticipate Pittsburgh's future. Please click the red download button below to read more about the Pittsburgh office market. And let me know if you would like to chat.