Future Cities
Emerging Industrial Markets: Pittsburgh, Pennsylvania
March 21, 2023
Formerly a major hub of heavy manufacturing, Pittsburgh has reinvented itself as a leader in life sciences, health care, robotics and computer science. In turn, the city’s old smokestack industrial market has been transformed into an important and growing high-tech manufacturing and distribution center that is within 500 miles of half the U.S. population.
Demographics
More than 2.8 million people live within a 50-mile radius of Pittsburgh, 21% of them in the important 18-to-34 age group. Within 250 miles, occupiers can reach 44.5 million consumers—more than Chicago (37.5 million), Los Angeles (28.4 million) and Dallas/Ft. Worth (28.3 million).Figure 1: Pittsburgh Population Analysis
Source: CBRE Location Intelligence.
Figure 2: Pittsburgh Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
Location Incentives
Over the past five years, there have been 112 economic incentive deals totaling more than $62 million for an average of $11,435 per new job in the Pittsburgh metropolitan area, according to WAVTEQ.
According to CBRE’s Location Incentives Group, among the top incentive programs offered in Pittsburgh is the Job Creation Tax Credit (JCTC), which provides corporate income tax credits to companies that create at least 25 new jobs or increase total employment by at least 25%. The tax credit ranges from $1,000 to $3,000 for each new job.
Another notable incentive offering is the Pennsylvania First Program, which provides discretionary grants and loans to facilitate increased investment and job creation in the state. To qualify, companies must commit to a state location for at least eight years and pay employees at least 150% of the federal minimum wage. Program funding can be applied toward capital expenditures, land and building improvements, job training, environmental assessment/remediation, land acquisition and machinery/equipment.
Figure 3: Top Incentive Programs
Source: CBRE Location Incentives Group.
Note: The extent of state and local incentive offerings depends on location and scope of the operation.
Logistics Drivers
Over the past 30 years, Pittsburgh has transformed from a major hub of heavy manufacturing to an up-and-coming high-tech manufacturing and distribution center. The city boasts a record-low 3.5%* unemployment rate, with more than 350,000 industrial-related workers. More than 2.8 million consumers live within 50 miles of the city center.
By air, the region is most directly served by Pittsburgh International Airport, which had a 48% year-over-year increase in landed air cargo to 406,448 tons in 2021, according to the Federal Aviation Administration. By road, the region is within a one-day drive of most major northeastern markets via U.S. 119, Interstate 70 and the Pennsylvania Turnpike (I-76). Class I rail providers include CSX, Norfolk Southern and Canadian National. And by virtue of its three rivers, Pittsburgh has an inland port that spans more than 200 miles of commercially navigable waterways in western Pennsylvania.
* Note: As of November 2022
Supply & Demand
Pittsburgh has 147.7 million sq. ft. of industrial space, the majority of which is in facilities ranging from 100,000 to 250,000 sq. ft. The market has recorded average annual net absorption of 1.3 million sq. ft. over the past five years, lowering its overall vacancy rate to just 4.1%. In 2022 alone, leasing activity of nearly 3 million sq. ft. lowered the vacancy rate by 1.5 percentage points. Three-quarters of that activity was in new leases.
Average asking rent increased by 10.8% last year and by 35.6% since 2018 to $7.80 NNN per sq. ft. Nearly 3.5 million sq. ft. of new industrial construction is currently underway, 2.2 million sq. ft. of it on a speculative basis. A 1 million-square-foot build-to-suit facility scheduled to break ground in Q1 2023 will add inventory to Westmoreland County, the region’s largest warehouse and distribution submarket with 23.7 million sq. ft.
Given its strategic access to major East Coast metro areas via an extensive rail, road and water transportation network, Pittsburgh is an attractive and profitable location for industrial investors and occupiers.
Figure 4: Pittsburgh Historical Data
Source: CBRE Research, Q4 2022.
Figure 5: Pittsburgh Size Range Comparison
Source: CBRE Research, Q4 2022.
Emerging Industrial Markets
Spotlighting markets across North America that offer demographic, logistics and incentives advantages for industrial investors and occupiers
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