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By 2006, the hottest neighborhood in the region for new residential construction had become Downtown Pittsburgh. After years of denying the likelihood of success, developers suddenly grasped the opportunity for attracting new residents to the city center. At that time the Encore on 7th had just opened for tenants, the Heinz Lofts and Cork Factory were well under construction and 151 First Side was topping of its steel structure. More than five hundred new units were in the process of coming on line, and occupants were lining up. Three years later, the buzz in town has shifted to other sectors of real estate, and discussions about the housing market center on bubbles bursting, rather than hot markets. Yet, just because the Downtown area is no longer the talk of the town, don’t assume there is any letup in interest. In fact, the housing market in Downtown seems to be expanding in geography and offerings.
Since the mid-decade another round of high profile projects have been started, bringing several hundred more units into the market. The projects have ranged from higher-end new construction, like the 63-unit Piatt Place or 3 PNC Plaza, to the adaptive re-use of the Union National Bank building for the 61-unit Carlyle, to the mix of old & new that is the 941 Penn Avenue condos. The growing interest in urban living has driven the development of more affordable units, and has pushed the boundaries of Downtown outward towards the Strip and Uptown. What has happened is that the market for residential units in the heart of the city has matured, attracting developers and dwellers that differ from the stereotype of just a few years back. “We describe the buyers Downtown in terms of a psychographic, not a demographic,” joked Kathy Wallace, Development Specialist for Solara Ventures, the owners of the 941 Penn and Otto Milk Company condominium projects. “Our prospective buyers are in their 20’s up to their 60’s; they are single and married and empty-nesters. What they have in common is a mind set about living in the city, being in proximity to the urban environment and all that goes with that.” What Wallace is describing is the spirit that unites downtown dwellers, a commonality of purpose instead of age or income. Those that live Downtown are driven to be where the action is, and willingly swap the amenities of the suburbs for the energy and density of opportunity of the center city. It’s a hard thing to measure or graph, but it’s a spirit that exists. “I can’t prove it with any stats but I believe there’s a continuing demand for urban living that hasn’t been tapped yet in Pittsburgh,” says Patty Burk, the VP of Housing and Economic Development for Pittsburgh Downtown Partnership. That hasn’t always been the prevailing sentiment, however. Compared to most major northeastern or midwestern cities, Pittsburgh has always had a very small number of center city residents. Until the past decade, development Downtown was a chicken-or-egg kind of problem: was there really no demand to live Downtown, or was there no one living Downtown because there weren’t available properties? The answer to that question began to appear in the mid-1990’s when the efforts of the Pittsburgh Cultural Trust began to take root along Penn and Liberty Avenues. The transformation of the Penn-Liberty corridor meant that potential Downtown residents would have a major lifestyle amenity attraction already built in if development occurred. The rise of the Cultural District also made available for re-use some of the “sliver” buildings that housed commercial ventures as far back as the turn of the previous century. These narrow, eight-to-ten story buildings turned out to be just what an unlikely pioneer named Eve Picker was looking for. Her industrial loft projects were small, and didn’t offer a wide variety of housing styles, but they turned out to be the proof of concept that Pittsburgher’s would move into town. You Don’t Have to Build It and They Will Still Come Almost every leader who has occupied an office on Ross Street in the past two decades has placed the revitalization of Downtown as a high priority. Ironically, all of their best efforts were aimed at creating amenities in the central business district that would attract residents. It wasn’t until the city and county became financially strapped, and could no longer engage in development activities themselves, that private developers stepped in and the market took off. What the local officials overlooked were two essential truths: First is that amenities traditionally follow residential development, not the other way around. WalMart didn’t drop a store in the middle of a field north of Freedom Road in the hope that Cranberry Township would grow; they waited until demand was there first. And the second truth about Downtown was that the amenities were there already. If you were to go to another city and find that the area where the highest concentration of jobs was located sat along two riverfronts, directly across from which sat two stadiums for major league sports, you’d think, “hey, that would be a cool place to live.” Add in a third professional team, an arena that still draws top entertainment