Given this stability in leasing activity, Pittsburgh apartment owners were able to avoid the sharp declines in rental rates seen in most parts of the country during the Great Recession. And same-store rents were up 10.6 percent between Q4 2007 (prior to the recession) and Q2 2011. It’s helped that Pittsburgh is a market where new apartment supply of any sort is a rarity. The metro area has issued permits for only about 17,000 multifamily units since 1990, according to the Census Bureau. By comparison, Dallas/Fort Worth built more than that in 2009 alone. In Pittsburgh, local players group pretty much any property built over the past decade as “new supply.”
That’s not to say there aren’t some interesting projects going up. Developers just wrapped up converting South High School, originally built in 1898 and expanded in 1932, into a 76-unit apartment property dubbed the Residences at South High. Leasing began in August at the site, located along Carson Street, the heart of the hipster-trendy Southside neighborhood just south of downtown.
Conversion Craze
Renovations and conversions constitute a big chunk of Pittsburgh’s modest pipeline and transaction market. In December, Philadelphia-based PMC Property Group bought the 12-story Verizon office building downtown for $4.4 million, according to local media reports. The tower is being converted to 158 apartment units, with move-in starting last month. PMC has become a more active player of late in the Pittsburgh apartment market. In April 2011, the company reportedly paid $13.5 million for the 117-unit Penn Garrison apartment tower in downtown Pittsburgh’s Cultural District. Penn Garrison, sold by the Regional Industrial Development Corp. of Southwestern Pennsylvania, was converted into an apartment building about 10 years ago. It had previously been the corporate headquarters for General Nutrition Centers.
And in 2008, PMC bought the 245-unit Kenmawr apartments for $26 million, according to the Pittsburgh Business Times. That property is located in eastern Pittsburgh near Bakery Square, a former Nabisco plant converted into a mixed-use development that includes office space for Google—a factoid that well represents Pittsburgh’s transformation over the past couple decades. The surrounding area is, in some ways, the heart of new Pittsburgh’s “eds and meds” economy. East Pittsburgh’s Oakland neighborhood, in particular, is regarded as the city’s “other” downtown. Oakland is home to several universities, hospitals, museums, and historic sites. The University of Pittsburgh (with 27,000 students) and Carnegie Mellon University (10,000 students) are both located in Oakland. The University of Pittsburgh Medical Center (UPMC) was headquartered here, too, until a few years ago, when it moved into downtown Pittsburgh’s tallest tower, a 64-story building that had been occupied by U.S. Steel Corp. UPMC remains a major employer in Oakland.
