Pittsburgh industrial market report

The Pittsburgh industrial market had a strong showing in the first quarter of 2023. Positive absorption was high, the leasing volume picked up, and vacancy continued to fall. However, rents remained flat and investment sales slowed. 

Demand for space remained high as roughly 556,171 sf of positive absorption was registered and 2.3 msf of space was under construction. The pace of development slowed slightly, but with so much older product on the market, the need for quality space still exists. Long lead times were still a nagging issue for developers, but construction pricing seems to be levelling out. 

Leasing activity was plentiful, with 905,654 sf getting claimed by tenants. It’s an impressive total considering that rents are elevated, and landlords aren’t typically offering many concessions. Three-to-five-year lease terms are still typical, but some tenants are showing some hesitancy when it comes to terms. Some third-party logistics providers, one of the more active tenant industries, opted for one-to-two-year leases over concerns of a potential recession and a desire to not overcommit.

Sales hit their lowest quarterly volume since the first quarter of 2021, but some brokers predict that more companies will opt to buy properties in lieu of renting. When faced with historically high rents, 2% annual escalations, and no pass-through protection, more tenants may jump at the chance to build equity and have full control over their properties.

Lastly, smaller properties are progressively leasing up faster than larger ones. The median number of months to rent for properties under 50 ksf decreased 41.8% in the last two years, while it increased 14.5% for properties over 50 ksf during that same period. A similar trend has appeared in other markets including Kansas City and Indianapolis, signaling that there is an increasing need for smaller industrial spaces.