Graphic: How do rent rates compare in the hottest Pittsburgh neighborhoods?
Pittsburgh has seen a heavy load of new multifamily units delivered to the market. Yet opinions are mixed on whether developers may have bitten off more than they can chew.
The Pittsburgh metro is still in the midst of its building boom. Depending on the source, industry research shows that the number of units that will be delivered in 2015 and 2016 ranges between 4,400 and 5,100. Demand coming from job and household growth, a large student population and empty nesters may not be quite enough to absorb all of that new supply.
Development has already prompted vacancies to tick higher in some segments of the apartment market. Most notably, Class A urban properties have seen vacancies climb from 6.0% to 7.8% in the past year, while suburban Class A vacancy rates jump from 3.6% to 6.25%, according to a 2016 multifamily market report produced by Integra Realty Resources. The report also described the market as “volatile” due to the flood of new supply that has been added to the region. However, any weakness that is emerging may be contained in the newer, Class A properties. Integra reported that vacancies remain tight in Class B properties at 0.3% for urban and 2.4% for suburban locations.
New apartment projects are popping up across the metro from historic loft conversions to new downtown high-rises. Some of the notable new projects include:
- A new Campus Advantage purpose-built student housing property is under construction in Pittsburgh’s Oakland neighborhood. The 13-story, 280-bed property is located within one-mile of both the University of Pittsburgh and Carnegie Mellon. Completion is set for fall 2017. The project will include two levels of parking, one level of retail and 10 floors of residential space.
- Pittsburgh Student Housing LLC is converting a six-story building at 1030 Fifth Ave. in Uptown into a fully furnished, 94-bed apartment. Union on Fifth Avenue will be located one-block from the Duquesne University campus with two- and three-bedroom units ranging in size from 585 square feet to 1,100 square feet. The project is set to open for fall 2016.
- Morrow Park City Apartments in Bloomfield officially opened in December. Located at the intersection of Liberty Avenue and Baum Boulevard, the 213-unit complex cost about $50 million to build. It includes features such as floor-to-ceiling windows, upscale common area space and an indoor-outdoor swimming pool.
Job growth in the Pittsburgh metro is expected to help absorb the added supply with 13,600 new hires in 2015 and a forecast for job growth to reach 12,000 this year, according to Marcus & Millichap. Pittsburgh also is home to a sizable student population at major schools such as the University of Pittsburgh, Carnegie Mellon University and Duquesne University, as well as the Community College of Allegheny County. In addition, a report on the “Resurgence in Secondary Markets” by CBRE highlighted the city’s goal to grow its downtown population from 12,600 to 20,000 by 2020.
Strong tenant demand and the higher rental rates being charged at the newly built properties is contributing to an uptick in rents across the Pittsburgh metro. Marcus & Millichap reported rent increases that averaged 3.7% in 2015 with a further jump of 4.1% forecast for this year. According to ABODO, key student housing market rents for a one-bedroom range from a high of $1,099 per month in Lawrenceville and Shadyside to a low of $644 in neighborhoods such as Dormont and Bellevue.
Strong momentum in the local economy should help deliver more demand for the rental market. Pittsburgh has been at the forefront of the state’s economic recovery. The city regained the GDP lost during the recession by early 2011 — a full two years earlier than the state as a whole. The city also has been working to reinvent itself and has traded its image as a rust belt city in lieu of a more diversified development strategy that focuses on growth sectors such as healthcare and technology. Combined, those factors present a positive outlook for continued renter demand. The wildcard is whether developers will slow their pace or end up delivering more supply than the Pittsburgh market can handle.