names, one of the best symphony and opera companies performing in one of the best concert halls in the land, plus one of the only producing theaters west of Broadway in a brand new facility, and all the restaurants that attend such cultural attractions, and you’d have a significant set of drawing cards. On top of these cultural and social attractions, the Downtown area adjoins some pretty cool areas. The Strip District and the South Side, with all its clubs and new retail, can be walked to or commuted in minutes. Oakland is only a ten minute drive (and a reverse commute). And the riverfronts are connected by a Comparing lifestyle amenities can be an interesting trap. Observers tend to look at Pittsburgh and compare its Downtown to other big cities. Buyers, on the other hand, are often more concerned about comparing the city’s lifestyle to other neighborhoods in the region. For example, here are a few of the amenities a Downtown resident has: 187 restaurants, nine hotels, ten art galleries, six churches, two elementary schools, one middle school, two high schools (including a CAPA school), What the local government did do to attract more residents was give incentives on taxes, making Downtown and the city in general, competitive with other regional neighborhoods. Pittsburgh allows buyers of Downtown property to receive tax credits of up to $2,700 for city property taxes, and up to $3,480 for Pittsburgh school taxes, for ten years. On a condo with a $300,000 assessed value, this abatement reduces the annual property taxes from $8,823 to $2,643 for the first ten years. In addition, Allegheny County enacted the Act 42 program, allowing the same owners to abate the county’s share of property taxes on up to $86,750 of assessed value on new homes or $36,009 for improvements to existing homes, for three years. The net result of these tax abatement programs is that a prospective Downtown dweller can look at getting between $600 and $700 a month reduction in property taxes. Anyone who has been in town during a week night recently can testify that the evolution of the lifestyle amenities is coming full circle. The Penn/Liberty corridor is teeming with people, and more importantly, with businesses. Restaurants and galleries line the area, and a quiet table is hard to find. And as each new project becomes available for occupancy, dozens of more consumers line up to make Downtown a place where retailers want More Units, More Options One of the most attractive demographic groups that Downtown developers were hoping to reach five years ago was the Baby Boom empty-nester. With high disposable income, and little desire to maintain a suburban home, this group was the target for the first wave of residential development, and the price tags reflected that. While the upwardly mobile professional did latch onto the higher end product, it became clear that much more demand existed from buyers looking to find homes that competed on price with the norms for the region, something in the $200,000 to $300,000 ranges. “I know there are not enough units for the demand in town, but I also think there is not enough variety, particularly in the range of price point,” says Patty Burk. “There are beginning to be more differing styles of residence available but there are still a lot of people that developers haven’t or can’t focus on yet, like those at the $800 per month price point.”
The Otto Milk Company project will offer 56 units for sale, ranging from $183,000 to $1,300,000, with most offered below $400,000. “The sweet spot for these units is between the mid-200’s and high-200’s,” noted Kathy Wallace. “We haven’t sold the least expensive units yet, but we have agreements on more than 50% of the condos, and all we’ve done so far is interior demolition and level the heavy concrete floors.” “I believe the higher end market is well served,” says Kevin Keane, vice president for Lincoln Properties, whose Encore on 7th and Lincoln North Shore apartments are 98% occupied. “However, some moderately priced units targeted at the $25,000 to $50,000/year annual income residents would fill a measurable demand for units in the $600 to $1,200/month rental range. This, in my opinion, is the next hot market for Downtown housing, as well as moderately priced condos in the $125,000 to $250,000 range.” Trying to serve the middle of the market is developer E. V. Bishoff, who is converting the Union National Building on Fourth Avenue to the Carlyle Condos. The units range from 1,100 to 2,400 square feet over 21 stories, including a 6,000 square foot penthouse. The majority of the condos are priced between $280,000 and $500,000, and 31 of the 61 units have been sold. At the high end of the market are The Residences at 3 PNC Plaza. Occupying ten floors between the 14th and 23rd levels of PNC Financial Services’s newest building, The Residences are 28 condominiums sandwiched between the new Reed Smith corporate offices and the Fairmont Hotel, but occupy a separate half of the tower with an exclusive elevator and lobby. Two units will be single bedroom, 1,275 square foot condos, with the majority of the units stretching out to between 1,700 and 3,000 square feet, plus an impressive 23rd floor, 5,000 square