How Office Environment Has Changed


By Tim Schooley, Pittsburgh Business Times

November 30, 2017 

When it comes to recruiting companies into a Pittsburgh office building, don't expect the price of rent to always be the biggest priority anymore. 

Despite downtown Pittsburgh's history as a cost-conscious office market in which average rents might not budge for decades at a time, a panel of real estate experts described a changed downtown office environment in which landlords are more willing to invest to create the kinds of environments companies need to draw talent. 

The panelists discussed the local office market at Bisnow's Pittsburgh State of the Market event at the Fairmont Hotel downtown. 

Marty Sweeney, a senior vice president for M & J Wilkow Ltd., noted how his latest leases at 11 Stanwix -- new offices for Wells Fargo and Pineapple Payments totaling in the range of 30,000 square feet -- were based less on competitive rent and more on what the building has to offer. 

"They're moving out of less expensive buildings," Sweeney said. "We are not the low-cost provider."

After his company bought the building as part of a joint venture early this year, Sweeney and his team have been working to bring a host of new amenities to the building, including more common areas, a fitness center and even garden plots in its surrounding plaza; he described events the building hosted earlier in the year that included a jazz night and food trucks as wildly successful, noting the need to create a social environment for the building's tenants. 

"You really have to activate your common areas in a communal way," he said. 

 Andrew Miller, a first vice president for CBRE, noted a more agressive approach to investing in office properties has come from new owners entering the market. 

"The new landlords who have come into Pittsburgh in the last five or 10 years have a different playbook," he said. "You've got landlords coming in now where it's typical to put in spec suites and take the vacancies back to white box space and spend all this money before you really even had any leasing activity. Ten years ago, if you'd have asked landlords, 'hey, how do you feel about spending $20 a square foot just to white box a space and polish the floors, very few would've said, 'yes, that's a great idea. I think that's money well spent.'"

Thanks to co-working operators of all kinds that have offered greater amenities and more flexible leasing arrangements, companies have come to think of their real estate needs very differently from the commercial real estate tradition of long-term leases.

Brandon Nicholson, a principal of Nicholson Kovalchick Architects, which operates a Pittsburgh office, said his firm has offices now in seven or eight states but only one of which it established through a traditional office lease. 

Often, that includes paying far more for space on a shorter-term basis with more flexibility, he said, further adding the overall savings can translate to adding 25 percent to his firm's profits. 

Sweeney expects co-working to continue to influence the traditional office market, in which tenants of all kinds will pay more for less time, while demanding greater flexibility and amenities. 

These are the kind of expectations that is leading M & J Wilkow to consider strategies more typically used by hotels, which lease by the day, and residential developers to best cater to a new variety of office tenant. 

"Co-working is not a fad," he said. "It's here to stay."