Pittsburgh Tech - Continued Momentum?

Pittsburgh’s technology industry is growing. That’s an easy statement to make if you have been watching the city the past few years.  But exactly how well is the Pittsburgh tech scene performing and how can it continue to grow from here?  As we start the new decade, let’s look back at our Pittsburgh Technology Report and 5 key takeaways to consider how the region can sustain this momentum.

1- The people – In the book “David and Goliath” by Malcolm Gladwell, he discusses how perceived disadvantages are, in most cases, actually advantages.  The classic underdog, Cinderella-type stories often portray a protagonist fighting against all odds and emerging victorious. The part that is taken for granted is that the underdog must think differently and work harder to overcome the competition.  It’s this determination that fosters wins, not necessarily how large and strong the competition might appear.  Pittsburgh is considered a second-tier city - not large enough to be in the same league as the coastal cities or large metros like Chicago and Dallas, but somehow we made it on the Amazon top 20 list for their HQ2 search.  The primary reason is the talent in Pittsburgh is among the best in the world.  Not only is the growing population of young professionals capable of performing high quality work, but the depth of local intellectual property in fields such as robotics research and autonomous vehicles has potential to change the world’s economy.  This reality stems from Pittsburgh’s unique ability to work collaboratively as a cohesive whole.  While some may consider Pittsburgh’s size a challenge, it has created a tight-knit community of like-minded individuals who support each other’s pursuits and look to solve problems while considering how it affects their neighbors. The technology network in Pittsburgh is strong and is growing.  This support is helping to build more startups that solve complex problems.

2- There’s room for more funding - With the growing number of startups, the amount of funding in the region has increased as well.  However, the funding is coming from different locations like New York or Silicon Valley, not necessarily from within the region.  JLL’s report gathered insight from funding experts in the region and the feeling was unanimous - more funding is needed from people within the region. While Pittsburgh has the potential to be an even larger tech hub, many local startups are stunted due to the limited funding. Currently, there is a surplus of ideas requiring capital to grow, and Pittsburghers should be investing to help grow these companies here.  This will improve with time as research further commercializes and profits are realized.

3-Different strokes for different folks, or in this case, different space types for different companies – There are different workspaces that fit the various stages of a startup.  Co-working has grown in popularity, especially among the startup community in Pittsburgh.  This is certainly a great option for companies who need to be nimble.  The build-outs of co-working spaces are some of the most progressive and appealing in the real estate industry and that’s the point.  Tenants can enter and exit leases very quickly, while enjoying abundant amenities.  Although co-working provides a flexible short-term solution, companies should recognize there are disadvantages to long-term commitments in co-working.  Compared to a 10-year traditional office lease, co-working can cost nearly double the amount per seat, all while sacrificing branding and corporate culture.  If a tenant is considering co-working for a longer term, but is not ready for traditional options, subleasing is a lower-cost alternative that typically provide shorter terms.  

4-Neighborhoods are changing – Growing up in Pittsburgh and witnessing neighborhoods transform into economic centers has been impressive. The North Side was once a desolate part of the city where the Steelers and Pirates shared a stadium and vast parking fields. Now there is over 1M sq. ft. of class A office space and sub-3% direct vacancy. The Strip District is another area that has transformed dramatically.  Just in 2015, there was less than 300k SF of class A office space and now there is 1.3m sq. ft. of combined existing inventory and new development.  Oakland and East Liberty are similar stories. Tenants like Microsoft, Facebook, Amazon, Google, Uber, Argo AI, Apple, Philips, and Honeywell make headlines with large office leases in these neighborhoods and new development quickly follows. The desire to attract key talent is what’s driving the growth, and the investment within our local universities is helping sustain that continued churn.  Now that more job opportunities are available in Pittsburgh, the students are staying, the city is getting younger [PITTSBURGH RANKED #6 IN MOST POPULAR CITIES FOR MILLENNIAL HOMEBUYERS], and it is attracting more companies exploring Pittsburgh.

5- Why Pittsburgh – Pittsburgh is not the only city with talent and a growing tech presence.  Coastal cities have the advantage of containing larger populations, additional capital and more flights (especially international), so why is Pittsburgh growing in popularity?  One answer to “Why Pittsburgh” is the cost of living.  A 3-bedroom, 2-bathroom home in Pittsburgh costs less than a parking spot in some major metros [MOST EXPENSIVE U.S. CITIES TO LIVE IN 2019]. Another reason is our universities. The University of Pittsburgh is a top 5 recipient of NIH funding and Carnegie Mellon University is often ranked as the top university for computer science in the world.  There are also other highly ranked universities in the region that help provide specialized professionals to support the growing industries. Finally, the quality in life Pittsburgh is often ranked in publications as one of the best places to live. All the offerings found in major metros can be enjoyed in Pittsburgh at a fraction of the price.

Some of the richest industrialists in history once called Pittsburgh home and their legacy of innovation is ingrained within Pittsburgh’s culture.  If you want to discuss the Pittsburgh Commercial Real Estate Market and the burgeoning tech scene more in depth, call or send me a message - I love this stuff!