Pittsburgh—Pittsburgh’s multifamily market is one of the strongest in the nation, according to Cynthia M. Kamin, CCIM, senior vice president in CB Richard Ellis’ Pittsburgh office.
Kamin points to two main growth drivers, including the metro’s first population increase in 20 years and job creation. The latest numbers from the U.S. Bureau of Labor Statistics report Pittsburgh’s unemployment rate at 7.4 percent, down 50 bps from the month prior.
Kamin tells MHN that not only are the “meds and eds’ driving this growth, but the Marcellus Shale is creating a number of new jobs. “The potential for energy from that source is very, very big,” she says. “The best well in Texas in the Barnett Shale area is equal to the worst well in Pittsburgh, so it shows the amount of potential energy that we can extract out of this shale, and about 150 companies now have landed here in Pittsburgh.”
Of course, this growth is fueling the demand for apartments market in Pittsburgh, whose vacancy is currently 2.9 percent, according to CBRE’s first quarter 2011 numbers. At the same time, rental rates have increased about 4 percent, to $921 per month.
As for the construction pipeline, Pittsburgh’s has, historically, been weak. Last year saw just over 100 units delivered, though Kamin notes that “because of the strong market with occupancy increases and rents and very little concessions, we do see some out-of-town developers starting to look around and study the market and consider building.” She believes that 2012-13 will see some additional construction, mostly in Southpointe and Cranberry, where Console Energy and Westinghouse are headquartered, respectively.
While Kamin doesn’t see any significant differences between asset classes, she does not that location does make a difference when it comes to fundamentals. Central Pittsburgh, she says, is achieving the highest rents. As for the city of Pittsburgh, which is outside the downtown perimeters, average rents are $1300 a month, and vacancy is 0.6 percent, she reports.
The investment market, meanwhile, has been slow so far this year, and seven deals, over 100 units, traded in 2010. The majority of the buyers are out-of-town, private capital investors who already have a presence in the market, Kamin tells MHN. Cap rates are averaging 7 percent.
Overall, while the market is poised for growth, Kamin does note that there are some talks about regulating and taxing the Marcellus Shale industry, which has the potential to slow the recovery. Furthermore, she notes, the metro’s dependence on the ‘meds and eds’ is good, as many students have returned to college during the recession, and the medical industry is expanding in Pittsburgh, most notably with the Hillman Cancer Center.