Pittsburgh's multifamily real estate rebirth

How 'Steel City' avoided Detroit's destiny

By Inman News Feed
Add Comment Add Comment | Comments: 1 | Posted Jun. 3, 2011

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How 'Steel City' avoided Detroit's destiny

Steve Bergsman
Inman News™

Pittsburgh, Pa. (Flickr image courtesy of Hannaford.)

Over the last decade, this is where apartment complexes got built: in Houston, where the vacancy rate now stands at 10.2 percent; in Jacksonville, a vacancy rate of 9.7 percent; in Las Vegas, with a 9.2 percent vacancy rate; in Atlanta, a vacancy rate of 9.1 percent; and in Phoenix, a vacancy rate of 8.3 percent.

This is the one town big apartment developers simply avoided: Pittsburgh, Pa.

Too bad, because the old steel city is experiencing a workplace renaissance, and finally, after years of emigration, a population stabilization. The vacancy rate for Pittsburgh's multifamily market chalks in at a sparkling 3.2 percent, the second best in the country after San Jose, Calif., according to the National Association of Realtors.

That's right -- San Jose, in the heart of Silicon Valley, and Pittsburgh, sharing the same spotlight. Who'd have thunk it?

Daniel Murrer and his father own a small apartment building of 22 units in Pittsburgh. It has been 100 percent leased since last September, and they have renewals for every single unit through April 2012.

Murrer not only dabbles in real estate, but his Pittsburgh company, RealSTATs, keeps track of local housing data.

I asked him about multifamily real estate. The city's low vacancies, he said, are not only due to the lack of construction but for about six years the Pittsburgh metro area had been experiencing a decline in single-family homes sales.

"If you have a hard time getting a mortgage, than you have to rent," Murrer said.

Steel City had been in the throes of what Murrer calls the "Pittsburgh Paradox," in which home sales were sliding but prices were climbing. That might have been due to the crosscurrents of the city's long, painfully slow demographic recovery.

"We have seen a dramatic turnaround from the dark days of the 1970s and early 1980s when the steel industry was in decline," said Robert Dye, a senior vice president and senior economist for PNC Financial Services Group in Pittsburgh. "Once the 2010 census data is recalibrated, I would expect to see the population trend line not just leveling off but actually showing some growth."

The important suburban counties, Washington and Butler, actually showed population growth over the past 10 years, said Dye. In the 2010 census, Allegheny County (Pittsburgh) showed only a slight population ebbing, but, once again, Dye predicts those days of decline should be over.

How did an old industrial city like Pittsburgh avoid being another Detroit or Cleveland?

For one thing, most people don't realize that Pittsburgh, like Boston, has always been a university city. It boasts two major institutes of higher learning, Carnegie Mellon University and University of Pittsburgh; a medium-size institution, Duquesne University; and three smaller, private four-year colleges.

The two key universities boast excellence in a couple of key fields: engineering and robotics at Carnegie Mellon, and medicine at Pitt.

Even with these advantages, Pittsburgh was losing its graduates to more attractive locales. That has finally changed.

"The region is doing a better job of holding on to its young people, because the local technology industries have done very well," said Dye. "Biotech, manufacturing technologies, robotics are all interesting and dynamic areas that young people want to be employed in."

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1. Anonymous said... on Jun 6, 2011 at 10:50AM

“A healthy, vibrant Pittsburgh is good news for Philadelphia as it strengthens the statewide economy, particulary the tax base.


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