foot penthouse. With floor-to-ceiling glass curtain walls on the exterior, The Residences give Downtown a residential architectural style that is unique to Pittsburgh. “We’re calling them skyhomes,” says Helen Hanna Casey, whose firm Howard Hanna Realty is marketing the units. “Everyone wants to be in the 23rd floor but the lifestyle is the same on all the floors.” Selling for nearly $400 per square foot, The Residences are at the high end of the market Downtown, although the prices are in the same range as the higher end of many of the newer projects. “The Residences are like nothing else in Pittsburgh,” Casey says. “The units are truly for discerning buyers, people who are making the choice for reasons beyond experiencing a Downtown or urban lifestyle. And they are not the people everyone Even though the units are under construction, it’s easy to see Helen Casey’s point about the uniqueness by touring The Residences even now. The floor plans and materials used bear little resemblance to the more industrial or ‘hip’ spaces that have been developed in the early stages of the Downtown revitalization. The renderings of the finished condos look like the kind of place James Bond (the Sean Connery version) would come home to mix up a ‘shaken, not stirred’ martini after a day of international espionage. Unlike most real estate projects, marketing for The Residences has been very low key, with a few private receptions held to showcase the space. Hanna couldn’t be more specific but allowed that between 20% and 25% of the units had been pre-secured, even as construction wraps up on the building itself. More Housing for Students The Downtown neighbor who should be making the most noise is Point Park University. Its president, Paul Hennigan, and Board have set a new vision for the college, with a physical plan to match called the Academic Village. Part of the fabric of the Academic Village is the continued growth of residential buildings surrounding Point Park’s Wood Street and Boulevard of the Allies hub. “Ten years ago there were essentially no resident students,” explains Point Park university architect Elmer Burger. “Since then, we’ve added about 1,000 beds, in dormitories, apartments and privately-owned buildings.” Point Park’s master plan calls for another 400 or so as the college of performing arts moves from Oakland to Forbes Avenue. Enrollment has grown from 2,300 in 1997 to 3,800 in 2009, with expectations of 4,500 students Downtown in 2014.
“There’s an opportunity to reach out to students as Downtown residents and be happy with them as customers and consumers,” Patty Burk explains. “The place to do that seems to be Market Square. One idea is for there to be a student-oriented evening in Market Square, where restaurants and retailers would offer a program for students, like a discount for showing your student ID.” One specific plan that is in the works is for a ‘Welcome Back’ party in fall of 2010, after the Market Square renovation is completed. While the proximity obviously targets Point Park students, the concept is to welcome students back to the city, connecting them to Downtown even if they study in Oakland or the Bluff. “They have a party like this in Philadelphia,” Burk says. “After ten years now, it’s huge.” More Than a Neighborhood Being in town after a hard day at work can be an energizing experience, and those that live there find the activities and the pace to be an attractive alternative to suburban life. The evidence suggests these aren’t eccentric ‘urban-ophiles’ either. Since the 2000 census was taken, the number of people living in Greater Downtown, between the Point and the Strip, has doubled, with over 5,100 people living there as of the first of the year. Even in an uncertain economy, interest in living Downtown remains high among professionals, and even higher among students. There are currently 341 total new dwelling units under construction, with another 421 units in the pipeline. The effect of the demand on real estate as an investment has been impressive. During the first quarter of 2009, the average unit sold Downtown went for more than $200 per square foot, including the price of several re-sales. Kathy Wallace has seen that first hand, since she lives in one of the projects her company developed, the 941 Penn condos. “We only got two of the seventeen units unsold, even though the project has only been available for around six months,” she says. “There have actually been a couple of units re-sold too, and the owners did As Mr. Rogers might have said, that sounds like a beautiful day in the neighborhood, Downtown. NH |
series of parks, some of which connect to areas dozens of blocks away by bicycle or foot.
Burk points to the Market Square Place, an adaptive re-use of several buildings on Fifth Avenue at Market Square being renovated by Millcraft Industries, as an example of pent-up demand. The project features 44 units at the $700 per month level, for which there is a list of prospects that has grown to 600 people.
That kind of increased load will create even more opportunities for private developers looking to create downtown residential projects. The Pittsburgh Downtown Partnership is trying to anticipate that demand right now.